Legal reforms are not frequent in Costa Rica, and occur approximately every four years, as they require a legislative approval process.

When a reform project is prepared, the deputy or group of deputies introducing the bill submits the proposed text to the Legislative Directory. The directory then assigns it to a special commission for further evaluation and review.

The commission may propose both formal and substantive amendments to improve and correct any deficiencies in the draft. The bill can also be sent to the Constitutional Chamber for a constitutionality review (where the Constitutional Chamber issues a favourable opinion, the bill is placed on the Legislative Plenary’s agenda for first reading).

If it passes the first debate, it is sent to a drafting commission where the final text is reviewed before proceeding to a second debate.

If it’s approved in the second reading, it is forwarded to the Executive Branch. The President of the Republic then has the authority to either enact the bill or veto it. If the President vetoes the bill, the Legislative Assembly may override the veto, thereby enacting the bill into law.

Section 128 of the General Tax Code outlines the obligations of taxpayers operating in Costa Rica. It specifies the requirement for taxpayers to properly register and keep their information updated with the tax authorities. Key obligations include maintaining accurate accounting and financial records in strict compliance with the principles set forth in the International Financial Reporting Standards (IFRS), as well as correctly reporting income and expenses.

On July 24th, 2025, the Tax Administration announced on the official website the resolution MH-DGT-RES-0026-2025 – “Resolution regarding the submission of the Informative Return on Transfer Pricing”.

The main points of this resolution are detailed below:

• Obligated Parties: Those who carry out national or cross-border transactions with related parties and are classified as large national taxpayers or entities operating under the free trade zone regime. Additionally, taxpayers who carry out operations with related parties that, separately or jointly, exceed the amount equivalent to 1,000 base salaries in the corresponding year, i.e., ¢462,200,000, will also be obliged.
• Deadline for submitting the informative return: It must be submitted within six months following the end of the taxpayer’s authorized fiscal period and will cover all transactions carried out with related parties during the income tax period.
• Submission: It will be done online through the virtual office of the “Integrated Tax Management System TRIBU-CR.”

In addition, recent developments show increased supervisory attention to compliance with the Common Reporting Standard (CRS), also known as the OECD’s Standard for Automatic Exchange of Financial Account Information (CRS/AEOI), including its accompanying commentaries. This regime is particularly relevant to financial institutions and other entities subject to CRS reporting obligations; it is not a general reporting obligation applicable to every ordinary taxpayer.

The Costa Rican legal framework for CRS supervision includes:

• Article 106 quater of the General Tax Code, which authorizes the Tax Administration to request financial information for exchange with other jurisdictions under international agreements and to supervise, verify, and monitor reporting entities’ compliance with CRS-related obligations.
• Annual Resolution establishing the objective selection and risk-based criteria for CRS supervision, verification, and monitoring. These criteria include, among others, late or missing CRS filings, incomplete or inaccurate information, deficiencies in internal controls or due diligence procedures, and failures to maintain supporting documentation for the required five-year retention period.
• Resolution MH-DGT-RES-0012-2025, which sets out the due-diligence rules for supplying CRS information and aligns the applicable framework with the amendments to Article 106 quater. This resolution replaced the prior general CRS due-diligence resolution.

Accordingly, entities subject to CRS reporting should ensure that their account-classification, due-diligence, self-certification, reporting, internal-control, and record-retention procedures are properly documented and consistently applied, as these are currently subject to enhanced review by the Tax Administration.

The Ministry of Finance is primarily organized around two Vice Ministries:

• The Vice Ministry of Revenue, which is responsible for the administration, collection, control, and enforcement of public revenues. Its principal bodies include the Directorate General of Taxation (Dirección General de Tributación or DGT), the Directorate General of Customs (Dirección General de Aduanas or DGA), the Directorate General of Finance (Dirección General de Hacienda or DGH), and the Fiscal Control Police.
• The DGT is responsible for the administration of internal taxes, including taxpayer registration, filing obligations, audits, assessments, tax collection, and taxpayer assistance.
• The DGA administers customs duties and related border-control matters.
• The DGH performs functions related to the administration and control of certain public revenues and fiscal matters; it should not be described solely as an office responsible for tax exemptions.
• The Vice Ministry of Expenditure, which is responsible for the public-finance functions associated with the administration of government expenditure. Its remit includes, principally, the national budget, treasury, public accounting, and public credit/debt management.

Within the Vice Ministry of Revenue, the DGT operates through specialized functional areas. These offices interact with taxpayers through taxpayer-assistance services, registration and filing administration, compliance monitoring, audits, assessments, and collection procedures.

Tax controversies are addressed through administrative procedures, including audits, determinations or assessments, challenges, and administrative appeals. Depending on the matter and the applicable procedure, disputes may ultimately be reviewed by independent administrative bodies, such as the Administrative Tax Court (Tribunal Fiscal Administrativo), or by the judicial courts, including the Contentious Administrative Court (Tribunal Contencioso Administrativo).

If irregularities are detected in a taxpayer’s returns, the Tax Administration itself initiates a Determinative procedure to make the necessary adjustments.

This procedure includes two stages of appeal, the final one being heard by the Administrative Tax Court. This court is an independent body with full jurisdiction, separate in its organization, operation, and competence from the Executive Branch. Its rulings exhaust the administrative process. The entire procedure can take up to two years to complete.

After this final act, the taxpayer has the option to escalate the dispute to the judicial venue before the Contentious Administrative Court.

The payment deadlines depend on the type of tax in question. For example, income tax follows an annual tax period, while sales tax is settled monthly. Another relevant case is the capital gains tax, which must be declared at the time of accrual.

Generally, the declared amount must be paid at the end of the tax period. However, if the Tax Administration issues an ex officio determination that increases the declared amount, the taxpayer must pay the additional amount once the dispute is resolved.

Yes, the administrative tax procedure and its files are confidential to third parties, including during hearings. This is established in Article 117 of the General Tax Code.

Yes. Costa Rica participates in the OECD Common Reporting Standard (“CRS”) framework for the automatic exchange of financial account information. Costa Rica implemented the CRS/AEOI standard and commenced exchanges in 2018; it subsequently began reciprocal exchanges in 2020.

The domestic framework includes Article 106 quater of the General Tax Code and regulations requiring financial institutions to conduct due diligence, identify reportable accounts, maintain supporting records, and submit the required information to the Tax Administration.

Costa Rica also maintains a beneficial ownership register, the Registro de Transparencia y Beneficiarios Finales (“RTBF”), established under Law No. 9416 (Law to Improve the Fight Against Tax Fraud) and regulated by Executive Decree No. 44390-H. Legal entities and other covered legal arrangements, including certain trusts, third-party asset managers, and non-profit organizations, must report the information required to identify their beneficial owners.

The RTBF is administered through the Central Bank of Costa Rica’s “Central Directo” platform, and declarations are generally filed annually, with extraordinary filings required upon certain ownership or control changes. Joint Resolution MH-DGT-RES-0020-2024 / DG-336-2024.

However, RTBF is not a fully public beneficial ownership register. A public consultation is available to verify compliance with the reporting obligation, but detailed beneficial ownership information is subject to restricted access and authentication requirements. The information is principally available to competent authorities for tax administration, anti-money-laundering, supervisory, investigation, and international-cooperation purposes.

Every entity that carries out economic activities has the legal duty to register with the Tax Administration. If this is not done, the competent authorities may carry out crosschecks with other state entities in order to corroborate the situation.

Yes, the Costa Rican tax authorities do target crossborder transactions within international groups. If any irregularities are detected in intercompany transactions and affect the local tax base, the authorities can initiate an audit to analyze the legality of the agreements and the accuracy of declared income and expenses.

The Tax Administration is empowered to request any type of documentary support to substantiate the transactions under review. Therefore, it is crucial for companies to document and maintain records of all transactions. It is important to note that Costa Rica operates under a principle of territoriality.

This means that while the tax authorities can challenge payments, expenses, royalties, that impact the local taxpayer, they do not have jurisdiction over entities outside of Costa Rica.

Currently, there is no individualized control regime for foreign entities that are related to companies located in the national territory.

a) Costa Rica has a statutory transfer pricing regime. Under Article 81 bis of the Income Tax Law, transactions between related parties—whether domestic or cross-border—must be valued in accordance with the arm’s-length principle, using the prices and consideration that independent parties would agree in comparable transactions.

The Tax Administration may make corresponding adjustments where the agreed price or amount does not meet that standard. The regime applies where the related-party pricing results in lower Costa Rican taxation or a deferral of tax.

b) Costa Rica does not operate a traditional debt-to-equity thin-capitalization ratio applicable generally to related-party debt. However, it has an interest-deduction limitation that operates as an anti-base-erosion measure. Under Article 9 bis of the Income Tax Law, net interest expense is generally deductible only up to 20% of EBITDA (UAIIDA under Costa Rican law) for each tax period. Excess net interest may be carried forward and deducted in subsequent years, subject to the same limitation. Certain interest paid to regulated financial institutions is excluded from the calculation, subject to the Tax Administration’s verification powers. Income Tax Law No. 7092, art. 9 bis.

c) Costa Rica does not provide a general transfer-pricing safe harbour. Related-party transactions must therefore be tested under the arm’s-length principle, using the applicable comparability analysis and transfer-pricing methods.

Yes. Costa Rica has an express general anti-avoidance rule (“GAAR”) in Article 12 bis of the Code of Tax Rules and Procedures. The GAAR applies where one or more acts are artificial or improper for achieving the result obtained and do not produce relevant economic or legal effects other than the tax saving. In those circumstances, the Tax Administration may disregard the chosen arrangement and apply the tax consequences that would correspond to the usual or appropriate acts for achieving the relevant economic result. Code of Tax Rules and Procedures, art. 12 bis.

This rule operates alongside the broader economic-reality principle in Article 8 of the Code. Under that provision, the legal form adopted by taxpayers is not binding for tax purposes where the taxable event is defined by reference to economic reality rather than legal form. Where legal forms are manifestly inappropriate to the underlying facts and result in a reduction of the tax liability, the Tax Administration may apply the tax law without regard to those forms.

In practice, the GAAR is principally enforced through a tax audit or abbreviated verification procedure. The Tax Administration must investigate the relevant facts and issue an initial proposed regularization or assessment. If the taxpayer does not regularize its position, the Administration must formally notify the observations or charges and explain the proposed adjustment.

Yes. Costa Rica applies its general 13% value-added tax (VAT) to cross-border digital services and intangible goods that are supplied by non-resident providers and consumed in Costa Rica. This is not a separate digital-services tax; it is the ordinary VAT applied to services supplied through the internet or other digital platforms, including, for example, streaming services, software, applications, online subscriptions and other digital-content or platform-based services.

There is currently no specific intention to withdraw or amend this tax once a multilateral solution is in place.

Yes, the Tax Administration updates its audit plans annually based on OECD guidelines to optimize and strengthen the collection and correct payment of taxes to the State coffers. Costa Rica is committed to implementing the OECD’s Base Erosion and Profit Shifting (BEPS) recommendations, including measures from the recent two-pillar solution to address tax challenges arising from the digitalization of the economy.

Cooperation and Development (OECD) has had a significant impact on the country’s tax policies. Costa Rica has adopted the actions of the OECD’s BEPS Project, which aims to combat aggressive tax planning practices that erode the tax base and shift profits to low- or no-tax jurisdictions. This includes implementing measures such as transfer pricing documentation and adopting standards to avoid double taxation.

The OECD has promoted the strengthening of tax administration in Costa Rica, encouraging the modernization of processes and systems within the General Directorate of Taxation (DGT) to improve tax collection and control.

Yes. Costa Rica’s tax system covers the principal categories typically found in OECD jurisdictions, including taxation of business profits, employment income, consumption, capital income, real estate, capital gains and certain transactional taxes.

However, Costa Rica’s income-tax system remains predominantly based on a territorial-source principle. In general, income derived from Costa Rican sources is taxable, while foreign-source income is outside the general tax base, subject to limited statutory exceptions.

The principal taxes and rates are as follows:
a) Business profits. Corporate income tax generally applies to net business income. The general rate for legal entities is 30%. Exceptions and lower rates may apply depending on the level of annual gross income and specific circumstances.

b) Employment income and pensions. Employment income, pensions and retirement payments are generally subject to a progressive monthly withholding tax. For 2026, income up to CRC 918,000 per month is exempt; the progressive rates are then 10%, 15%, 20% and 25%, with the top rate applying to monthly income exceeding CRC 4,727,000.

c) Value-added tax (VAT). Costa Rica imposes VAT on the habitual supply of goods and services, as well as on imports and certain cross-border supplies. The standard VAT rate is 13%. Reduced rates of 4%, 2%, 1% and 0.5% apply to specified goods and services, while exemptions apply in defined cases, including certain financial services, exports, particular residential leases, public transport and other activities specified by law. VAT Law No. 6826, arts. 8, 10 and 11.

d) Savings income and royalties. Costa Rica taxes capital income under a separate regime. The general rate for capital income and capital gains is 15%. This includes, in principle, interest, dividends, royalties and other returns from capital, subject to statutory exemptions and special rates. Interest earned on balances in savings accounts and current accounts is exempt; however, it would not be accurate to state that savings income is generally untaxed.

Royalties are generally taxable as capital income when derived from Costa Rican sources. Payments to non-residents for the use of patents, formulas, trademarks, franchises and royalties are generally subject to a 25% withholding tax, unless reduced by an applicable tax treaty. Income Tax Law No. 7092.

e) Income from land. Rental income from real estate is generally taxed as capital income at 15%, subject to the applicable rules for deductions and the classification of the activity. In addition, Costa Rica levies an annual municipal real-property tax at 0.25% of the value of the property recorded by the relevant municipal tax authority. Property Tax Law No. 7509, arts. 9 and 23.

f) Capital gains. The general tax rate on capital gains is 15%. This rate applies to gains derived from the sale of assets, including real estate and securities.

g) Stamp and capital duties. Costa Rica does not impose a general capital duty comparable to those historically charged upon the formation or capitalization of companies. The country does, however, impose certain transaction-based taxes and charges. For example, transfers of Costa Rican real property are subject to a 1.5% real-estate transfer tax, in addition to applicable registration fees and other charges.

Yes, in Costa Rica, business tax is generally levied on the revenue profits of a business as computed in accordance with accounting principles. The financial and accounting records form the basis for determining the taxable base that the taxpayer will declare to the Tax Administration.

Businesses can maintain their accounting and financial records using computer systems of their choice, provided that the accounting complies with the principles of registration and information established in the regulatory standards. In the absence of specific local standards, businesses must adhere to the International Financial Reporting Standards (IFRS) adopted by the College of Public Accountants of Costa Rica.

However, it is important to note that if there is any conflict between accounting principles and tax regulations, the provisions of the tax regulations will prevail for tax purposes. This ensures that the tax laws take precedence over accounting standards when determining taxable income.

In summary, while accounting principles and standards play a crucial role in the computation of revenue profits, tax regulations ultimately govern the determination of the taxable base in Costa Rica.

Yes, common business vehicles in Costa Rica, such as companies, partnerships, and trusts, are recognized as taxable entities. These vehicles are subject to the country’s tax obligations, meaning they must register, file tax returns, and pay taxes according to the applicable laws and regulations.

Costa Rica’s tax system is based on the principle of territoriality. This means that any service or good commercialized within the country’s territory is of Costa Rican source.

On August 7, 2023, a Special Commission of the Legislative Assembly approved amendments to the Income Tax Law to further clarify the territoriality principle. According to the new text, Costa Rican source income or benefits are those generated exclusively within the national territory, in line with the territorial space defined by the Political Constitution.

The new amendments also specify that, exceptionally, passive income derived from assets located or rights economically utilized outside the national territory will be considered Costa Rican source income if it is obtained by an entity that is part of a multinational group and lacks economic substance.

Yes, Costa Rica offers favorable taxation regimes, most notably through the “Free Trade Zone Regime Law.”. This law provides a set of incentives and benefits to companies making new investments in the country, provided they meet the requirements and obligations established in the law and its regulations.

The Free Trade Zone (FTZ) is a designated area where goods can be stored, manufactured, or processed without being subject to customs duties. In Costa Rica, the FTZ is a delimited territory, meaning its perimeter and access points are supervised by customs authorities.

Companies operating within the FTZ engage in industrial or commercial activities and receive specific tax benefits as part of an economic promotion strategy.

These benefits can include exemptions from customs duties, income tax, and other local taxes, making the FTZ an attractive option for foreign and local investors looking to expand their operations in Costa Rica. This regime aims to stimulate economic growth, attract foreign investment, and create jobs in the country.

Currently, Costa Rica does not offer a special tax regime specifically for intellectual property, such as a patent box.

No, fiscal consolidation is not permitted in Costa Rica. The tax system does not allow for the consolidation of financial statements for tax purposes across a group of companies. Each company within a group is required to fulfill its tax obligations individually, without the ability to offset losses or gains across the group.

In Costa Rica, economic groups are recognized for certain regulatory and administrative purposes, but this recognition does not extend to tax consolidation. Instead, the tax system treats each entity as a separate taxpayer.

Companies classified as “large taxpayers” are subject to specific criteria and may receive closer scrutiny from the tax authorities, but their tax compliance remains an individual responsibility.

Therefore, there is no group contribution system or mechanism to relieve losses across group companies in Costa Rica.

Yes. Costa Rica applies withholding-tax mechanisms to several categories of payments. The principal withholding obligations include the following:

• Employment income: Employers must withhold and remit income tax from salaries, pensions, retirement payments and other employment-related remuneration. The withholding is calculated under the progressive monthly wage-income scale and generally constitutes the final income tax for individuals who receive only employment income
• Domestic capital income: Certain payers must withhold income tax on specified capital income, including, as applicable, dividends, interest, income from investment funds, royalties and other income from movable or immovable capital. The general rate applicable to capital income is 15%, although exemptions, special rates and transaction-specific rules may apply. For example, interest earned on balances in savings accounts and current accounts is exempt. Income Tax Law No. 7092.
• Payments to non-residents: Payments or credits of Costa Rican-source income to non-resident individuals or entities are generally subject to the remittance tax (impuesto sobre remesas al exterior), which is collected through withholding by the Costa Rican payer. The applicable rate depends on the type of income.
• Specified services and other domestic payments: Costa Rica also imposes withholding obligations on particular domestic payments, such as certain professional fees, commissions, directors’ fees and other payments specified by the Income Tax Law and its regulations. The applicable obligation and rate depend on the nature of the payment and the status of the recipient; they should therefore be assessed on a transaction-by-transaction basis.
• VAT collection and withholding mechanisms: VAT is generally charged, collected and paid by the supplier of taxable goods or services, rather than withheld by every purchaser. However, the law provides for specific withholding or payment-on-account mechanisms. In particular, entities that process credit- or debit-card payments may be required to withhold up to 6% of the net amount of taxable sales paid to an affiliated merchant, as an advance payment of that merchant’s VAT liability. VAT Law No. 6826, art. 29.

Accordingly, withholding is an important feature of Costa Rica’s tax system, especially in relation to employment income, capital income, cross-border payments and specific payment mechanisms. The payer may be jointly liable for the tax if it fails to withhold and remit the required amount.

Costa Rica does not currently impose a broad, economy-wide carbon tax or operate an emissions-trading system. However, businesses may be subject to certain taxes, charges and regulatory costs with environmental effects, depending on their activities.

• Fuel excise tax: The principal tax with an environmental impact is the Single Fuel Tax (Impuesto Único a los Combustibles) under Law No. 8114. It applies to specified domestically produced and imported fuels and is reflected in the fuel cost paid by businesses. Although it is not formally designed as a carbon tax, it taxes fossil-fuel consumption. A portion of its proceeds is earmarked for environmental purposes, including payments for environmental services through FONAFIFO.

• Wastewater-discharge charge: Businesses that discharge wastewater into water bodies may be subject to the environmental wastewater discharge charge (canon ambiental por vertidos). This charge follows the “polluter pays” principle and applies to point-source discharges, with the amount depending on the discharge and its pollutant load.

• Waste-management charges and compliance costs: Costa Rica does not have a general national plastic tax or general waste tax applicable to all businesses. Nevertheless, businesses generating waste are subject to the Integrated Waste Management Law. Municipalities may charge service fees for collection, transport, treatment and final disposal of ordinary waste, and those fees may vary according to the quantity and type of waste generated. Producers and importers of certain priority products—such as lubricating oils, electrical and electronic equipment, batteries, tires and cells—may also be subject to extended producer-responsibility obligations. Law No. 8839, Integrated Waste Management Law.

• Electric-vehicle incentives: Businesses acquiring or operating electric vehicles may benefit from targeted tax incentives under Law No. 9518, as amended. These include temporary relief from VAT, selective-consumption tax, customs-value tax and vehicle-property tax, subject to the statutory phase-out schedules and eligibility requirements.

Costa Rica does not provide a general environmental tax credit available to all businesses for environmental expenditure, carbon reduction, recycling, renewable energy or sustainability investments. The available benefits are generally targeted exemptions, accelerated depreciation, municipal incentives or sector-specific programmes, rather than a transferable or generally available environmental tax credit.

According to Sub-section IV, paragraph a), numeral 1 of Article 27 ter of the Income Tax Law, distributions of disposable income in the form of dividends, social participations, and the distribution of surpluses of cooperatives and solidarity associations, as well as all kinds of benefits assimilated to dividends, constitute income from movable capital.

A 15% withholding tax must be retained on the distribution of dividends, unless specific exemptions apply as outlined in Article 28 bis 3. Exemptions include cases where the partner is another capital company domiciled in Costa Rica, provided that it engages in economic activity and is subject to this tax, or when it is a controlling company of a financial group regulated by a superintendence attached to the National Council of Supervision of the Financial System (Conassif).

Costa Rica is generally an attractive jurisdiction for international groups relocating export-oriented, higher-value activities -particularly medical-device manufacturing, advanced manufacturing, regional shared-service centres, software and digital services, engineering, and other operations serving North America and Latin America-.

Its principal strengths are institutional stability, established foreign-investment ecosystems, preferential trade access, a sophisticated Free Trade Zone regime, and a largely renewable electricity matrix. It is less well suited to activities driven primarily by low labour cost, a large domestic consumer market, or highly time-sensitive and logistics-intensive supply chains.

Advantages

• Political and institutional stability. Costa Rica has a long-standing democratic system, comparatively strong rule-of-law institutions and a predictable legal framework for foreign investment. This has supported sustained investment in export-oriented manufacturing and services. The OECD identifies institutional stability, trade openness, investment incentives and human-capital policies as key elements of the country’s FDI model. OECD Economic Survey: Costa Rica 2025.

• Strategic nearshoring location. Costa Rica is well positioned for companies seeking to diversify supply chains closer to the United States and to serve the Americas. Its time zone, proximity to the United States, CAFTA-DR membership and broad network of trade agreements support regional manufacturing and service-delivery models. CAFTA-DR has been in force for Costa Rica since 2009 and provides a robust framework for trade in goods and services, investment, customs, e-commerce and intellectual property.

• Free Trade Zone regime. The Free Trade Zone regime is Costa Rica’s principal tax and customs incentive for qualifying projects. Subject to approval, investment commitments, authorised activities, location requirements and continuing compliance, eligible companies may benefit from reduced or zero income-tax rates for defined periods, customs and import-duty exemptions, VAT-related benefits, and exemptions from certain local taxes. The regime is especially relevant for export manufacturing, medical devices, R&D, strategic services and regional operations. Free Trade Zone Law No. 7210.

• Established advanced-manufacturing ecosystem. Costa Rica has a mature medical-device and life-sciences cluster, supported by suppliers, specialised service providers, quality and regulatory talent, and experience with regulated production. Medical devices represented approximately 48% of Costa Rican goods exports in 2025, underscoring the depth of the sector’s export platform. PROCOMER: medical-device investment promotion, 2026.

Disadvantages

• Not a low-cost jurisdiction. Costa Rica should not be viewed as a lowest-cost Central American location. Labour, specialised talent, electricity, logistics, real estate and compliance costs can be material. It is generally more competitive for quality-sensitive and knowledge-intensive functions than for labour-intensive, low-margin production.

• Infrastructure and logistics constraints. Road congestion, limited intermodal transport, capacity constraints at Pacific ports and delays in public infrastructure projects can increase transportation costs and delivery-time uncertainty. These constraints are particularly relevant for operations dependent on port traffic, imported inputs, cold-chain logistics or frequent time-sensitive shipments. OECD: trade and infrastructure constraints.

• Regulatory and permitting timelines. Although Costa Rica has taken steps to digitalise and streamline investment procedures, permits and approvals may involve multiple agencies and can take longer than expected, particularly for environmental, health, construction, customs, utility-connection and specialised industrial approvals. The project timetable should include a realistic permitting critical path.