Costa Rica - A Paradise Where Taxes are Minimal

Most people who take up residency, do business or even visit frequently are surprised to learn that the tax system in Costa Rica is much less complicated than many European or North American countries. It is much different than that of United States, mainly because anyone relocating to the country can quickly understand the system.

Overall, the basic principle for paying taxes in Costa Rica is based upon level of earnings. If you earn over a certain amount of income, you are liable to pay income tax to the government. There are four main types of taxes that a foreigner moving to Costa Rica will have to pay – income, government, property, and sales tax.

Income Tax

Everyone regardless of his or her citizenship pays income tax in Costa Rica. However, the only way in which you would not have to pay income tax coming from abroad, would be if your income was less than eight hundred dollars a month. Any earned income below this amount will not levied income tax. Above this salary however, the income tax you are required to pay will range from 10 to 15 percent, dependant on the amount you earn. In Costa Rica, the tax year ends in September.

Government Tax

Each area of Costa Rica land is divided into branches of local governments (or municipalities) who oversee the collection of government tax. Just as in the United States, this government tax is used to provide services to the residents such as electricity for streetlights, or garbage removal etc… Each area has its own government tax, at its own levels that to go towards the services that municipality provides. Depending on the price of your home, you will also be required to pay a government property tax.

Property Tax

The government of Costa Rica has established a Costa Rica property tax equivalent to 0.5 to1.5 percent of the purchase price of a home in Costa Rica. If you are planning to purchase a home in Costa Rica, expect to pay property tax for Costa Rica real estate, at the price similar to that of many states within the United States. With one large exception,…The cost of the home will be considerably less!

Sales Tax

If you are relocating from the United States, then paying a tax on items purchased will not be a new concept to you. Costa Rica has a sales tax of 13 percent above the cost of each item. However, unlike in the United States in which certain items are exempt from sales tax, Costa Ricans pay sales tax on all goods sold to them. This sales tax can also be levied against certain services in the country. Again, remember though the cost of most goods and all services are drastically lower than what you are used to.

When it come to taxes, everyone will have a different situation, and it is therefore important to consult your tax advisor when considering the tax implications in any relocation or that of any foreign country. One thing the Costa Rica government does well is that it goes easy on its own citizens, and relocating residents when it involves prying the tax dollars from them.

by David Lovendahl

David Lovendahl is the owner of Costa Vista Land.