Costa Rica Taxes: Income Tax Rates & Territorial Rules

Costa Rica taxes income that is earned in Costa Rica and generally leaves foreign income alone, so a US pension, Social Security and US investment income are not taxed there. What you do pay is sales tax on what you buy, property tax on what you own, and income tax on anything you earn inside the country.

Costa Rica tax rates at a glance

Tax	Rate	What it applies to
Foreign pension, Social Security, US investment income	Not taxed by Costa Rica	Income from sources outside Costa Rica
Income tax on a salary	0 to 25 percent, in bands	Wages from a Costa Rican employer, withheld each month
Income tax on self-employment	0 to 25 percent, in bands	Net profit from work or a business carried on in Costa Rica
Corporate income tax	30 percent, with lower bands for small companies	Profit of a Costa Rican company
Rent, interest and dividends	Generally 15 percent	Income from Costa Rican property, banks and companies
Capital gains	Generally 15 percent of the gain	Sale of Costa Rican assets; a main home is exempt
Sales tax (IVA)	13 percent, with reduced rates on some items	Most goods and services
Municipal property tax	0.25 percent a year	The registered value of real estate
Luxury home tax	About 0.25 to 0.55 percent a year	Homes whose construction value is above a threshold
Property transfer tax	1.5 percent	Paid when real estate changes hands

Bands and thresholds are set in colones and adjusted every year by the Ministry of Finance (Ministerio de Hacienda). Use the table for orientation, and ask a Costa Rican accountant for the current figures before you act on it.

How the territorial system works

Most countries tax their residents on income from anywhere in the world. Costa Rica taxes income by where it comes from. If the work was done, the property sits, or the business operates in Costa Rica, the income is Costa Rican. If not, it generally isn’t.

For a typical American retiree, that means:

Not taxed by Costa Rica: Social Security, a US pension, IRA and 401(k) withdrawals, dividends and interest from US accounts, rent from a house in the US.
Taxed by Costa Rica: rent from a property in Costa Rica, profit from a business there, a local salary, interest paid by a Costa Rican bank, and the gain when you sell Costa Rican property that isn’t your main home.

Becoming a Costa Rican tax resident, which generally follows from spending more than 183 days there in a tax year, does not change this. Tax residency and immigration status are separate things.

Two points are less settled, and worth a conversation with an accountant:

Remote work. Holders of the digital nomad visa are explicitly exempt on their foreign remote income. For residents who work from Costa Rica for clients abroad, the tax authority can take the view that the work is performed in Costa Rica.
Foreign passive income of companies. A 2023 reform, made to meet European Union standards, taxes some foreign passive income received by companies that belong to multinational groups and have no real activity in Costa Rica. It was not aimed at individuals, but it matters if you hold investments through a Costa Rican company.

Income tax if you earn money in Costa Rica

Employees. The employer withholds income tax from each paycheck. The lowest band is exempt, which in recent years has covered roughly the first ₡900,000 a month, and the top band is 25 percent. Employees also pay social security contributions to the Caja of roughly 10 to 11 percent of salary.
Self-employed people and business owners. You register with the tax authority, issue electronic invoices, charge sales tax where it applies, and file an annual return. The tax year is the calendar year, and the annual income tax return has been due by mid-March.
Landlords. Rent from a Costa Rican property is generally taxed at 15 percent after a fixed deduction, declared monthly, and short-term rentals to tourists also carry sales tax. See renting in Costa Rica for how this shows up in a lease.
Companies. Many foreigners hold a house or car in a Costa Rican corporation. Every company pays an annual corporation tax, usually a few hundred dollars or less, and files a yearly declaration even when it has no income.

Sales tax and other taxes you pay as a resident

Sales tax (IVA). 13 percent on most goods and services, already included in shelf prices. Private healthcare, medicines, private education and basic foods have had reduced rates. Residential rent is exempt below a monthly threshold and taxed at 13 percent above it.
Property tax. 0.25 percent of the registered value each year, paid to the municipality. See buying property in Costa Rica.
Luxury home tax. A national tax on homes whose construction value is above a threshold that is updated every year.
Vehicle taxes. The annual marchamo includes a tax based on the car’s value, and imported vehicles are taxed heavily on arrival. See driving and owning a car in Costa Rica.
What Costa Rica doesn’t have. There is no inheritance tax and no tax on net wealth.

What you still owe the United States

Costa Rica’s territorial system doesn’t reduce your US obligations. US citizens and green card holders are taxed by the US on worldwide income wherever they live.

You file a US return every year. Your pension, Social Security and investment income are taxed by the US as they were before you moved.
Costa Rican income is taxed by both countries first. The US foreign tax credit or the foreign earned income exclusion normally removes the double tax. There is no US and Costa Rica income tax treaty to rely on.
Self-employment tax. The two countries have no social security agreement, so Americans who are self-employed in Costa Rica generally still owe US self-employment tax.
Foreign accounts are reported. Costa Rican accounts that together pass $10,000 at any point in the year go on an FBAR. See banking in Costa Rica.
Your state may still expect a return until you have clearly cut ties.

The US side, and how to choose a preparer, is covered in US expat taxes in Costa Rica.

When to get advice

Talk to a preparer who knows both systems before you do any of these: rent out a Costa Rican property, set up a corporation, sell a home in either country, start working for foreign clients from Costa Rica, or make a large transfer for a rentista deposit. Each one changes what you file, and most are cheaper to plan than to fix.

Common questions

Does Costa Rica tax foreign income?

Generally no. Costa Rica taxes on a territorial basis, so it taxes income from Costa Rican sources, such as a local salary, a local business or rent from a property in Costa Rica. A US pension, Social Security and income from US investments are generally outside Costa Rican income tax, even if you live there all year.

What is the income tax rate in Costa Rica?

Costa Rica's income tax on salaries and self-employment runs in bands from 0 to 25 percent, and the bands are adjusted every year. Companies pay 30 percent, with lower bands for small businesses. Rental income, interest, dividends and capital gains from Costa Rican sources are generally taxed at 15 percent.

What is the sales tax in Costa Rica?

Costa Rica's sales tax is a value added tax (IVA) of 13 percent on most goods and services. Reduced rates apply to some items, including private healthcare, medicines and a basket of basic foods. Restaurants also add a 10 percent service charge, which is not a tax.

Do Americans living in Costa Rica pay taxes in both countries?

Americans living in Costa Rica file a US federal return every year on their worldwide income, and pay Costa Rican tax only on income from Costa Rican sources. The two countries have no income tax treaty, so double taxation on Costa Rican income is usually avoided with the US foreign tax credit or the foreign earned income exclusion.

Sources

This page is general information, not professional advice. Rules and amounts change, and officials apply them differently. Confirm the details with the relevant authority or a qualified professional before you act on them.