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Costa Rica Taxes for Foreigners

Posted by admin on September 1, 2013
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tax-costa-ricaLiving in Costa Rica means participating in their system as well. Taxes are handled a bit differently in Costa Rica than they are in the United States; each municipality collects its own property taxes, for example, which are due every quarter. Corporate taxes are also handled differently, as they are not required to be filed before the end of the Costa Rican fiscal year (September 30th.) If you have any questions or concerns about your tax obligations to the country, it is always best to consult a local law firm.

Land Tax

Land tax is a matter which is often neglected by foreigners who purchase property in the area, but not paying your tax obligation can have the same repercussions as it would in any other country. Taxes are paid to your local municipality every quarter, but can be paid in advance. Some municipalities offer a discount for advanced tax payment, so it is often recommended if you have the resources to do so. Your taxes will be assessed based on the size and location of the property, and that assessment will need to be performed every five years.

Income Tax

Regardless of which country you reside in, you may still be obligated to pay income taxes to your country of origin. United States citizens who have resident alien status in Costa Rica still have a tax obligation for income to consider, which includes filing your taxes to the IRS by the same deadlines. You’re obligated to submit Form 2555 for Foreign Earned Income. If your foreign income is less than $80,000, or your return is not for a short year, then you may be able to file for Form 2555-EZ, or Foreign Earned Income Exclusion.

Your tax obligations can include:

Foreign income
Rental income from foreign properties
Foreign capital gains, including real estate sales or purchase
Foreign royalties

You are still eligible to file for certain exemptions and deductions in your claim, just as you were when you lived in the United States. If your employer in Costa Rica withholds foreign taxes, you can’t consider that as withheld taxes for your Form 2555, but you may be able to get deductions and credits based off any foreign taxes paid. Review the form carefully to understand what your tax obligation for the year will be.

Other countries, such as the United Kingdoms, may have their own foreign tax laws as well. Review the tax codes for your country of origin regarding foreign income, or speak with a legal tax professional about what your obligation may be.

Other Tax Considerations

As per life in any country, you will be subject to sales tax, employer-deducted income tax, and taxes on your vehicle. You may also face additional duties or import taxes if you import any goods. When and if you depart from Costa Rica, you will have to pay a departure tax should you decide to leave by air travel. Other taxes may apply to services like health care, transportation, and more.