Costa Rica does not distinguish between onshore and offshore businesses as such. The basis of taxation is territorial, with both residents and non-residents paying tax on Costa Rican income, and not foreign currency income. However, the Costa Rican Government has increasingly sought to make a virtue out of the country's low-tax regime, and there are a number of special regimes offering tax privileges to particular sectors, which are described in this section. Between 2003 and 2005 the government has been struggling to pass a Permanent Fiscal Reform Package in an attempt to reduce the country's deficit. One of the key components of the package would be a switch from the sales tax to a Value Added Tax system; taxes payable by Free Zone companies would also be increased over a period, and it's possible that the territorial basis of personal taxation would be abandoned in favor of world-wide income taxation.

Tax Treatment of Offshore Operations

See Domestic Corporate Taxes for the general principles of Costa Rican corporate taxation, which also apply to entities taking advantage of special low-tax regimes. Businesses in Export Processing Zones (Free Zones) have a number of tax privileges. Originally these concessions were offered only to industrial or agricultural companies, but they have now been extended to a wide range of processing and service activities. The main incentives are:


Full exemption from income tax on profits for a period of 8 to 12 years from the commencement of trading, and 50% exemption for a further period of 4 to 6 years; exemption for the same period from customs duties on raw materials, machinery and equipment; exemption for the same period from VAT and other sales taxes including selective consumption tax; exemption from withholding tax on payments to non-residents; new legislation passed at the end of 1999 offers a 4-year extension of the 12-year 100% tax exemption to companies that have operated in a free zone for more than 4 years and that have reinvested profits in Costa Rica.


Costa Rica is a member of the WTO, and as such should have begun to eliminate Free Zone fiscal privileges for manufacturing companies in 2003. However this deadline was extended until 2009. There is no such obligation to eliminate incentives granted to companies providing services and it has been widely accepted that there are no commitments by the Costa Rican Government to reduce or eliminate incentives for service companies; the official standing on this matter is that the regime for services will continue with few or no changes at all.


The FTZ special regime is not bound to disappear as a direct effect of the Doha Qatar negotiations. The FTZ are based on local laws that establish many other incentives. The terms of the Agreement on Subsidies and Compensatory Measures signed at Doha, extended the deadline for the elimination of the income tax exemption from 2003 to 2007, plus a two-year period for progressive elimination. As a result, the regimes will maintain the same benefits as they have now until 2007, and in that year, only companies manufacturing and/or exporting goods (not companies providing services) will be affected by the elimination of the income tax exemption regime. All other incentives for FTZ companies will be maintained.


A number of sectors involved in the tourist business receive tax incentives under the Incentives to Tourist Development Law 1985: a. All business entities engaged in the running or construction of hotels are exempted from import duties on goods imported for the purposes of their trade, purchase (sales) taxes on supplies (excluding those payable on the purchase of vehicles and fuels) and the 0.25% annual rates tax. They also benefit from accelerated depreciation allowances. b. All business entities engaged in the air transportation of tourists are exempted from import duties on goods imported for the purposes of their trade and purchase taxes on supplies required for the operation of airplanes. Furthermore they can purchase their fuel at favorable prices and are entitled to accelerated depreciation allowances. c. Businesses engaged in maritime transportation of tourists are exempted from import duties and purchase taxes on goods imported for the purposes of the construction of marinas, bathing resorts and aquariums. Furthermore they are entitled to accelerated depreciation allowances and are exempted from all taxes relating to the purchase of a boat with the exception of import duty. All business entities engaged in car rentals are entitled to a 50% reduction in all taxes relating to vehicles imported for rental. For an agreed period forest development businesses are exempted from income tax on business profits and the annual rates tax of 0.25% of the value of the land.

Taxation of Foreign Employees of Offshore Operations

This section refers to the taxation of foreign employees of tax-privileged operations; see Domestic Personal Taxes for the general principles of individual taxation in Costa Rica, which also apply to the resident employees of offshore entities. Foreign employees working in Costa Rica are taxed at normal rates whether resident or non-resident. There are no special arrangements for expatriate workers; indeed they and their employers pay full social security contributions although they can receive little benefit from it.


Fiscal year for businesses is the same as that for individuals (October 1st through September 30th of the following year). The balance of any taxes due must be paid by the end of the calendar year (December 31st). All taxes are payable at any state-sponsored bank.


As noted on the page on Forming Your Corporations, your corporation receives a set of six books. The three accounting books, “Mayor,” “Inventario,” and “Diario,” must be kept up-to-date, detailing the accountants, balances, and flow of money through the company. In addition, along with the daily accounting and annual taxes, corporations are also subject to file additional statements on a monthly basis. As stated under Types of Corporations, you are required to appoint a fiscal agent, the company’s accountant. You also may have selected to have a Nominee-directed company. As we at Law Office of Meléndez and Bonilla practice business law in Costa Rica, we work with several Costa Rican and resident U.S. accountants that know the vagaries of the local tax-code, and can help you avoid issues such as double-taxation, dividend taxes, etc.

Please see Forming Your Corporations for information on establishing your own Costa Rican corporation.

Types Of Corporation

  • Limited Liability Corporation
  • Limited Partnership
  • General Partnership
  • Sole Proprietorship
  • Foundation or Trust
  • Stock Corporation
  • Shelf Corporations

Why Choose Costa Rica?


Costa Rica has many distinct characteristics and advantages that International Business Corporations (IBC's) can make the most of. Although Costa Rica is not classified as an offshore financial hub in the traditional sense, its favorable tax regime implies that it could have been classified as a tax haven some decades ago.

However, the Costa Rican government has only recently realized the potential of being a tax haven and has started to actively legislate and promote this sector of economic activity. The low taxation available to businesses of Costa Rica makes it an attractive offshore financial investment center for most businesses across the globe.

A number of well known businesses have already set up shop in Costa Rica but the economy is still at infancy. © 2019