Income tax law in Costa Rica

Income tax law in Costa Rica

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The Income Tax Law was introduced to the Costa Rican tax system in 1988, through Law No. 7092; however, it has been reformed over time, one of the latest modifications being those introduced by the Law for the Strengthening of Public Finances.

This law is of great relevance for Costa Rican tax legislation, since it provides for different types of taxes to which Costa Rican taxpayers are subject, such as the profit tax, the single tax on income from work and taxes on remittances from abroad.

The purpose of this article is to inform the main aspects of each of the taxes established by this law.

Utilities Taxes

According to Article 1 of the Law, utilities tax is levied on legal entities, individuals or entities without legal personality, that are domiciled in the country and carry out lucrative activities in Costa Rica.

Generating Fact

Likewise, as indicated in Article 2, the generating fact of said tax will be the collection or accrual of income, whether in money or in kind, in a repeated or occasional manner, that comes from a profitable activity of Costa Rican source.

It is understood as such, that income or revenue that is generated in the national territory and that comes from goods located, capital used or services rendered in Costa Rica, during a certain fiscal period.

It will also be considered within such activities the obtaining of any capital income and capital gains or losses, from a natural or legal person.

Fiscal period

According to Article 4 of the Law, the fiscal period shall be one year and shall run from January 1st to December 31st, except for special rules.

Determination of the Taxable Base

Income tax is levied on net income, for which purpose certain expenses must be subtracted from gross income in order to determine the amount of taxable income, provided that they are directly related to the generation of income and that they have sufficient supporting documentation.

In this regard, it should be considered that the norm indicates certain expenses that are not deductible from gross income, according to article 9, such as the value of permanent improvements, income and sales taxes, profits or dividends paid to partners, among others.

Likewise, there are certain expenses whose deductibility is limited, such as non-banking interest, which may not exceed 20% of the company’s EBITDA (earnings before taxes, depreciation and amortization), as indicated in Article 9 bis, for which a correct interest rate must be agreed upon in order to proceed with the deduction.

Rate or Tariff

The utilities tax rate in Costa Rica depends on the gross income level of the taxpayer:

Gross Revenue

Up to ¢54.303.000,00

10 %

Up to ¢109.228.000,00

20 %
More of than ¢109.228.000,00

30 %

While gross income must be verified to establish the percentage of the fee, it should be considered that the tax will be calculated on a net income basis.


The due date for filing the income tax return will depend on each company’s year-end.

Single Tax on Employment Income

According to Article 32 of the Income Tax Law, individuals domiciled in Costa Rica who receive income from dependent personal work, retirement or other consideration for personal services are subject to this tax.

Taxable Income

The income that is affected by this tax will be the following:

  1. Wages, salaries, bonuses, commissions, overtime payments, royalties and bonuses.
  2. Per diems, gratuities and shares in the case of executives, directors and other members of a corporation, even if a relationship of dependence is not established.
  3. Other income of a similar nature to the above.
  4. Retirements and pensions from any system.

Tax Rate

According to Article 33 of the law, this tax will have a sliding scale fee, which will be applied to the net income.

Net Rental Rate

Up to ¢3.628.000,00

Not applicable

Over the excess of ¢3.628.000,00  up to ¢5.418.000,00

Over the excess of ¢5.418.000,00 up to ¢9.038.000,00


Over the excess of ¢9.038.000,00 up to ¢18.113.000,00

Over the excess of ¢18.113.000,00


Tax Credit

Taxpayers of the referred tax may take as a credit against it, the following:

  1. The amount ascending to ¢1.570,00, for each child, as long as this one is a minor, has some physical disability or is in higher studies.
  2. The amount of ¢2.360,00 per spouse, in case both spouses are taxpayers only one of them may take the credit.

Tax on Remittances from Abroad

This tax is levied on all income that is of Costa Rican source and is destined for foreign countries.

Generating Fact

This tax has as taxable fact the payment of the income or benefit of Costa Rican source, or the only disposition of these to persons not domiciled in Costa Rica.

Income from Costa Rican sources

Article 54 of the Law states that the following shall be considered income from a Costa Rican source:

  1. Those coming from real estate located in Costa Rica, which includes rentals, usufructs for onerous title.
  2. Those produced by the use of capital.
  3. Those originating from civil, commercial, agricultural or fishing activities.
  4. Those that are considered aguinaldo or also called thirteenth month that are paid or accredited by the State or by the private sector.
  5. Those payments for the use of patents, supplies, trademarks, royalties and insurance premiums of any kind.

Tax payer

Legal entities or individuals domiciled abroad that receive income from Costa Rican sources are considered taxpayers of the tax. However, the individuals or legal entities that make the remittance will be considered jointly and severally liable for the payment of the tax.


With respect to this tax, the taxable base will be the total amount of the income sent, which will be multiplied by a rate whose value will depend on the type of activity, with rates from 5% to 25%.

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