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Taxes are applicable to all residents and non-residents that
maintain commercial activities in Costa Rica.
The fiscal year in Costa Rica begins on October 1 and ends on
September 30 every year. Tax returns are due by December 17 every
year.
Requirements to apply for taxation
Foreigners
- Filled out form from the Costa Rican Tax Collection Office
(Oficina de Tributacion Directa).
- Copy and original passport.
Anonymous or Limited Liability Corporations
- Filled out form from the Costa Rican Tax Collection Office
(Oficina de Tributacion Directa).
- Copy and original identification document.
- Corporation bylaws and certificate of legal capacity.
INCOME TAXES
The Costa Rican income tax system is based on the Territorial Law
which states that any income generated within the physical territory
of Costa Rica is subject to income tax.
Article 1 in the Costa Rican Income Tax Law (ITL) states that taxes
apply to occasional or consistent revenues received by individuals
or entities located within domestic territory, regardless of their
nationality or domicile.
Article 1 also states that in order for revenues, income or benefits
generated from a Costa Rican source to be taxable, they should
derive from services rendered, goods located or capital invested
within Costa Rican borders during a specific tax period, regardless
of the business owner's nationality, domicile or residency status.
Nevertheless, there is a difference between taxes applied to people
residing in Costa Rica and people living abroad.
-
A net Income Tax applies to any profit generated by businesses of
foreigners who reside in Costa Rica.
-
A Withholding Tax on International Remittances applies to the gross
income remitted from other countries.
Corporate Income Tax
A corporation's net profits are taxed according to their annual
gross income as follows:
Income Tax Rates
applicable to companies
|
2003
Gross Income Amount |
Ordinary Rate 2003 |
Extraordinary Rate
from 01/01/03 to 12/31/03 |
2004
Gross Income Amount |
Tax Year Rate 2004 |
Up to
19.695.000 |
10% |
2% |
21.468.000 |
10% |
Up to
39.617.000 |
20% |
4% |
43.183.000 |
20% |
|
Excess of
39.617.000 |
30% |
6% |
43.183.000 |
30% |
Amounts entered in
Colones (local currency).
Consult current exchange rate at
www.bccr.fi.cr
Gross income includes earnings, benefits and rent, whether they are
paid in cash or in kind. Partnerships are taxed in the same way
corporations are, independently from their partners, and are liable
for corporate taxing on net profits.
In order to protect their investments, companies may deduct all the
necessary costs and expenses from their gross income, which will
reduce the tax amount to be paid.
Applicable deductions from Gross Income:
- Duly recorded expenses that produce taxable income.
- Severe debt that demonstrates legal collective action to the
company.
- Payments of rent, royalties, technical or financial assistance,
trademark franchises, among other instances, to residents or non-residents.
- Payment of other taxes, such as sales and consumption taxes or
similar obligations.
- Payment of business loans including interest.
- Asset and casualty loss excluded from insurance coverage.
- Contributions to cultural or charitable organizations.
- Insurance premiums.
- International trade or exchange losses, except when acquiring
fixed assets.
Professional Services Income Tax
This tax applies to individuals who offer their professional
services privately and independently from governmental health
insurance regulation, which deducts a fixed percentage monthly from
people that work in the public and governmental workforce.
The following chart shows the corresponding percentages taxed from
different income amounts.
Income Tax Rates applicable to
individuals
|
|
2003
Net Income Amount |
Ordinary Rate Year
2003 |
Extraordinary Rate
from 01/01/03 to 12/31/03 |
2004
Net Income Amount |
Tax Rate Year 2004 |
|
Exempt |
1.316.000 |
Exempt |
Exempt |
1.434.000 |
Exempt |
|
Between |
1.316.000
and
1.965.000 |
10% |
2% |
1.434.000
to
2.142.000 |
10% |
|
Between |
1.965.000
and
3.278.000 |
15% |
3% |
2.142.000
to
3.573.000 |
15% |
|
Between |
3.278.000
and 6.5269.000 |
20% |
4% |
3.573.000
to
7.160.000 |
20% |
|
In excess of |
6.569.000 |
25% |
5% |
7.160.000 |
25% |
Annual Taxes
|
|
Year 2001 |
Year 2002 |
Year 2003 |
Year 2004 |
Rate |
|
Up to |
241.500 |
270.000 |
296.000 |
323.000 |
Exempt |
|
Between |
241.500
and
363.000 |
270.000
and
405.800 |
296.000
and
445.000 |
323.000
and
485.000 |
10% |
|
More than |
363.000 |
405.800 |
445.000 |
485.000 |
15% |
Amounts in both charts are
entered in Colones (local currency).
Consult current exchange rate at
http://www.bccr.fi.cr
MUNICIPAL, LICENSE AND STAMP TAXES
Costa Rica lacks state or city income taxes. Minor municipal taxes,
operation permit fees and stamp taxes are applied instead. Stamp
taxes are levied on most legal documents.
|
Territorial tax = 0.25% of
the value of the property |
|
Municipal services = |
from $0.50 to $2.45 for
every meter of garbage collection
from $0.75 to $1.87 for
street cl eaning and maintaining |
Operation License or warrant tax
- 0.035% from the company's gross income, due every trimester.
Education and Culture Stamp tax
- From $2 to $24 imposed annually, based on the company's
Stock Capital.
SALES TAX
The Sales Tax is a percentage added to the sale and import of goods
and the rendering of certain services. This tax is charged only once
on the total of the goods in question. The common sales tax has a
percentage of 13%.
Since 2003, the Costa Rican government has added a 0.1% tax on the
commercial patrimony of the corporation. Few exceptions apply.
MUNICIPAL LICENSE TAX
Any lucrative activity in Costa Rica requires a documented license
that should be placed on a visible area in the business
establishment. This license imposes an additional tax that must be
paid only during the time such business operates.
CAPITAL GAINS TAX
The Costa Rican Tax System does not tax capital gains except when
real estate sales are conducted as an ongoing business activity,
whether it is privately or publicly.
If an individual or company sells two parcels within a tax period,
this will be considered an ongoing business and taxes are applicable.
The possibility of introducing the capital gains tax is being
discussed in Congress, and it may be applied in the future. A
separate tax applicable to Costa Rican business activities performed
outside the country is being discussed as well.
The concept of ongoing business activity is defined by the Income
Tax Law as "the activity a business or individual is primarily
committed to, which is performed in a public and periodic manner,
and to which most of the taxpayer's time is devoted." However, this
concept does not have a specific definition or application to all
cases, since they vary in nature.
DIVIDEND PAYMENTS FROM DOMESTIC REAL ESTATE COMPANIES TO FOREIGN
SHAREHOLDERS
Dividends that are paid from a Costa Rican company to a foreign
partner company are taxed with a 15% withholding tax.
The following chart shows the tax rates applied to different
transactions made with foreign associates or providers.
Tax Rates Applicable to Transactions made by Domestic Companies with
Foreign Company Partners
|
ACTIVITY |
RATE |
|
Transporation and
Communications |
8.50% |
|
Retirement and Pension,
Salaries and similar remuneration |
10% |
|
Fees, Comissions, Diets and
similar personal income |
15% |
|
Refinancing and Insurance
Premiums |
5.50% |
|
The use of Films for
television, Recordings and any other means of Public
Broadcasting, as well as International News Footage |
20% |
|
Radio and TV Soap Operas |
50% |
|
Income ensuing from entities
related to Stock Markets and other official Insitutions |
5% |
|
Dividends from entities not
related with Stock Markets or other Official
Insitiutions |
15% |
|
Commercial Leases |
15% |
|
Interests, commisions and
other financial expenses |
15% |
|
Technical or Financial
Support related to Patents, Formula Supply, Trademarks,
Privileges, Franchises or Royalties |
25% |
|
Other payments not
contemplated in previous secitons |
30% |
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