Legal Ease – Costa Rica Income & Sales Tax

Ivan Granados - JUN 05, 2017
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As per Costa Rican tax laws, any and all physical persons or legal entities (SA or SRL) that carry a business or conduct an activity that generates a profit within Costa Rica, are subject to income tax.

Currently, Costa Rica abides by a limited territoriality concept in taxation. Thus, Costa Rica only taxes the income that is derived from a Costa Rican source. However, you need to be careful about the Tax Office and the court’s interpretation of what constitutes a Costa Rican source. Therefore, seeking proper legal and accounting advice is highly advisable.

Costa Rica’s período fiscal (tax year) begins on October 1st and ends on September 30th, for both individuals and most legal entities.

In Costa Rica, the taxable income is based upon net income. Therefore, any legal entity or person generating income shall be duly registered as a taxpayer before the Dirección General de Tributación (Costa Rica’s Tax Office). Upon registration, the legal entity or person receives a Tax ID number and an authorization to have either hard copy or electronic invoices.

Depending on the type of business performed, the legal entity or person might be subject to not only the impuesto de la renta (income tax) but also to the impuesto de ventas (sales or vat tax).

Income tax is levied on both employment and self-employment income, with rates ranging from 10% to 30% for legal entities and 10% to 25% for individuals. The exempt amount is adjusted every year. Tax form D-101 needs to be filed on a yearly basis, on or before December 15th each year. The payment can be done either quarterly or in full on or before the stated date.

The vat tax stands at 13% and is levied both at the point of importation and at the point of sale (unless the sale is by way of export). Tax form D-104 need to be filed and paid on a monthly basis.

Vacation property rentals (houses, apartments, and condominiums) for periods of less than or more than one month are subject to both income and sales/vat taxes. Therefore, those who perform such activity must register and comply with the payments, in order to avoid fines and penalties.