Benjamin Franklin is famous for having said that in life, there are only two certainties – and one of them is taxes. (I may be paraphrasing.) That was true in Colonial Philadelphia and it remains true here, too: Costa Rica taxes are a part of life. They aren’t always painful, though.
Of course, “Costa Rica taxes” is a deeply layered and very detailed topic. So much so that there are entire professions – more than one, even! – devoted to understanding every detail of every type of tax. Suffice it to say, I won’t attempt to fully cover them in a single blog post.
I will, however, introduce you to four of the most common, every-day, everybody’s-life types of Costa Rica taxes: property taxes, income tax, import taxes, and IVA (aka the VAT tax):
Costa Rica Property Taxes
Property tax in Costa Rica can be a multi-layered topic but the short answer is that all properties in Costa Rica are subject to a 0.25% municipal property tax. To clarify, that’s one-quarter of one percent of your home’s declared value. In other words, you’re looking at $750/year on a $300,000 home and $2,500/year on a $1M home.
In addition to the 0.25% municipal property tax, so-called “luxury” properties – as of 2023, those valued at ¢148,000,000, or about $250,000, or more) also pay the solidarity tax, known in layman’s terms as the luxury property tax. This tax accounts for an additional 0.25% to 0.55%, depending on the value of the property.
That’s the short of it. There’s a bit of longer tale to tell, though, if you’d like to know. Here goes:
Determining a Property’s Taxable Value
Property taxes are paid based on a property’s taxable value, sometimes called the declared value. That’s because you, as a property owner, are responsible for declaring your property’s value; to do so, every five years, you’ll complete a property valuation form for your municipality.
When you purchase a home here in Costa Rica, you’ll need to update your property’s tax information with the municipality. If you’re purchasing a new build, this valuation will be equal to your purchase price. Those are the basics. If you need more information, feel free to get in touch or speak with your real estate attorney.
Solidarity Tax
For 2023, the solidarity tax will apply to homes valued at ¢148,000,000+, or about $250,000+. Note, I said homes: land owners are exempt from this tax.
Here’s where it gets just a touch complicated: If the value of your construction is below the current solidarity tax cut-off, then the tax will not apply to your property. If your construction is valued at more than the cut-off, then the solidarity tax will apply to your total property value (land + construction).
In other words, if in 2023, you purchase a $200,000 homesite and build a $200,000 home on it, then you will not pay solidarity tax because your property’s construction ($200,000 home) does not meet the solidarity tax cut-off. However, if you purchase a $400,000 home and the construction for that specific property is valued at $250,000, then you would pay the solidarity tax on the entire $400,000.
- Up to ¢371.000.000: 0.25%
- ¢371.000.000 to ¢744.000.000: 0.30%
- ¢744.000.000 to ¢1.116.000.000: 0.35%
- ¢1.116.000.000 to ¢1.490.000.000: 0.40%
- ¢1.490.000.000 to ¢1.859.000.000: 0.45%
- ¢1.859.000.000 to ¢2.233.000.000: 0.50%
- Over ¢2.233.000.000: 0.55%
So, how do you know how much your property is worth? It all goes back to that declared tax value: When you fill out your municipality forms, you’ll calculate the value based on the home’s age, square footage, and other characteristics. For more information, I’d recommend speaking with your real estate attorney.
Costa Rica Income Taxes
Ah, everyone’s least favorite subject: income taxes!
And now, what is likely your favorite answer: You probably won’t pay income tax to Costa Rica!
The thing is, most of the common residency categories – rentista, pensionado, and inversionista – don’t allow resident foreigners to work directly in Costa Rica. And Costa Rica will not tax your income outside of Costa Rica. In other words, if you are a resident and collect an income or pension from outside of Costa Rica, you will pay no income tax on that income or pension. (Note that if you own a business, your business may pay income tax.)
If you are a permanent resident or have working rights, then you may pay income tax. Note that if you are a salaried employee, Hacienda (the Ministry of Finance) will automatically deduct an amount from your paychecks; if you are a freelancer (known in Costa Rica as a trabajador independiente), Hacienda will auto-calculate a monthly deduction, which you will have to pay separately (ex. via online banking). Note that these amounts may or may not cover your yearly tax obligations.
Costa Rica taxes income on a sliding scale, which will be different for varying categories. By this, I mean that salaried employees and pensioners pay based on one scale, independent workers on another, businesses on another… It’s too much to put into one post (and the scale will be outdated within the year, anyway), but if you search for the current year’s impuesto de la renta, you should find it. Can’t? If you get in touch, I’ll be happy to link you.
Costa Rica Import Taxes
Costa Rica’s import taxes are, dare I say, legion. There’s a reason for that, though: As you can see above, property taxes and income taxes are fairly low, so the government has to collect taxes somehow.
Their answer is through import taxes, which apply to almost everything not produced here in Costa Rica. As taxes go, it’s fairly well balanced: the more you buy, the more import taxes you’ll pay.
For the most part, these import taxes will just become part of your life. Buy something at the store? The import taxes are already included. Visiting the car dealership? Ditto. Etc. etc. And this is why “stuff” is “more expensive” in Costa Rica, as you’ll often hear people say. Others will just call it the price of paradise.
Any way you cut it, though, you’ll soon learn just how much Costa Rica taxes imported goods: anywhere from 1% (books) to 49.27% (electronics). Notably, if you’re importing something via mail or freight forwarder/importer, you’ll pay that rate over not just the value of your good, but the total price, including shipping and handling to Costa Rica. Luckily, most freight forwarders offer online calculators to help you determine your all-in cost.
Costa Rica VAT / IVA Taxes
Finally, you’ll likely come across one of the newest Costa Rica taxes: IVA (pronounced ee-vah), which is the Spanish language’s version of the VAT (value-added) tax.
A few years ago, Costa Rica implemented the value-added tax, which added 13% to most service fees, rates, and invoices (specific categories may be either exempt or taxed at a lower rate).
In other words, let’s say you’re paying to translate your residency documents: If your total translation comes to ¢50,000, you’ll actually pay ¢56,500 (¢50,000 + 13%, or ¢6,500). If you’re getting a tree trimmed, that ¢150,000 invoice will actually come to ¢169,500. And so on, and so on.
Note that if you’re in one of the above-mentioned categories that allow you to work in Costa Rica, and your work includes professional or freelance services, then you’ll likely be required to collect the IVA tax, which you’ll remit to Hacienda every month. Again, though, that’s an entire topic unto itself; I’d recommend speaking with your Costa Rican accountant regarding questions on how to remit IVA tax for your professional services.
Questions About Costa Rica Taxes?
Hi, I’m Rebecca Clower. (My friends call me Becky.) In 2006, I did what you’re either preparing to do or have already done: I followed my heart and moved to Costa Rica.
Over the years, I’ve strengthened my roots here. I’ve given birth to my two boys and raised them here in Costa Rica. I’ve founded a wildly successful business. I’ve been on TV. I’ve given back to my community. I’ve taken on major positions of responsibility and authority. I am a dual citizen and have completely integrated into Costa Rica and my community.
Along the way, I’ve become an expert on Costa Rica relocation. And so, for years, I’ve made it my job to help other people make their own successful transitions to Costa Rica life and living. I offer real, honest advice and expertise to my clients.
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