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Income Tax in Costa Rica
Executive Decree Nº 44772-H, published in La Gaceta Nº 227 of December 3, 2024
Starting January 1, 2025, the Costa Rican Ministry of Finance officially updated the tax brackets applicable to individuals, both for employees, retirees, and self-employed individuals (freelancers or local PFAs).
What you need to know - Income Tax in Costa Rica
The Costa Rican tax system is based on the principle of territoriality, one of the most favorable for people who earn income from outside the country.
This means that only income earned in Costa Rican territory is taxed.
Any income obtained from external sources — whether it is remote work for a foreign company, dividends, rents or pensions from another country — is not subject to tax in Costa Rica, according to the legislation in force at the time of writing this article (2025).
This principle is essential for anyone thinking of moving, investing or working from Costa Rica, without having direct commercial links with the local economy.
🇨🇷 Also, local tax legislation does not differentiate between residents and non-residents when it comes to taxes on income of Costa Rican origin: what matters is the source of the income, not citizenship or residency status.
The update was established by Executive Decree Nº 44772-H, published in La Gaceta No. 227 of December 3, 2024, and reflects an adjustment of -0.79%, in accordance with the annual obligations provided for in article 33 of the Income Tax Law (No. 7092).
Note: In the Costa Rican tax system, self-employment and corporate income taxes are levied on net profits (income minus deductible expenses), not on gross income or total turnover. This differs from the accounting method used in other countries, where “income” can refer to total receipts without deductions.
Tax on salaries and pensions
Employees, Pensioners and Private Pensioners
Monthly installments 2025
It is calculated based on gross monthly income, as follows:
-
Gross monthly income (CRC) Tax rate
-
Up to ₡922,000 0% (exempt)
-
₡922.001 – ₡1.352.000 10%
-
₡1.352.001 – ₡2.373.000 15%
-
₡2.373.001 – ₡4.745.000 20%
-
Over ₡4,745,000 25%
Applicable tax credits
For each child: ₡1,720 / month – For dependent spouse: ₡2,600 / month
self-employed
Individuals with Gainful Activities
annual installments 2025
If you have a registered activity in Costa Rica (consultant, therapist, programmer, lawyer, etc.) and you invoice locally, the tax is applied on the annual net income (after deducting accepted expenses).
-
Annual net income (CRC) Tax rate
-
Up to ₡4,094,000 0% (exempt)
-
₡4.094.001 – ₡6.115.000 10%
-
₡6.115.001 – ₡10.200.000 15%
-
₡10.200.001 – ₡20.442.000 20%
-
Over ₡20,442,000 25%
Applicable tax credits
For each child: ₡20,640 /year – For dependent spouse: ₡31,200 /year
companies incorporated in Costa Rica
Legal Entities
Corporate income tax in 2025
For the 2025 fiscal year, companies incorporated in Costa Rica (e.g., limited liability companies – S.R.L.) will pay tax based on annual net profit, but eligibility for the reduced tax regime depends on the level of total gross income generated in that year.
➡️ If gross income does not exceed ₡119,629,000 (approximately $234,500), the company falls into a progressive taxation regime, with reduced rates applied to net profit.
Tax brackets and rates for microenterprises and small businesses – 2025:
-
Annual net income (CRC) Tax rate
-
Up to ₡5,642,000 5%
-
₡5.642.001 – ₡8.465.000 10%
-
₡8.465.001 – ₡11.286.000 15%
-
Over ₡11,286,000 (up to the ceiling of ₡119,629,000 gross income) 25%
➡️ If the company records annual gross revenues above ₡119,629,000, the general rate of 30% on net profit (as for large corporations) applies.
Important notes
- Companies must declare income and expenses at the end of the fiscal year (which coincides with the calendar year).
- The tax is applied to net accounting profit, not to gross income.
- Inactive companies (that have not carried out economic activity) still have annual reporting obligations.
- There is an obligation to use electronic invoices, even for freelancers or LLCs with a single partner.
CCSS & INS
Social contributions in Costa Rica
In Costa Rica, the public insurance system is managed by two main entities
CCSS – Caja Costarricense de Seguro Social
→ covers health and pension (equivalent to CNAS + CAS in Romania).
→ covers health and pension (equivalent to CNAS + CAS in Romania).
INS – Instituto Nacional de Seguros
→ provides compulsory insurance against professional risks and work accidents.
→ provides compulsory insurance against professional risks and work accidents.
A. For employees and employers
When you are employed in a local company, social contributions are shared between you and your employer.
Estimated values for 2025:
Estimated values for 2025:
| Contribution type | Percentage borne by the employee | Percentage borne by the employer |
|---|---|---|
| CCSS (pensions, health) | 10,34% | 26,33% |
| INS (occupational risk) | 0% | between 0.5% – 3%* |
➡️ The INS percentage varies depending on the company's activity (IT vs construction = big difference).
The employer is legally responsible for registering employees and paying contributions monthly, along with withholding tax on wages.
B. For employees and employers
If you work on your own (freelancer, liberal professional, micro-business), you must register individually with the CCSS as trabajador independiente.
The contribution is calculated based on the declared income.
In general, it varies between 12% and 18% of income. Payment is made monthly, directly by the taxpayer, through the CCSS account connected to the EDUS online service or physical offices.
In general, it varies between 12% and 18% of income. Payment is made monthly, directly by the taxpayer, through the CCSS account connected to the EDUS online service or physical offices.
🔹 What does it include:
- Social security (health)
- Pension contributions
- Contribution to Banca Popular (legal obligation)
- Optional: contribution to INS (for work accidents)
C. Benefits offered
👉 The public health system (CCSS) covers:
- Free medical consultations
- Investigations and treatments
- Admissions
- Births, surgeries and emergencies
🔹 Through contributions to the CCSS
You also have the right to a pension (with a minimum contribution period of 15 years).
IVA – equivalent to VAT
Value Added Tax
Since 2019, Costa Rica has applied a Impuesto al Valor Agregado (IVA), similar to the VAT in Europe. The standard rate is 13% and generally applies to: goods and services delivered within the country, commercial rents, subscriptions, bank commissions, professional fees, etc.
A. Who must collect VAT (IVA)?
Any individual or legal person registered in Costa Rica who:
- sells products locally,
- offers professional services to local clients (individuals or legal entities),
- rents real estate for commercial purposes.
It is mandatory to issue an electronic invoice with separate detailed VAT, through the official Hacienda system.
B. Services and income not subject to VAT
Not all income is subject to VAT. The following are exempt from collection, among others:
- income obtained from abroad (remote work for international clients),
- residential rents (homes, not commercial spaces),
- educational and religious services (authorized),
- some medical services, depending on professional status,
- sale of real estate between individuals, if it is not a recurring economic activity.
C. Special cases:
- Freelancers who work 100% with clients outside of Costa Rica do NOT have to collect IVA, but must have contribuyente status and file monthly tax returns with “0”.
- Individuals who carry out mixed activities (e.g. sell both locally and internationally) must separate income in billing and reporting.
The VAT return is submitted monthly through the ATV platform of the Ministry of Finance.
Even if you do not have VAT to pay, the return is mandatory.
The tax on
Capital Gains and Real Estate Transfers
In Costa Rica, the sale of real estate (land, houses, apartments) and other assets may generate specific tax obligations, in particular capital gains tax.
A. What is capital gain?
Capital gain represents the positive difference between the selling price of the asset and its purchase price (or the declared value in the case of inheritances/donations).
B. Applicable tax
- The capital gains tax is 15% of the net gain.
- This tax applies to both individuals and legal entities.
- It is declared and paid to the tax authority within the legally established deadline (usually, in the fiscal year following the sale).
C. Exceptions and important details
- For the main residence, there are certain exceptions, depending on the duration of ownership and the value of the transaction.
- If the property was acquired before the law came into force in 2019, there may be partial or total exemptions.
- If the sale is part of the usual business activity (e.g. real estate developers), the tax is applied as income from economic activity.
- Transfers of property that do not involve an economic transaction (inheritances, donations) may be subject to other specific taxes, not capital gains tax.
D. Additional taxes on property transfer
- Stamp and registration fee: approximately 1.5% of the transaction value, paid to the Public Registry and local institutions.
- Municipal tax related to the transfer of ownership.
- Other possible costs: notary fees, real estate agent commissions, legal fees.
recommendation
- Consult a qualified accountant or lawyer before selling to correctly calculate the taxes due.
- Keep all purchase and sale documents, as well as proof of investments made in the property.
- Find out if you are entitled to tax reductions or exemptions depending on your specific situation.
The analysis is based on official legislative texts and specialized press reports.
Conclusions – What you need to know about taxes in Costa Rica
Costa Rica offers an attractive tax system, based on the principle of territoriality, which means that only income obtained within the country’s territory is taxed. For those who work remotely or have external sources of income, this represents an important opportunity for tax optimization.
The main taxes for individuals are:
- Income tax, with clear and annually updated installments, both for employees, freelancers and liberal professions.
- Social contributions (CCSS and INS), mandatory for all employees and self-employed individuals.
- Value added tax added (VAT – 13%), applicable to most local transactions of goods and services.
- Capital gains tax and real estate transfer taxes, relevant especially for investors and owners.
It is essential to inform yourself correctly, to keep clear records of income and expenses and to respect the legal deadlines for declaration and payment.
For efficient management and compliance with the law, I recommend consulting a local tax specialist who can adapt to your particular situation.
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