Costa Rica Taxes

 

Costa Rica Source Income

 

The Costa Rican corporate income tax system is based on the “territoriality principle” which means that only income derived within the CR territory and from CR sources is subject to income tax. CR source income in relation to compensation is defined as all earnings received for personal services rendered in CR, irrespective of the location from which the salary is paid and the mode of payment. Regarding the corporate income tax rates we must say that there are not more than the 30% for the profits.

The following are the kinds of taxes in  Costa Rica

 Corporate Income Tax

 Corporate Rates

  

All US dollar amounts included herein are computed based on an exchange rate as of October 8, 2008 of 549.00 colones per US dollar.

 

The statutory tax year runs from 1 October through 30 September. Companies must file corporate income tax returns and pay taxes due within two months and fifteen days after the end of the tax year.

 

Advance income tax installment payments must be paid on March, June, Sept, based on the prior year’s income tax paid or the average of the last three years, whichever is higher. A 75 % of that amount is divided on three, and this is the payment to be done each three months, If, for any reason, a company did not file a return during the last three years, it computes its installment payments based on its last filed return, following the formula said . New companies must make quarterly payments based on their first-year projections, which must be filed with tax authorities on or before the last day of January. If no projections are filed, the tax authorities determine the quarterly payments based on an imputed amount.

 

Educational & culture Tax

In Costa Rica every legal entity (corporation) as well as its subsidiaries, or agencies of a foreign company, which are duly recorded in the Costa Rican Public Registry mercantile section, must pay an annual tax that is around $2 or $6 dollars per year depending on the Company.

Tax on Distributed Profits / Dividends

Whenever a corporation distributes its profits as dividends, the following tax is applied:

• When the profits are distributed to corporation partners, the corporation, for payment to fiscal authorities must withhold a 15% tax.
• When dividends are distributed by a corporation whose shares are registered in an officially recognized stock exchange, a 5% tax must be withheld only if the shares were acquired through a stock exchange.
• If the partner is another corporation also subject to this withholding tax and with its capital duly registered in Costa Rica, the tax is not applicable.

 

·         Income tax for the partners: called , the dividends paid to the partners are under this tax structure:

 

–           If the dividend is send it out of Costa Rica, the tax rate is 15% over the sum sent it (and the payer is obligate to retention of the sum and deposit in the Tax Administration). But if in the country where the shareholder lives or has his domicile, doesn’t accept this tax as a deduction, he can ask to our T.A. for an exemption, and then the dividend is sent without any retention.- If the residence country does not recognize the dividend and is not credited or reported in its declarations the tax authorities may exonerate the payment of that tax through a special process procedure.

 

–           If the dividends are paid here in Costa Rica, (residents) the taxation rate is 15%.

 

 

Commercial License

 

Known in Costa Rica as “Patente”, it depends on the type of business you have (selling products, services, or administrative services). You need a commercial license for running your business in the location, so the local government (or municipality) will issue an operating license for your business .Once this license is approved, a canon (quota) which in most all cases does not exceed $200 is due quarterly.

 

Annual Property Taxes

In Costa Rica if any corporation or individual owns a property must pay a determined amount of money in concept of property taxes to the Local Government (Municipalidades) in which the property is located. This property tax may be paid annually, by semester or by quarter depending on the procedures established by each Local Government.

All around the Country, the property taxi s .25% over the value registered of the property in the Local Government.

Sales Tax

Sales tax is 13% on the amount paid for (all) goods and for some services. In all cases if a company buys and or sales products, should pay or collect this tax. According with the taxes regulations, there is a list of services affected to this Tax. If services your company offer is in that list your should collect this tax.

Income Tax on salary.

In accordance with Costa Rican tax laws, employees are required to pay taxes on any income earned as a result of an employment contract. The employer is required to apply the appropriate tax withholdings on a monthly basis and report the taxes to the Tax Authority. This payment is made monthly.

 

In order to calculate the withholding tax, we need to use the following tax rate: