Costa Rica’s tax system is designed with simplicity and territoriality at its core, offering a clear and straightforward framework for both individuals and corporations. The system includes a standard Corporate Income Tax rate of 30%, a progressive Personal Income Tax with rates up to 25%, and notable absences of Inheritance, Gift, and Wealth Taxes. Central to its regime is the principle that only income generated within Costa Rica is subject to taxation, ensuring foreign source income remains untaxed. This approach, combined with a set of rules aimed at preventing tax avoidance and fostering international cooperation, positions Costa Rica as an attractive destination for investors and residents alike.
Tax overview
| Corporate Income Tax: | 30% |
| Personal Income Tax: | 25%, progr. |
| Inheritance Tax: | None |
| Gift Tax: | None |
| Wealth Tax: | None |
Territorial Tax Regime
Corporate Income Tax
Corporations incorporated, or with a permanent establishment in Costa Rica, are subject to tax on Costa Rican source income at a standard rate of 30%, with lower rates applicable to lower income thresholds.Â
Personal Income Taxation
Residents of Costa Rica are subject to income tax on local sources income at progressive rates, up to 25%. Employment income is subject to tax at progressive rates up to 25%, and investment income is generally subject to tax at rate of 15%.
Anti-Avoidance Rules
Costa Rica has a General Anti-Avoidance Rule (GAAR) to avoid aggressive tax strategies lacking a business purpose. Transfer Pricing rules are based on OECD guidelines, which require transactions between related parties to be arms-length. Costa Rica has no specific thin capitalization rules, and no Controlled Foreign Corporation (CFC) rules.Â
Double Tax Treaties (DTTs)Â
Foreign Investment Protection
OECD Multilateral ConventionÂ
Common Reporting Standard (CRS)
FATCA
In summary, Costa Rica’s tax system presents a balanced approach to taxation, characterized by its territorial regime and absence of certain taxes. With competitive corporate and personal income tax rates, along with robust anti-avoidance measures and international agreements for investment protection and tax cooperation, Costa Rica offers a favorable environment for both local and foreign investors. The country’s participation in global tax initiatives further underscores its commitment to transparency and international best practices, making it a compliant and attractive jurisdiction for conducting business.
