Costa Rica’s Income Tax – Expat Rules Are Now More Complicated

tax-manWe were going to write about this  six months ago, but when it comes to the government of Costa Rica, it can be heresy until it really happens. Or just a procrastration until something major happens like the  bridge tragedy. But when talking to an U.S account doing business in Costa Rica, he pretty much cut our conversation short because he had an important meeting with his accountant. This Monday, he has to file his annual report for his sales and purchases with the Dirección General de Tributación, the tax collecting agency. Okay, Costa Rica is just like any other country, when one owns, one is required to pay.

But unfortunately, those expat businesses  have a new surprise, this fiscal year these tax filings get more complex they will have to do the same every three months. Yes, three times a year one has to file a report on a two page form that lists all sales  they have made in the year to a single customer that total more than 2.5 million colons, about US$4,500.

They must also list their expenses for purchases or services for more than 2.5 million colons.

So rents, professional fees, commissions and interest need to be itemized. And transactions to a company or individual that total more than 50,000 (or about $90 US) during the fiscal year. In other words, something very minor, for example, a visit to a dentist that cost you US$100, has to be reported (expense) and the dentist must report the same as income. Tributación also wants a report every three months of any sales or other income for more than one base salary, which is estimated at 290,000 colons. That’s about $522.

It isn’t bad enough that the Government has increase taxes this year on cigarettes, toll fees, and gas, now they are tightening up its surveillance of the country’s economy so that most significant and insignificant or minor financial transactions must be reported by both sides. “Big Brother is Watching You” mentality many are complaining about.

However, taxing something like Costa Rica’s gambling income got major repercussion, and was put it on the back burner. The government continues to tax the little guy, or in this case, those foreigners that bring in big bucks to the economy, which have little or zero argument on their behalf.

Obviously, Tributación wants to keep a running tab on as much economic activity in the country as they can, claiming, so the proper amount of income tax can be assessed. And the Tributación has even gone high-tech where this info can be filed from software and online at their website.

But, according to several friends and business associates,  the system is always crashing, which will force those to file it at  Tributación office; many expect very long lines this Monday, and those that can afford it, will have their accountants and attorneys,  standing in those lines.

The bad thing, foreigners, who have not heard about this, are in for a surprise. We understand the late fees and penalties are pretty high!!

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  1. irk_music says:

    Dear Author !
    It is remarkable, it is the amusing answer

  2. RAY TOSTADO says:

    Nice to realize when on the brink of a $400k move from US to CR residency. Will likely have a big effect on my options to just rent.


  3. Nice job of putting this together into something that’s easy to understand. Thanks a million.

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