Costa Rica Tax Tips
Costa Rica has a unique tax system. Unlike the United States and many other countries, large portions of income are exempt from taxation altogether here. Knowing where those breaks come in can save you hundreds or thousands of dollars. If you are considering setting up a business in Costa Rica, learning to navigate the tax landscape is critical to success.
For instance, Costa Rica’s minimum payment cutoffs for personal income taxes are very different from what many of us are used to paying. Those earning $800 or less working for a corporation in Costa Rica are not required to pay income taxes at all. Freelance workers also enjoy substantial benefits, earning up to $3,000 in self-employment income without having to file a personal income tax return. For comparison, the cutoff for self-employment tax in the United States is just $600.
The United States requires its citizens to file a US tax return no matter where they live, but under current US tax law, up to $78,000 in overseas income – that is, money earned outside of the United States – is excluded from income tax. For couples, the exclusion is nearly double ($144,000), meaning that many individuals and couples retain their US citizenship while paying little or no personal income tax to the IRS.
Unlike the United States and many other countries, Costa Rica only collects personal income taxes on income generated within the country. This and other exemptions and considerations should be taken into account when settling in or setting up a business in Costa Rica. As a rule, Costa Rican taxes run between 10 and 15 percent of annual income after all the various exemptions and deductions are factored into the equation. Professional help in English is available for the foreigner looking to both comply with the law and reduce his or her tax burden as far as possible.
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