INDIVIDUAL TAXES
GENERAL NOTE
The information in this entry is current as of January 1998. For subsequent developments consult the contact listed above.
TERRITORIALITY AND RESIDENCE
Income taxes on individuals in Costa Rica are levied on local income
irrespective of nationality and resident status. For individuals domiciled in Costa Rica, any income obtained within the boundaries of Costa Rica is considered local income. For nonresident in Costa Rica, any income derived from business, goods sold or services rendered within Costa Rica is considered of local source and therefore taxable. However, nonresidents are liable only for the applicable withholding taxes, depending on the nature of the local income.
Independent of nationality, an individual is considered "resident" who is self-employed and has been living in Costa Rica more than six months of a taxable year and must file a regular income tax return. This period may be shorter if the person is employed and subject to payroll withholding taxes.
GROSS INCOME
Employee gross income/Individuals domiciled in Costa Rica are taxed on salaries, commissions, fees, royalties, and any other form of remuneration for services rendered, plus any interest and rental income received from local sources. Any income earned abroad while in residence in Costa Rica is not taxable, as indicated above.
Individuals with a monthly salary of less than CRC173,500 and self-employed individuals with annual income of less than CRC770,000 are exempt from income taxes.
The reimbursement of personal living expenses and travel expenses for individuals not formally domiciled is not subject to taxes. This would include the reimbursement of similar expenses for the taxpayer's family. Certain expense allowances at the discretion of the tax authorities are not subject to taxation, nor are they deductible for the payer.
Capital gains and investment income/At present there is no capital gains tax on the sale of real estate or securities.
Real estate transferred is taxed at 3%.
Domiciled individuals are subject to a 15% tax on interest on bearer documents except for those bearer documents registered at the local stock exchange, in which case the tax is 8%. This tax is withheld at source of payment. Income on investments from a foreign source is not taxable.
Foreign-domiciled individuals are subject to withholding taxes at the rates shown below.
%
Interest …………………………… 15
Dividends …………………………… 15
Director's fees, etc. ………… 15
Salaries …………………………… 10 or 15
Because rental income denotes a permanent physical establishment in Costa Rica, the landlord must file a regular tax return indicating total income less permitted expenses; the net income is subject to tax at regular individual graduated rates.
DEDUCTIONS
Business deductions/A domiciled individual, whether or not a national,
whose only source of income is salary for personal services cannot deduct business expenses, regardless of whether they are reimbursed or not. However, self-employed individuals and those whose source of income is from commissions(sales), fees, etc., may deduct up to 25% of the gross income as a deduction without itemizing the expenses or may elect to itemize the
expenses incurred in producing the gross income. Itemized deductions must be substantiated to the authorities upon request.
Non-business expense/The amount of legal annual bonus(Christmas bonus) that does not exceed one-twelfth of net salary (which is one-thirteenth of gross salary) is exempt from income taxes.
Personal allowance/Individuals are permitted the tax credits shown below.
MONTHLY ANNUAL
CRC CRC
Spouse……………………………………… … 200 2,400
Child(each)…………………………… ……150 1,800
The child allowance is permissible only if the child is a minor, is unable
to work or is a university student under 25 years of age.
TAX CREDITS
In accordance with Costa Rican legislation, there are no tax creditsallowed to
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