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Corporate Taxation

The Costa Rican income tax system is based on the territoriality principal; therefore, only Costa Rican source income derived from real estate, movable assets, goods, services and services rendered or located in Costa Rica is subject to tax. This is regardless of citizenship, residence, or domicile.

The tax year is from October 2st to September 30th. Tax payers must file by Dec 15th. All costs and expenses necessary to generate taxable income and protect investments are deductable from gross income which is subject to revision by Tax Authorities.  Operating losses incurred by commercial enterprises may not be carried forward.  Corporate tax is levied based on the size of the taxpayer; therefore, small companies, or entities with gross incomes of less than around USD $ 150,000 are taxed at lower rates.

Dividends paid by corporation to individuals or to foreign entities are subject to a 15% withholding tax.  Dividends paid to another Costa Rican corporation subject to income tax are exempt from withholding taxes.  Employers are required to withhold income taxes from their employees on a monthly basis.

Capital gains are taxable and losses are deductible when derived from the sale of assets. Transfer taxes occur as 1.5% on a transfer of real property over the value of the property. In the case of vehicles a 2.5% tax is levied.

General sales tax applies for merchandise in Costa Rican territory. General sales tax is currently at 13% Corporations are permitted to purchase items tax exempt every three months as long as their value is under USD $ 4,000; whereas, individuals are only allowed USD $ 1,000 every six months.

Real Estate taxes are assessed on land, buildings, and other permanent structures. The tax is managed, assessed, and supervised by the municipalities having jurisdiction over the administrative locality where the property is located. Local governments are beneficiaries of property taxes. Property tax is 0.25% of the declared value and can be paid annually, semiannually, or quarterly.

Tourism Taxes include: three percent tax on lodging applied to daily room revenue, five percent tax on international transportation any type, departure tax is USD $26 paid by each foreigner or national leaving Costa Rican territory, and forestry claims three percent on timber.

Tax evasion is a crime that could incur economic sanction, minor tax crimes, incarceration for up to ten years, and seizure or confiscation of equipment.

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