Services taxable income
Non-resident’s taxation
Costa Rican Income Tax Law, Number 7092 from April 21st, 1988, is based on three
characteristics :
1. Benefits product (land, capital, labour).
2. A schedular income tax, which separate taxes are imposed on different
categories of income.
3. Territorial tax system.
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Characteristics
Costa Rican income tax is made up of different revenue types charging on different
displays:
1) Profits.
2) Earnings from employment, retirement or other personal services
compensations or benefits.
3) Financial market revenues .
4) Disposable Income (Dividends)
5 ) Abroad Remittances from non-residents taxation.
Territorial subjection principle
Every profit raised in Costa Rica by a person must pay taxes with independence of
their resident:
Article 2. taxable income . It consists of revenues , income or profit from a Costa
Rican source, continuous or occasional, receiving by cash or goods, earned or
accrued during the tax period, by both legal persons as physical with lucrative
activities , domiciled or not in the country. ( Bylaw Income Tax )
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Territorial subjection principle
Applies the "economic ownership" principle.
Costa Rican DGT have published many norms accepting to tax other income
outside geographical boundaries of the country.
Example : Online Commerce
Abroad Remittances
Non - residents treatment in Costa Rica, is regulated in an individual chapter in the
Tax Law, called Remittances Abroad.
Article 52: The generated tax is when the Costa Rican income or profit source is
paid, credited or made it available to persons located abroad.
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Abroad Remittances
• For the first six months in the country, foreigners will be considered as nonresident; by generating profits of a Costa Rican source they will be subjected to
tax on abroad remittances.
• The tax gross income cannot be deduced of their net incomes.
• A fee is applied to determine the tax according to the personal service provided.
• Costa Rican residents that pay to non-resident must act as a withholding of this
tax.
Abroad Remittances
Article 59 Income Tax Law
RATES
• Carriers , communications ( 8.5%)
• Pensions, retirement, wages and other remuneration to be paid for personal
work performed as an employee (10 % )
• Fees, commissions, allowances and other benefits for personal services
performed without a relationship of dependency (15 % )
• Reinsurance, leverages, insurance premiums (5.5 % )
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Abroad Remittances
Article 59 Income Tax Law
RATES
• Films, television movies , recordings, phonograph records , cartoons (20%)
• Soap operas and radio soap operas (50 % )
• Profits, dividends or shares (15 % ) or (5 % )
• Interest , fees and other financial expenses , leasing of capital goods (15 % ) or
( 5.5 % )
• On the technical and financial or other advice, use of patents, supplies
formulas, trademarks , privileges , franchises , and royalties (25 % )
•
For any remittance of income source (30 % )
Abroad Remittances
EXCEPTION
Permanent establishments are not subjected to the six months regulation, in
accordance with Article 5 of the Bylaw Income Tax Law.
They will be imposed on profits.
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Abroad Remittances
Branches, agencies and other permanent establishments of non-domiciledresidents in the country will be subject to a payment of fifteen percent (15%) on
the one hundred percent (100%) of the disposable income that is credited or
remittance (Art. 29 subsection c, Costa Rican Income Tax Law )
AGREEMENT BETWEEN THE REPUBLIC OF COSTA RICA
AND THE KINGDOM OF SPAIN FOR THE AVOIDANCE OF
DOUBLE TAXATION
Is the only valid agreement that has Costa Rica with the Kingdom of Spain.
Ratified by the Law No. 8888 of 2010, which took effect in 2011.
It has an annex protocol that follows the OECD Model with some reservations
inclined to the UN Model.
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AGREEMENT BETWEEN THE REPUBLIC OF COSTA RICA
AND THE KINGDOM OF SPAIN FOR THE AVOIDANCE OF
DOUBLE TAXATION
Business Profits (Art . 7)
Oceanic and air transport (Art . 8)
Royalties (Art . 12)
Personal services themselves ( Art. 14)
Dependent personal services ( Art. 15)
Participation of Directors (Art . 16)
Artists and Athletes (Art . 17)
AGREEMENT WITH SPAIN IN PRACTICE
• Costa Rica has not established control mechanisms to measure the impact of
the implementation of the Convention in Spain .
•
The disclosure statements do not reflect today detailing the deductions to nonSpanish residents .
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