SIGNIFICANT DEVELOPMENTS
There have been no significant tax or regulatory developments regarding individual taxation in the past year. The information in this entry is current as of January 2001.
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 nonresidents, any income derived from business, goods sold, or services rendered within Costa Rica is considered local-source income and is therefore taxable. However, nonresidents are
liable only for the applicable withholding taxes, depending on the nature of their local income.Independent of nationality, an individual who is self-employed and has been living in Costa Rica for more than six months in a taxable year is considered "resident" and must file a regular income tax return. Although foreign employees are considered "nonresident aliens" during the first six months of working in Costa Rica, their salary will be taxed from the beginning of their work period. However, during the first six months, this salary will be subject to withholding tax of 10%; after the end of
this period, the employee will be considered resident, and all the ordinary rules for residents will be applied. The employee does not have to file an income tax return. The employer must file a monthly return for the payment of salary withholdings. This payment is made directly to the tax authority within the first 10 days of the following month the withholdings are made.
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.As of October 2000, individuals with a monthly salary of less than CRC241,500 and self-employed individuals with an annual income of less than CRC1,073,000 are exempt from income taxes.For individuals not domiciled in Costa Rica, the reimbursement of personal living expenses and travel expenses is not subject to tax. This would include the reimbursement of similar expenses for the taxpayer's family.
Certain other expense allowances are also not taxable, although they are then not 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 1.51%.Domiciled individuals are subject to a 15% tax on interest on bearer documents, except for bearer documents registered with the local stock exchange, which are taxed at 8% . This tax s withheld at source. 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
Directors' fees, etc. 15
Salaries
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