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Taxation of Costa Rica Companies: What Foreign Owners Must Know

Introduction

Costa Rica is a popular destination for foreign entrepreneurs due to its territorial tax system, political stability, and business-friendly environment. However, understanding Costa Rican taxation is critical for compliance and tax efficiency.

This guide covers:

Corporate income tax
VAT (IVA) obligations
Territorial tax implications
Compliance requirements for foreign owners

➡️ For an overview of company formation, see our guide: Costa Rica Company Formation – The Definitive Guide for Foreign Entrepreneurs and Investors.
➡️ For step-by-step setup, see Blog: How to Set Up a Company in Costa Rica.

1. Understanding Costa Rica’s Territorial Tax System

Costa Rica uses a territorial tax regime, meaning:

Only income earned within Costa Rica is subject to local tax
Foreign-sourced income is generally exempt

Implications for Foreign Investors:

Ideal for international service companies, holding companies, and export businesses
Reduces exposure to double taxation when combined with home-country compliance
Requires clear documentation of income sources

⚠️ Professional advice is crucial to ensure correct classification of income.

2. Corporate Income Tax (Impuesto sobre la Renta)

All companies operating in Costa Rica must pay corporate income tax on local-sourced income.

Tax Rates

Progressive rates based on annual net income
- Up to CRC 3,000,000 (~$5,000 USD): 10%
- CRC 3,000,001 – 5,000,000: 20%
- Above CRC 5,000,000: 30%

Taxable Income

Net profit calculated as revenue minus deductible expenses
Includes operational income, local services, and Costa Rica-sourced investments

Deductions

Eligible business expenses include:

Salaries
Rent
Utilities
Professional fees
Business travel

➡️ See Blog: Opening a Bank Account for a Costa Rica Company (Coming soon) for managing cash flow and accounting.

3. Value Added Tax (VAT / IVA)

Costa Rica imposes VAT at 13% on most goods and services sold domestically.

Who Must Register?

Companies providing goods or services in Costa Rica
Foreign-sourced services delivered outside Costa Rica generally not subject to VAT

Filing Requirements

Monthly declaration to Hacienda
Payment of VAT collected on sales minus deductible VAT on purchases

Exemptions

Exported services and goods
Certain essential services

Proper classification ensures compliance while minimizing unnecessary tax exposure.

4. Social Security and Payroll Taxes

Companies hiring employees in Costa Rica must contribute to the Caja Costarricense de Seguro Social (CCSS).

Employer Contributions

Social security: 26.33% of salary
Includes health insurance, pensions, and work risk coverage

Employee Contributions

Deducted from salary: 10.34%

Foreign-owned companies with Costa Rican employees must strictly comply to avoid fines.

5. Reporting and Compliance Obligations

Annual Corporate Tax Return

Filed with Hacienda
Includes financial statements and income breakdown
Due March 15th of the following year

Monthly VAT Returns

Filed even if no VAT collected

Accounting Records

Maintain ledgers for at least five years
Include all invoices, receipts, and banking transactions

Non-compliance may result in:

Penalties
Interest on unpaid taxes
Suspension of company operations

6. Taxation of Foreign-Sourced Income

Foreign income is generally exempt, but documentation is critical:

Proof that income was earned outside Costa Rica
Contracts, invoices, and bank statements
Proper bookkeeping and accounting

Planning Tip:
Use international bank accounts and maintain clear separation of Costa Rican and foreign income.

7. Withholding Taxes

Certain payments made from Costa Rica to foreign entities may be subject to withholding tax, including:

Dividends
Interest
Royalties
Technical service fees

Rates depend on tax treaties and local regulations. Always consult a professional to avoid double taxation.

8. Tax Incentives and Special Regimes

Costa Rica offers incentives for:

Free Trade Zone (FTZ) companies
- Corporate tax exemptions
- VAT exemptions
- Payroll tax reductions
Export-oriented businesses
Technology and innovation companies

➡️ For more details, see Blog: Costa Rica Company Types Explained.

9. Choosing the Right Tax Structure

Selecting the correct company type affects:

Corporate tax rates
VAT obligations
Eligibility for incentives
Banking and investment flexibility

Examples:

SRL: Best for service-based foreign income
SA: Ideal for asset holding and investors
FTZ: Best for export and manufacturing

10. Common Tax Mistakes by Foreign Entrepreneurs

Treating Costa Rica as “offshore” and assuming all income is tax-free
Mixing foreign and domestic revenue
Underestimating payroll obligations
Missing VAT registration
Neglecting documentation

Avoiding these mistakes requires professional accounting and legal support.

11. How Bris Group Supports Costa Rica Tax Compliance

Bris Group provides:

Corporate tax registration and planning
VAT guidance and filing support
Payroll and social security compliance
Strategic advice for foreign-sourced income

Professional assistance ensures efficient, compliant, and optimized tax strategy.

👉 Explore our services:

Conclusion

Understanding Costa Rica’s taxation system is critical for foreign entrepreneurs and investors. With proper planning and compliance:

Corporate taxes can be minimized
Territorial taxation maximized
Legal and financial risk reduced

A well-structured Costa Rica company can serve as a credible, efficient hub for international operations.

If you wish to register a company in Costa Rica our team will be happy to help you there and provide you with more detailed information, please contact us

Taxation of Costa Rica Companies: What Foreign Owners Must Know