Costa Rica expat tax update 2014 – 2015
Any idea what taxes you have to pay in Costa Rica and when? Probably not… Therefore, let’s give you a Costa Rica expat tax update. In Costa Rica, most taxes and other payments, especially when you have employees, are due between December and January each year. Aguinaldo (Christmas Bonus) has to be paid in December, so everyone will have money to pay taxes.
Tax and other payments are due between 15th of December and 31st of January 2015. Allow me to show you the most important ones. And you can put them on your agenda for your next Costa Rica expat tax update: Aguinaldo, Marchamo, Property Tax, Luxury Home Tax, Corporation tax.
The Aguinaldo is a 13th month of salary or Christmas bonus that needs to be paid before the 20th of December each year. Every employee, no matter how much time they work for you, has the right on Aguinaldo. Therefore, even if you have a maid or gardener work for you half a day a month, they have the right of receiving Aguinaldo.
To calculate the aguinaldo, you add ALL the salaries you have paid to an employee and you divide it by 12. That will give you the amount to be paid. Aguinaldo calculation runs from 1 December of the year prior to November 30 of the year in question.
Click here to understand all your obligations you have when hiring an employee.
First find the type of vehicle (leave “particular” if it’s not a pick-up, motor bike or van) and then type in your tag number. You can pay your marchamo almost everywhere. Your bank might have a cash-back promotion if you pay it with your credit card.
All vehicle owners should have the Compulsory Insurance for Motor Vehicles, which aims to insure people that are injured in an accident involving such means of transport. This insurance is charged annually and is a prerequisite for the registration certificate of the vehicle. The marchamo also includes road tax for the whole year.
Thus, the Compulsory Motor Vehicle Insurance covers the injury and death of people (pedestrians and occupants), victims of a traffic accident, whether or not subjective responsibility of the driver (Traffic law 9078). Talk to your insurance agent for more information o car insurance and coverage.
The marchamo is charged each year and is payable from the second half of November until the 1st week of January. Most years, the INS (Institution that charges the marchamo), will give extra time for the vehicle owner to pay, but don’t count on it. As a result, if not paid in time, there are fines and you risk the detention of your car. You will also find, when you pay, any unpaid tickets from the last year.
In Costa Rica you will not get a notice from the government that your property tax is due, like you do in many other countries. Because YOU have the obligation to know when to pay.
The percentage of the annual property tax is 0,25% of the registered value in your municipality, as regulated by Law 7509. You can check the 2017 tax rates here.
Property tax is payable at the municipality where your property is located. Before January 31st 2015, you HAVE to declare the value of your property to the municipality, no matter which municipality you live in. If you don’t’, they will do it for you and you probably know where that leads to. You can find the land values of your property at the Ministry of Taxes website.
I recommend you just put it in low (except for the land value), they might not come and check in person. Some municipalities have the value declaration downloadable from their website. In others, you will have to go in person to pick one up.
Property tax can be paid before the end of each quarter and most municipalities can give you the annual amount to be paid by mid-February. Most municipalities will give you a discount when you pay the whole year in advance. Late payment fines are usually very low.
Costa Rica property tax can be paid at the cashier in the municipal building or deposited in their account in the Banco de Costa Rica. If you have an account in the Banco de Costa Rica or any other bank in Costa Rica, you can pay by SINPE online.
Luxury Home Tax
The Luxury Home Tax, created by Ley Nº 8683, has to be paid before the 15th of January every year.
The Luxury Home Tax law or Ley del Impuesto Solidario, was created and approved by the Laura Chinchilla government in October 2009. This law was created to eradicate the slums on Costa Rica and they decided the rich should pay for that.
Some of the people who email me to ask questions tell me things like “oh, my attorney told me my house does not qualify for Luxury Home Tax”. Has your attorney been to your house? Does your attorney know anything about property values? Does he know about construction values? Probably not… and that is the reason you should read this blog about the Luxury Home Tax.
The Luxury Home Tax declaration must be submitted every three years from the effective date of the purchase. You have to update the value or property, obligation that must be met no later than January 15 of the years 2016, 2019. If the house was constructed in 2013, the tax liability occurs on 1 January 2014.
Any business or corporation owner can pay the Corporation tax starting the 1st to the 31st of January of each year in any of the BCR agencies. At the moment of writing this blog, there are updates on the corporation tax in the make. The corporation tax unconstitutional in 2016 by the Costa Rican courts, and in 2017 a new law was approved. In August 2017, we will be able to tell you how much corporation tax you need to pay. Learn all about the November 2017 Update Corporation tax and form D140 here.
• Active corporations (those that are used to run a business or own assets) pay 50% of the basic salary, which is 135,000 Colones [$267] if the minimum salary doesn’t change before April 2014.
• Not active corporations (those that are not being used) pay 25% of the basic salary, which is 67,500 Colones [$134] if the minimum salary doesn’t change before April 2014.
You can check if you owe corporation tax yourself online through the National Register’s website. But you will have to register first (only once)and go to “impuesto personas jurídicas” where you will have to give the corporate ID number, not unlike 3-101-xxxxxx. There it will show if you owe any corporation tax or not.
Income Tax / Impuesto de la renta
Every person with an in come should pay Impuesto de la renta, or income tax every December 15th. The Costa Rica tax year closes on September 30th. If you have a foreign income and you already pay in that country, you don’t have to pay any income tax in Costa Rica on such foreign income.
For business done in Costa Rica, the following percentages apply:
- Income up to ¢793,000/month is not subject to payment.
- Between ¢793,000/month and ¢1,190,000/month, the charge is 10%.
- Any amount over ¢1,190,000, the charge is 15%.
Small Business income
A business is considered a small business when the gross income of a fiscal year doesn’t exceed ¢106,026,000.00. Then, the business can apply the following percentages:
- Up to ¢52,710,000.00 gross income, the charge is 10%.
- Also, up to ¢106,026,000.00 gross income, the charge is 20%.
Large Business income
- Annual gross income up to ¢3.522.000.00 annual gross income, is not subject to payment
- Between ¢3.522.000.00 and ¢5.259.000.00 annual gross income, the charge is 10%.
- Also, between ¢5.259.000.00 and ¢8.773.000.00 annual gross income, the charge is 15%.
- Between ¢8.773.000.00 and ¢17.581.000.00 annual gross income, the charge is 20%.
- Any amount over ¢17.581.000.00 annual gross income, the charge is 25%.
For more information on Income Tax or any other Costa Rica expat tax update, contact your accountant.
This Costa Rica expat tax update 2014 – 2015 is a FREE service by the American European Real Estate Group Costa Rica. For information on any of the MLS listings or real estate related questions, contact us NOW.
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