Costa Rica's Territorial Tax System: Your Foreign Income Is Tax-Free
One of Costa Rica's biggest attractions for expats, retirees, and digital nomads is its territorial tax system. In simple terms: you only pay tax on income generated within Costa Rica. Foreign-source income is exempt.
$0
Tax on Foreign Pensions
$0
Tax on Remote Work Income
$0
Tax on Foreign Investments
What's NOT Taxed in Costa Rica
- ✅ US Social Security income
- ✅ Foreign pensions (military, government, private)
- ✅ Remote work income from foreign employers
- ✅ Foreign investment dividends and capital gains
- ✅ Foreign rental income
- ✅ Digital nomad income (explicitly exempt under DN visa)
What IS Taxed
- ❌ Rental income from Costa Rica property
- ❌ Income from a Costa Rica-based business
- ❌ Interest from Costa Rica bank accounts
- ❌ Capital gains on Costa Rica property sales
- ❌ Employment income from CR employers
Tax Rates for CR-Source Income
Individual income tax is progressive, from 0% to 25%. The first ~$1,800/month is tax-free. Corporate tax is 30% for large companies, with lower rates for small businesses.
"Between the territorial tax system, 0.25% property tax, and $995 flat fee to list my property, Costa Rica is incredibly cost-effective for real estate investors."
Important Notes
- ⚠️ You may still owe taxes in your home country (US citizens are taxed worldwide)
- ⚠️ Costa Rica has no tax treaty with the US or Canada
- ⚠️ Consult a tax professional in both countries
- ⚠️ The definition of "Costa Rica-source" income can be nuanced — get professional advice