Is Costa Rica A Fiscal Paradise?

At first glance, anyone you can ask about if Costa Rica is a fiscal paradise will give a powerful “no”, and this is not something that is a surprise since the country is well know for having one of the highest living cost in all America, when we take this into account we might be getting into something regarding CR not being anything close to a fiscal paradise, however, in some aspects, Costa Rica leads the list of the best places with lower tax rates, adding this up to a high stability of it’s economics and government, social balance and accelerated growth due the high international interest in the country due it’s vast natural resources, location, and low crime rate, it might not be a bad idea to consider moving your operations to CR depending of the type of activity you’re planning on executing in the know as the Central-American Switzerland.

Property taxes: In United States, the average property tax rate is 1.31%, compared to US, Costa Rica has a property tax of 0.25%, a 1.06% less than US. Panama has a 0.5% property tax, Nicaragua has a 1%, Belize has a 1.5%, Colombia has a 0.5%, this also taking into account that the average capital gain tax among all those countries is 15%, equal to the 15% fixed capital gain tax in Costa Rica, plus, even for investors that purchased their properties before 2019, the tax can be as low as 2.5% on the total sell price under certain conditions.

This can be considered if you’re planning on investing on real estate in Latin America, and will make huge differences through the years with also great capital gain opportunities, in Costa Rica, the real estate market is very active and the properties increase their value in an average of 10% annually.

Income taxes: United States averages an incredible 39% income tax, compared to a max 30% in Costa Rica, also for new entrepreneurs of mid and small businesses, there can be very good tax benefits by linking your company with MEIC (Ministry of Economics and Commerce), in @ConsultantsCR blog we have written a full article about all the tax benefits you can obtain by suscribing your business to this government institution for the support of micro, small and mid businesses.

The income tax on the CD’s or Certificates of Deposit: Another hidden advantage about Costa Rica is the performance of the certificates of deposit from banks and credit unions against the tax rates applied to them, the average performance rates in Costa Rica are:

CDP’s for corporations: The max annual performance of a CD in Colones can go as high as 7.8% with the Central Bank instruments (government bonds and other financial products) and as high as 6.4% with the national banking system while in US the average performance can be about 0.6%, this also adding up that national bank instruments and funds have the back up from the government with no amount limit. Now lets analyse the taxes, the CD’s from Costa Rican banks in Costa Rica are taxed 15%, this brings the 7.8% from the Central Bank instruments to a 6.63% and the 6.4% from the national banking to a still not despicable 5.44%, still a 4.84% over the average performances from CD’s in the US after taxes.

CD’s for a physical person: In the case of an individual, the credit unions are the best option to go for high performance rates, Credit Unions are very popular in Costa Rica, and they’re the entities that offer the most high interest rates, the CD’s in USD can go as high as 5.4% that with the 7% tax can result on a net 5.02% and for the CD’s in Colones the annual yield can go as high as 11% with a net performance of 10.16%, this, considering the continuous increase in the US dollar value against the CR Colon. By propertly analyzing the price and taking the right measurements in the exchange rate variations the performance of those financial products can be very attractive.

In following posts we will keep analyzing other very important facts about the opportunities of investing in Costa Rica.

In @ConsultantsCR, we’re business, tax and finance advisors, with over 25 years of accumulated experience, our job is to make your life easier so you can do what you’re best at! Don’t hesitate to contact us for more information at info@consultantscr.com or write us a WhatsApp text at +1 917 993-8055.

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