Costa Rica Taxes 101

WHAT DO YOU NEED TO KNOW ABOUT YOUR TAXES IN COSTA RICA?

The Costa Rican tax administrator in Costa Rica is ¨Ministerio de Hacienda¨, this institution is divided in three grand departments which are the DGT (General Tax Administration), DGH (Tax Administration), DGA (General Customs Administration).

There are tax administration branches in certain strategic places all over the country, each one of them is responsible for a different area, so when you plan to visit one make sure the branch you´re visiting correspond to the place where you have founded your business.

There are no restrictions on how or who can do business in Costa Rica, foreign people can get a NITE (special tax identification number), that equals to having a Costa Rican id for tax purposes, you need a NITE whether you are doing business personally or through a corporation.

Registering yourself or a corporation can be a very stressful process if you don´t know how to do it, normally the people rely on their accountant to do this process for them instead.

The list of economic activities is extensive for both personal and corporation businesses, with one single corporation or physical person you can have as many economical activities as you want as long as those are registered and reported to the tax administration.

What type of documents has to file a corporation with no economic activity holding one or multiple property only?

The taxes for a corporation that is used to only handle their assets are the following:

  • Luxury tax (for homes with values over 133,000,000.00 colones or $225,000.00 approximately), this tax is filed each 3 years with the form called d-179, and the tax is paid yearly at the beginning of the year, the base rate is 0.3% of the value of the home.
  • Property tax, any property in Costa Rica has to be declared at the local government each 4 years, from the property tax form the municipality calculates the annual property tax to be paid, the property tax is due in February of every year, the rate is 0.25% the value of the property.
  • Corporation tax, this is a tax paid to the tax administration, it´s paid annually and the rate depends on the income of the corporation, for corporations with no economic activity the property tax is usually around $120 a year.
  • Stamps for education and culture, this is a small tax that paid every year, it goes along the corporation tax and its calculation depends on the income of the company, for corporations with no economic activity it is usually round $40 a year.
  • The property tax for vehicles is included on the annual payment called ¨marchamo¨, this is an annual fee that the car holders pay to the government as a right to circulate through the national roads.

If you own a corporation for having your property and assets in Costa Rica and need to know more about the new requirement from the CR Tax administration please visit our blog post ¨New tax form for inactive corporations¨.

What type of documents has to file a corporation with economic activity?

Besides the taxes mentioned above, the variety of taxes on a corporation with an economic activity depends on the nature of the activity, each case has to be analyzed separately, but generally the following are the possible tax types:

  • Traditional income tax: The traditional income tax corresponds to the tax that is calculated using the income through the year and subtracting the costs and expenses, the remaining amount will be taxed with the traditional income tax, the form for this tax has to be filed annually for regular economical activities and monthly for rental incomes for homes that are rented for vacation purposes.
  • Capital gain tax: The capital gain tax corresponds to the tax that is paid when an asset is sold and there is a profit due the asset has increased their value through the time, as an example, if you buy a property for $10,000 and a year later your sale it for $15,000 you´re taxed 15%, this tax form is filed when the sell process of any asset is giving.
  • In mobiliary rental tax: The mobiliary rental tax is a special income tax for corporations or physical persons who have homes that are rented for vacation purposes (in periods less than one calendar month), in this case the form has to be filed monthly.
  • In-source retainer: The retainer is a tax that is applied to salaries over $1,400.00 approximately, a variable % has to be ¨retained¨ based on brackets that are stablished by the TA every year, those tax amounts have to be retained by the employer and paid directly to the tax administration in a monthly basis.
  • Dividend tax: When a corporation is making dividend distribution between their shareholders, a 15% dividend tax has to be retained to the shareholders by the company and paid to the tax administration, there is a special form for this tax as well.
  • Value added tax: The value added tax is a tax applied to the consumption of goods and services in Costa Rica, this tax is called ¨transferable¨, which means it starts being charged by the fabricator to the distribution businesses and finally paid by the final consumer, which means if you have a business buying and selling goods for example you will collect the tax and pay it to the tax administration only on the portion of your margin, not the entire value, as a clear example, if you bought an item for $113 ($100 value + VAT), and you sell it for $150 + VAT, you have a tax credit of $13, which means the final tax amount to be paid is $6.5 only ($19.50 Vat on sell minus $13 Vat on purchase). The VAT tax form is a form that has to be filed every month and it´s one of the taxes that involves the most work accounting wise.
  • Selective consumption tax: This tax is filed when an import is done, also for goods fabricated and sold in the country.
  • Other taxes:
    • Transfer tax: Tax generated at the transfer of a tittle from one owner to the other.
    • Casinos
    • Investment funds
    • Fuel and other energy sources
    • Alcoholic and no alcoholic beverages

Retainers of VAT and Income tax on the credit-debit card machine and other bank-related payment tools

The tax administration along the national banking system holds a percentage of funds when a customer makes a payment to a commerce, those retainers are accumulated through the year and are applied to both VAT and income tax forms as a tax credit monthly and/or at the end of the year, if you have a business and you receive cards you need to have into account that besides the commission from the bank (typically 2.5%), you will also be retained 2% income tax and a range from a 1% to 6% of VAT tax.

In ConsultantsCR, we´re a network of qualified professional for all your needs in Costa Rica, we are compromised with providing support to our customer and make their ideas a reality before, during and after, we´re here to make your business idea profitable and sustainable, feel free to contact us anytime.

Published by rdavidfallas

Blog writter & consultant.

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