Costa Rica Taxes for Expats: Territorial System & Nomad Visa

Costa Rica applies a territorial income tax system. For an expat who becomes a Costa Rican tax resident, only income sourced inside Costa Rica is subject to Costa Rican income tax; foreign-source income — including foreign pensions, dividends from a foreign portfolio, and salary paid by a foreign employer — is generally outside the tax net. The top individual rate is 25%, and a separate digital-nomad regime (Ley 10.008, in force since 2022) codifies an explicit exemption for qualifying remote workers. That framework has boundaries, and the boundaries are where most expats create problems.

This piece breaks down the rules that actually matter for foreigners living in or moving to Costa Rica: how residency is triggered, what "Costa Rica-sourced" means in practice, what the digital-nomad visa does and does not do, how a local Sociedad Anónima gets treated, and how it all interacts with US filing obligations. Rates and thresholds are current as of 2026 and should be reconfirmed with a Costa Rican tax adviser before any move.

How Costa Rica taxes individuals

Residency threshold

Costa Rica uses a 183-day rule. Physical presence of 183 days or more in a calendar year makes an individual a Costa Rican tax resident. Once resident, the taxpayer reports only Costa Rica-sourced income for Costa Rican tax purposes. Non-residents can still owe tax on Costa Rica-sourced income, but at flat withholding rates on the local payer side rather than through a filed return.

Rate structure

Individual income tax on Costa Rica-sourced income runs on a progressive schedule capped at 25%. The top rate is reached at fairly modest local earnings by international standards. Value-added tax (locally called IVA) is 13% on most goods and services. Property tax is levied by municipalities at roughly 0.25% of registered value. There is no wealth tax and no inheritance tax.

Capital gains and passive income

Capital gains for individuals sit in a 0-15% range. Gains on the disposal of a Costa Rican asset by a non-habitual seller are generally exempt, with a 15% rate applying to habitual disposals and to specific asset categories. Dividends paid by Costa Rican companies to individuals attract withholding at up to 15%. Local bank interest is generally taxed at source. All of this applies to Costa Rican assets and Costa Rican payers only — the same instrument held abroad and paid abroad is normally outside scope.

What "Costa Rica-sourced" actually means

The territorial line matters more than the rate. Costa Rican doctrine, as applied by the Dirección General de Tributación (DGT), treats income as Costa Rica-sourced when it is generated by activity performed inside Costa Rica, by assets located in Costa Rica, or by services provided to Costa Rican payers. Widely accepted patterns:

• Rental income from a Costa Rican property — Costa Rica-sourced, taxed.
• Dividends from a Costa Rican company — Costa Rica-sourced.
• Consulting income invoiced to a Costa Rican client — Costa Rica-sourced, regardless of where the money ultimately lands.
• Foreign-portfolio dividends, foreign pensions, US retirement account distributions received by a Costa Rican resident — outside scope.
• Salary paid by a foreign employer, in a foreign account, for work performed remotely from Costa Rica — historically outside scope under a payer-side reading, but subject to interpretive risk and now explicitly resolved by the digital-nomad statute.

The gray zone is remote work for a foreign employer without the digital-nomad visa. Some practitioners argue that the work being physically performed on Costa Rican soil creates a domestic source; others rely on the traditional test of where the payer sits. The digital-nomad statute removes the ambiguity for anyone who qualifies — which is why the visa matters beyond immigration.

The Digital Nomad Visa (Ley 10.008)

Costa Rica's Ley 10.008, formally the Ley para atraer trabajadores y prestadores remotos de servicios de carácter internacional, was enacted in August 2021 and implemented in mid-2022. It creates a temporary residency status designed for remote workers and remote service providers earning income from foreign sources.

Core requirements

• Initial permit of one year, extendable to a second year on evidence of continued stay.
• Minimum stable foreign income of USD 3,000/month for the individual applicant, or USD 4,000/month when applying with dependents.
• Private health insurance covering the applicant's Costa Rica stay.
• No local employment permitted under this status.

Tax carve-outs

The visa's tax content is the interesting part. In summary:

• Full income tax exemption on the foreign-source income that qualifies the holder for the visa. This eliminates the source-rules argument for the covered stream.
• Exemption from import duty on personal computing and telecommunications equipment brought in for professional use, subject to procedural rules.
• Simplified recognition of a foreign driver's license during the visa period.
• No VAT exemption — the standard 13% still applies to local purchases.

Two constraints are commonly missed. First, the exemption applies to the foreign income supporting the visa; if the holder later picks up Costa Rica-sourced consulting fees, that stream is taxed normally. Second, time spent on the visa still counts toward the 183-day tax-residency threshold for any income not covered. The visa does not pause residency; it changes the tax outcome for the specific income stream that supports it.

For someone whose entire income already comes from a foreign employer or foreign clients, Ley 10.008 is essentially a statutory endorsement of what the territorial system would arguably already produce — with the certainty of a written exemption rather than a source-rules argument.

When local activity kicks in the corporate rules

Costa Rica has a widespread culture of small Sociedades Anónimas (S.A.) and Sociedades de Responsabilidad Limitada (S.R.L.), used to hold real estate, run a Costa Rican business, or bundle professional activity. If an expat's Costa Rican company generates Costa Rica-sourced income, the corporate rules apply in full:

• Progressive corporate income tax of 5-30% based on income level, with a top rate of 30%.
• 13% VAT registration where turnover crosses thresholds and the activity is VATable.
• Dividends distributed to individual shareholders taxed at up to 15%.
• Annual impuesto a las personas jurídicas (legal-entity tax) — a modest tiered flat fee, higher for active companies than dormant ones.
• Electronic invoicing (factura electrónica) required for essentially all activity.
• Transfer pricing rules on related-party transactions.

Where this catches expats out: buying a beach house through a Costa Rican S.A. and then listing it on Airbnb. That is local rental activity by a local company. The rental income is Costa Rica-sourced, taxed at corporate rates, and short-term lodging is a VATable activity requiring registration. The territorial system does not shield local activity just because the shareholder lives abroad.

Similarly, an expat consultant who invoices Costa Rican clients through a Costa Rican S.R.L. is running Costa Rica-sourced business income — regardless of whether the underlying know-how was developed abroad. The company pays corporate tax; distributions add another layer.

US expat interaction

Costa Rica and the United States do not have a comprehensive income tax treaty in force as of 2026. There is a bilateral tax information exchange agreement, but no treaty-based double-tax relief or reduced withholding. Practical consequences for US citizens and green-card holders resident in Costa Rica:

• Worldwide US reporting is unchanged. Form 1040 still covers worldwide income regardless of Costa Rican residency.
• Relief flows through unilateral tools. The Foreign Earned Income Exclusion and Foreign Tax Credit do the work. Because Costa Rica levies little or no tax on the foreign-source income of an expat resident, the credit is often small — the exclusion tends to be the more useful lever for salaried remote workers.
• FBAR and FATCA still apply. Costa Rican bank accounts and financial holdings above the standard thresholds are reportable. The US-Costa Rica FATCA IGA is in force, and account onboarding routinely asks about US-person status. See our FBAR and FATCA reporting guide.
• Costa Rican companies owned by US persons are typically controlled foreign corporations for US purposes, triggering Form 5471 and Subpart F / GILTI analysis. This is where the largest US-side surprises appear.
• No treaty tie-breaker. US citizens are always US resident for tax purposes, and Costa Rican residency does not displace that.

Costa Rica vs Panama vs Mexico

For readers weighing Costa Rica against the two most-comparable Latin American options for US expats:

The Costa Rica versus Panama choice is often decided on lifestyle, not tax. Both are territorial; both cap out at 25% on local individual income. Panama is dollarized and applies a softer day-count doctrine, with a center-of-vital-interests test available. Costa Rica has a formal digital-nomad statute; Panama does not, but its territoriality generally reaches the same result. For a fuller comparison, see the Panama territorial tax guide.

Mexico is a fundamentally different structure: worldwide taxation once resident, top rate 35%. Mexico's RESICO simplified regime is competitive for very small self-employed taxpayers, but there is no equivalent of a foreign-income exemption for a Mexican tax resident. Details are in the Mexico taxes for expats guide.

Common pitfalls

Several patterns produce most of the expat problems in Costa Rica:

• Treating the digital-nomad visa as an immigration formality. It is a tax instrument. Applying under it and later picking up Costa Rica-sourced side income catches many holders by surprise.
• Airbnbing a property held in an S.A. without registering. DGT has stepped up enforcement on short-term rentals and cross-references platform data. Corporate income tax and VAT both apply.
• Skipping the corporate legal-entity tax. Every S.A. and S.R.L. owes it annually; unpaid amounts accumulate and can block registry actions later.
• Assuming "territorial" means "no filing." Individuals with any Costa Rica-sourced income — including local rental income or a Costa Rican payroll — file with DGT via the ATV system and must issue electronic invoices where applicable.
• Treating Costa Rican bank accounts as invisible to the IRS. The FATCA IGA is active and account onboarding asks about US-person status.
• Confusing the Pensionado residency category with a tax status. Pensionado (a retiree residency route with a modest pension income requirement) is an immigration category with some import perks; it does not, by itself, change tax outcomes.
• Underestimating source-rules risk for remote work without the visa. Some Costa Rican advisers argue that work physically performed inside the country is Costa Rica-sourced regardless of who pays. Applying for Ley 10.008 status collapses that argument.

Where to go next

The Costa Rica country page keeps the current rate card and last-updated date. For the underlying framework, see the territorial vs worldwide taxation guide and the broader list of territorial tax countries. US citizens weighing the move should read the US citizen moving abroad guide. To place Costa Rica alongside other candidates, use the country comparison tool or check the FAQ. This piece is informational only and does not constitute tax or legal advice — decisions should be made with a qualified Costa Rican adviser and, for US persons, a US tax practitioner familiar with cross-border returns.