May 17, 2022Remote taxes6 min read
How to set up your taxes in Costa Rica
Table of Contents
I.How to set up your taxes in Costa Rica?
1. 1.How it works
1. 1. 1.Social Security Contributions
1. 1. 2.Pros & Cons
1. 2.How to apply
1. 2. 1.How does Costa Rica benefit from this system?
Who will this be the most beneficial for? Remote workers and location independent workers who plan on spending more than 183 days in the country. Digital nomads planning on spending less than 183 days in-country may find this beneficial as there is no strict visa process involved when it comes to temporary entries. This visa is not a path to tax residency.
Difficulty of applying from 1-5: 4-5, due to the difficulty of obtaining the residency and the fact that all applications and documents required need to be in Spanish and notarised.
Are there any citizens of specific countries that can’t apply? There are no current restrictions for specific countries.
What % of the process can be done online? 0% for temporary long-term residency.
How to set up your taxes in Costa Rica?
To obtain a preferential tax rate in Costa Rica, you have to get a Rentista Visa first. Once you have gone through this process, you would be looking at a tax rate of approximately 25%, as most nomads fall into that bracket.
Although vaguely stated within the legislation, digital nomads should not have to pay tax on foreign-sourced income such as dividends.
The Costa Rican Rentista program is open to all applicants. Anyone can apply for temporary residency within the country, allowing them to stay for two years. This residency can then be further extended. After three years of living (totaling 183 days of the year in the territory), permanent residency status can be applied for and obtained. As a permanent resident, you’re only obliged to spend 72 consecutive hours within the country per year to maintain it. Permanent residency status still requires renewal every five years.
There is talk of a new nomad visa to be released, although nothing is yet confirmed. This visa would allow you to gain a one-year residency and open up the possibility of a year extension, and bypass bank deposit requirements. Legislation within the country is notoriously slow, so this visa may take a long time to come into existence.
How it works
Social Security Contributions
There’s a possibility that an additional 10.5% to 18.62% social security contribution could likely be applied to you in addition to what you’re already paying in tax; however, the official guidelines relating to this area are not clear regarding which tax applies to whom. Suppose you have a health insurance plan in place already. In that case, it’s likely that you will not have to pay this contribution, although, much like the taxation amounts mentioned above, there is no clarity in official legislation relating to this.
Costa Rican Tax Brackets for those on the Rentisa Visa:
*These rates are adjusted on a yearly basis, although fluctuations tend not to be significant.
Conversion taken at: 1.00 Costa Rican Colon = 0.0015169313 US Dollars Due to low brackets, the taxation for self-employed will effectively be approximately 25%.
Pros & Cons
- Costa Rica is one of the most desirable locations for nomads and travelers alike due to its pristine beaches and lush tropical forests.
- The country is a nomad hub and has a thriving community with great co-working spaces.
- You can enter the country on a tourist visa and then apply for a long-term residency visa.
- There are no strict visa laws in place regarding temporary entries.
- Those who obtain permanent residency are only expected to stay 72 consecutive hours within the country to maintain it.
- All documents you need to present to gain this visa status must be in Spanish and notarised.
- The legislation surrounding taxation is often convoluted or vague at best.
- To go through the visa process, you need to do it within the country, and there is no official online resource available to expedite the process.
- A significant bank deposit ($60,000) has to be made to qualify for the visa.
- The application process can take between 12-15 months.
How to apply
- Applying for residency in Costa Rica is done through the Direccion General de Migracion y Extranjeria (the General Directorate of Immigration and Nationality), better known as Migracion. Information about the different types of residency and how to apply can be found on their website under the Personas Extranjeras tab.
- A bank deposit of $60,000 USD must be made to a local bank to meet the requirements of temporary residency.
- Additionally, a commitment letter stating that at least $2,500 USD of funds will be made available each month must be acquired.
- Proof of regular income amounting to $2,500 from a guaranteed source must be presented. If you have dependents outside your immediate family, these requirements could be higher.
- At least two passport photos will be required.
- Proof of fingerprinting by the Ministerio de Seguridad Publica (Ministry of Public Safety) should be shown.
- Proof of registration within your country's embassy in Costa Rica will need to be presented.
- A birth certificate, complete with apostille (a special stamp usually issued by your local government proving the document is valid) and a police record, also apostilled, will need to be handed in.
- You may also need to provide a cover letter explaining why you wish to stay in Costa Rica.
- Importantly, all documents must be presented and notarised in Spanish.
It’s important to note that residency is achieved individually and cannot be extended to relatives if they do not meet the time requirements and monetary criteria for non-dependents.
Fees There are no official payable fees per se, but the bank deposit requirement of $60,000 still makes this a capital-intensive venture for any Nomad.
How does Costa Rica benefit from this system?
The Rentista program is specifically designed to attract high-income individuals into the country and encourage investment in Costa Rica.
Disclaimer: SafetyWing and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own independent tax, legal and accounting advisors before making any decisions or engaging in any transaction.
About the author
Researcher & Writer
Luke has been traveling around the globe for the last decade and is currently based in Chiang Mai, Thailand. He's been working remotely on everything from directing music festivals, to online ESL coaching, to writing and contributing as a researcher for Borderless. He is a passionate advocate for the modern nomadic way of life and enjoys getting others started on their journey towards remote living.
Founder | Business Strategy Consultant
The Consulting Company & Pnyca
Nick is a business strategy consultant, currently based in London but traveling the world. He is the founder of The Consulting Company, which specializes in startup and SME growth, finance, operations and tax optimization. Coming from a Mechanical Engineering background but with extensive knowledge in finance, tax law and project management, Nick is a problem solver at heart. He is also building Pnyca - an app reinventing democracy and citizen engagement.