What Taxes Apply to Foreign Residents and Investors in Costa Rica?
One of the biggest surprises for expats is how simple and favorable Costa Rica’s tax system is for foreign residents. Unlike the United States, Costa Rica taxes only local income — not worldwide income.
This means:
✔ Your Social Security is not taxed
✔ Your pension is not taxed
✔ Your dividends or investments abroad are not taxed
✔ Your IRA or 401(k) withdrawals are not taxed
✔ Your rental properties abroad are not taxed
But when you live, work, invest, or buy property in Costa Rica, several local taxes apply.
This 2026 guide breaks down every tax you may encounter as a foreign resident or investor.
## The Short Answer
Foreign residents in Costa Rica pay tax on:
✔ Local income (jobs, business activity, rentals, services)
✔ Property ownership
✔ Property sales (capital gains)
✔ Corporate activity
✔ Municipal services
✔ Luxury homes
Foreign income is not subject to Costa Rican tax unless it becomes Costa Rican–sourced.
Now let’s break it down clearly.
# Part 1: Income Tax for Foreigners
Costa Rica uses a territorial tax system.
✔ You only pay income tax on income earned inside Costa Rica.
✔ Income earned outside Costa Rica is tax-free.
## 1. Costa Rican–Sourced Income (Taxable)
Examples:
-
Income from a business in Costa Rica
-
Local employment
-
Local independent contractor work
-
Rental income from property in Costa Rica
-
Airbnb / vacation home income
-
Commissions from Costa Rican companies
These must be declared and taxed according to Costa Rican law.
## 2. Foreign-Sourced Income (Not Taxed)
Examples:
-
U.S. Social Security
-
Pensions
-
Retirements withdrawals
-
IRA / 401(k) distributions
-
Brokerage dividends
-
Foreign rental income
-
Foreign wages (unless performed in Costa Rica)
-
Investments abroad
Costa Rica does not tax foreign income — including for residents.
This is one of the reasons retirees and remote-income earners love Costa Rica.
# Part 2: Property Taxes for Foreign Residents
Foreigners who own property in Costa Rica must pay:
## 1. Annual Property Tax (Impuesto de Bienes Inmuebles)
Rate:
0.25% of the registered property value, paid to the municipality.
Example:
-
Home value: $300,000
-
Annual tax: $750
Costa Rica’s property tax is extremely low compared to the U.S. or Canada.
## 2. Solidarity Tax / Luxury Home Tax (Impuesto Solidario)
Applies only to homes whose construction value (not land value) exceeds a government-set threshold.
For 2026, the estimated threshold is around:
~$250,000–$275,000 (construction value only)
Rates vary between:
0.25% to 0.55% depending on property value.
This tax applies to the building, not the land.
## 3. Municipal Services Tax (Basura / Garbage)
Most municipalities charge a small quarterly or annual fee for garbage collection.
Typical: $40–$120 per year.
# Part 3: Capital Gains Tax
Implemented in 2019, capital gains apply when you sell:
-
Real estate
-
Vehicles
-
Shares in Costa Rican companies
-
Other capital assets
Rate:
15% capital gains tax
However, there are important exemptions.
## Capital Gains Exemptions
✔ If the property is your primary residence
No capital gains tax applies.
✔ If you owned the property before July 1, 2019
You may opt to pay a flat 2.25% on the sale price instead of 15% on the gain.
✔ Inheritance transfers
Generally exempt.
# Part 4: Rental Income Tax (for Airbnb or Long-Term Rentals)
Rental income from property located in Costa Rica is taxable, even for foreigners.
Rates:
15% tax on rental income
after allowable deductions.
Airbnb hosts must also charge:
13% IVA (sales tax)
on short-term stays.
# Part 5: IVA (Sales Tax) – 13%
Costa Rica charges a 13% VAT on goods and services, including:
-
Restaurants
-
Hotels
-
Legal and professional services
-
Airbnb stays
-
Tours
-
Mechanic and repair services
-
Online purchases through local providers
IVA does not apply to most essential foods and medicines.
# Part 6: Corporate Taxes for Foreign Investors
If you own a Costa Rican corporation (SA or SRL), you may be subject to:
## 1. Corporate Income Tax (on active companies)
Rates based on gross income:
-
Up to ₡112 million/year: 5–20%
-
Above ₡112 million/year: 30%
Small companies qualify for reduced rates.
## 2. Corporate Personhood Tax (Impuesto a las Personas Jurídicas)
Every SA or SRL must pay an annual tax:
-
Active corporation: approx. $200–$400
-
Inactive corporation: approx. $120–$150
## 3. Municipal Business License Tax (Patente)
If your corporation operates a business, you need a local business license.
Rates vary by municipality.
# Part 7: Import Taxes
Costa Rica charges import duties on goods brought into the country:
-
Vehicles (Tax can be 52–82%)
-
Electronics
-
Furniture
-
Appliances
Foreign residents often use shipping companies to estimate total import costs.
# Part 8: Taxes That Do NOT Apply to Foreign Residents
Foreigners in Costa Rica do not pay:
✖ Wealth tax
✖ Tax on foreign pensions
✖ Tax on foreign Social Security
✖ Tax on foreign capital gains
✖ Estate tax (Costa Rica does not have inheritance tax)
✖ State taxes like in the U.S.
Costa Rica’s tax system truly favors retirees and investors with foreign income.
# Part 9: Do You Need to File a Tax Return in Costa Rica?
Foreign residents must file a tax return only if they have Costa Rican-sourced income.
If you have no local income?
✔ No return required
✔ No tax owed
✔ No obligations
This is why pensionados and investors with purely foreign income love Costa Rica.
## Summary: What Taxes Apply to Foreign Residents and Investors?
✔ Local income → taxed
✔ Foreign income → NOT taxed
✔ Property tax → 0.25%
✔ Luxury home tax → 0.25–0.55% (if applicable)
✔ Capital gains → 15% (with exemptions)
✔ IVA → 13%
✔ Corporate tax → applies to active companies
✔ Inheritance tax → does not exist
Foreign residents with foreign income often pay very little tax in Costa Rica.
# Frequently Asked Questions
Do I need to pay tax on my U.S. pension?
No.
Is my Social Security taxed in Costa Rica?
No.
Are Airbnb rentals taxed?
Yes — 15% income tax + 13% IVA.
Does Costa Rica have state or municipal income taxes?
No — only national income tax.
Is there double taxation with the U.S. or Canada?
No — Costa Rica does not tax foreign income.
## Call to Action
If you’re planning to move, invest, or purchase property in Costa Rica, we can help you structure your residency, corporations, and real estate to minimize taxes, stay compliant, and protect your assets.
Costa Rica rewards smart planning — and we help you plan intelligently.
