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, not in overall but in some aspects, Costa Rica leads the list of the best places for some of the taxes, adding this up to a high stability of it’s economics, social balance and government 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 Centro-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, for properties bought before 2019, the tax can potentially be 2.5% on the total 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.

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 wrote a full article about all the tax benefits you can obtain by joining your business to this government institution for the support of micro, small and mid businesses.

The income/tax ratio of the CDP’s: Another advantage very undiscovered about Costa Rica is the performance of the certificates of deposit from banks and credit unions against the tax rates applied to them, the best performance rates in Costa Rica goes as follows:

CDP’s for corporations: The max annual performance of a CDP can go as high as 7.8% with the Central Bank instruments (government bonds and IF) and as high as 6.4% with the national banking system while in US the average best APY 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 consider the taxes, the CDP’s from 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 best performances from US after taxes.

CDP’s or physical person: In the case of a physical person, with credit unions, that are the ones that offer the most attractive interest rates, the CDP’s in USD can go as high as 5.4% that with the 7% tax can become 5.02% and for the CDP’s in CRC the APY can go as high as 12% with a net APY of 11.16%, this, considering the continuous appreciation of the US dollar against the CR Colon, and making a good analysis and projection of the price in the case the investor wants to bring the money back to his country the performance of the investment 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 message at +1 917 993-8055.

Published by rdavidfallas

Blog writter & consultant.

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