Tired of Paying High Taxes? - Come to Costa Rica!

by David Lovendahl

It is no secret that the American tax structure is a very complex system, which involves at least four levels of the government. These levels include the local government and one or more of these municipalities: the city, district, and county governments. Under certain circumstances, regional entities (schools, transit districts etc.) are also included apart from the state and the federal government.

Happy expats in Costa Rica.A sharp contrast to the above account is the tax structure in Costa Rica. Here, both residents and corporations pay taxes for income they have earned operating in the country. The financial year begins October 1st and ends on September 30th of the following year. Unlike the April 15th deadline the citizens of the United States experience each year, the Costa Ricans need not worry about ‘filing’ their taxes. Their low percentage due to their country is removed each payday automatically, therefore there is no need to file a return at year-end. In this country is is not only that inexpensive but it is that easy too.

The income tax that applies to both individuals and legal entities (excluding income derived from a foreign source) exempts the Government, local governments, and autonomous and semi-autonomous organizations. Income tax also applies to the religious institutions, associations, foundations, chambers, unions, political parties and other non-profit organizations. Employer-sponsored workers’ associations enjoy the exemptions as well as companies that are under the Free Zone status.

Visitors from other countries can reside in Costa Rica for three months depending on the country you are coming from. Foreign residents are allowed to rent or buy property and homes in Costa Rica. Compared to North America and other countries, property tax in Costa Rica is much lower. If you are a foreigner, you will not have to pay income tax on pensions or on profit generated outside the country. Sounds like very preferential tax treatment, compared to the United States, doesn’t it?