Taxes in Costa Rica: What You Need to Know

Costa Rica’s tax framework is administered by the Ministry of Finance and its tax authority, the Dirección General de Tributación. The system is built upon a territorial principle that determines how income is taxed for residents, non-residents, and corporate entities. This approach is distinct from systems in countries like the United States, which often tax worldwide income.

Understanding the Territorial Tax System

Costa Rica uses a territorial tax system, meaning only income generated from sources within the country’s borders is subject to taxation. Earnings from activities or assets located outside of Costa Rica are not taxed by the Costa Rican government. This differs from systems where an individual’s entire income is taxed, regardless of where it is earned.

Income from a Costa Rican source includes a salary paid by a Costa Rican employer for work performed in the country. Rental income from a property located in Costa Rica or profits from a local business are also considered domestic-source income. Conversely, foreign-sourced income is exempt from Costa Rican taxes. This includes pensions from a foreign country, salaries paid by a non-Costa Rican company into a foreign bank account for remote work, and investment income from foreign stocks.

Primary Taxes for Individuals

Personal Income Tax

Personal income tax in Costa Rica applies to individuals earning income from profitable activities within the country. The tax is structured progressively, so the rate increases as income rises. For salaried employees, monthly income is taxed using brackets updated for the 2025 tax year. This tax is withheld by employers.

• Income up to CRC 922,000 per month is exempt.
• A 10% rate applies on the excess of that amount up to CRC 1,352,000.
• A 15% rate applies on the excess up to CRC 2,373,000.
• A 20% rate applies on the excess up to CRC 4,745,000.
• A 25% rate applies to all income above CRC 4,745,000.

For self-employed individuals, the tax is calculated annually for the 2025 tax year.

• Annual income up to CRC 4,094,000 is exempt.
• A 10% rate applies on the excess up to CRC 6,115,000.
• A 15% rate applies on the excess up to CRC 10,200,000.
• A 20% rate applies on the excess up to CRC 20,442,000.
• A 25% rate applies on all income above that amount.

Capital Gains Tax

Costa Rica imposes a tax on capital gains, which are the profits from the sale of assets like real estate, stocks, and other investments. The standard tax rate for capital gains is 15%. This rate is applied to the net gain, calculated as the difference between the sale price and the original purchase value of the asset, including any improvements.

The sale of a person’s primary residence may be exempt from capital gains tax. For properties acquired before July 1, 2019, sellers have an alternative. They can choose to pay a one-time tax of 2.25% on the total sale price of the property instead of the 15% on the gain.

Property Tax

Property tax, or Impuesto sobre Bienes Inmuebles, is a municipal tax levied on the value of real estate. The standard rate is 0.25% of the property’s registered value. This value is updated every five years, and the tax is paid directly to the local municipality where the property is located.

A separate tax known as the Solidarity Tax for the Strengthening of Housing Programs, or “Luxury Home Tax,” applies to high-value residential properties. This tax is triggered for residential properties where the construction value exceeds CRC 145,000,000 for 2025. The tax is calculated on the total property value, including land, using progressive rates from 0.25% to 0.55%. This tax is paid annually to the Ministry of Finance by January 15th.

Value-Added Tax (VAT)

Value-Added Tax (VAT), or IVA, is a consumption tax applied to the sale of most goods and services. The standard VAT rate is 13%. While the general rate is 13%, certain goods and services have reduced rates or are exempt.

• A 4% rate applies to private health services and domestic airline tickets.
• A 2% rate applies to medicines, private education services, and insurance premiums.
• A 1% rate applies to items in the “basic taxable basket.”
• Some services, like public transportation and long-term residential rentals, are exempt from VAT.

Business and Employment Related Taxes

Corporate Income Tax

Legal entities, such as corporations, are subject to corporate income tax on their net profits. The standard corporate income tax rate is 30%. For the 2025 tax year, this rate applies to companies with gross income exceeding CRC 119,629,000.

For smaller businesses with gross income below this threshold, a progressive scale applies to their net income.

• A 5% rate applies on the first CRC 5,642,000.
• A 10% rate applies on the excess up to CRC 8,465,000.
• A 15% rate applies on the excess up to CRC 11,286,000.
• A 20% rate applies on the excess over that amount.

Social Security Contributions (CAJA)

Mandatory contributions to the Costa Rican Social Security Fund, known as the Caja Costarricense de Seguro Social (CCSS or Caja), are required for all employees, employers, and registered self-employed individuals. These contributions fund the public healthcare system, pensions, and other social benefits.

The contribution rates are split between the employer and the employee. Employers contribute approximately 26.67% of an employee’s gross salary. Employees have about 10.67% of their salary deducted. For self-employed individuals, the contribution rate varies based on their declared income, with combined rates for health and pension ranging from approximately 7% to over 18%.

The Tax Filing and Payment Process

Information Gathering and Registration

Individuals and entities engaging in taxable activities in Costa Rica must register as a taxpayer to obtain a tax identification number. For Costa Rican citizens, this is their national identification card (Cédula). Foreign residents use their immigration identification document (DIMEX). Foreigners without residency or non-domiciled entities must apply for a Special Tax Identification Number (NITE) at a local tax office. This registration links the individual or company to the national tax system.

Filing Procedure

Tax declarations in Costa Rica are filed electronically through the government’s online portal, the Administración Tributaria Virtual (ATV). This platform is the mandatory channel for submitting tax returns. To use the ATV portal, taxpayers or their legal representatives must create an account.

The form for declaring income for both individuals with profitable activities and corporations is Form D-101, the Declaración Jurada del Impuesto sobre la Renta. This form requires a summary of the taxpayer’s Costa Rican-source income, deductible expenses, and the resulting tax liability for the fiscal period.

Payment and Deadlines

Once a tax return is filed through the ATV portal, any tax liability must be paid. Payments can be made through authorized financial institutions or online banking systems linked to the tax portal. The system provides a clear statement of the amount owed.

The fiscal year in Costa Rica runs from January 1 to December 31. The deadline for filing the annual income tax return and paying the tax is March 15. Corporations also have mandatory advance income tax payments due in three installments, by the last business day of June, September, and December.