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As someone who is in the final stages of assembling a business in Costa Rica, I am VERY concerned about the effects of the new TAX PLAN and how it would affect foreign investment in vacation homes and construction prices (and reduced profits). I have been keeping tabs on it since it began, but I suppose I always assumed there would be no way it’d go into effect due to the immense negative aspects. Besides, the papers all say that the government is trying to spur growth and foreign investment and all… The more I get to know how things work in CR, I now see that I should have assumed the government would always choose the strangest possible choice! I just got an email from an expat friend of mine (perpetual tourist) who said that several of their friends are just going to sellout and move on to Panama or Chile while they can still afford to!!!
I ask, is this overrated (I hope)?
I ask, is the rest of the construction industry as worried as I am?
I ask, is the government really going through with this or will it get tabled at the last minute?
JimJim
I’m not quite sure why people would over react to this. The United States IRS has been ‘training’ various parts of the Costa Rica government in tax collection for quite some time.
Can we really be surprised if Costa Rica now proposes to tax people on their worldwide income? I wonder where they got that idea from?
For people with plans to retire in Costa Rica, unless I am missing something, there really doesn’t appear to be too much to worry about.
At first glance, it does appear that real estate speculators will be expected to pay some taxes that they may not have paid in the past but I doubt very much if it will be meaningful.
Your property taxes in the USA probably go up more every year than any increases you’ll eventually be expected to pay in Costa Rica.
And don’t they have capital gains taxes in the USA? Although they do state that there may be a 10% capital gains tax on the profits made in the sale of an asset (home) in Costa Rica, we have no idea yet what exemptions may be tied to those transactions.
Didn’t the USA also donate lots of computers to the Costa Rican immigration service? Hmm! I wonder why?
And for those real estate buyers that have declared a ridiculously low value on their real estate to try and avoid transfer taxes which is called TAX FRAUD in America, those people may suffer. So what? They’re not contributing anything to Costa Rica, they are STEALING.
I KNOW this does not apply to you Jim but if anyone reading this is planning on coming to Costa Rica with an eye on illegally evading taxes due to the Costa Rican government, stay home please!
As for “will it happen” in the form that it is presently? That’s anybody’s guess but I would suggest that we’ll see a number of changes slipped in there before it’s finalized.
Time will tell! I have learned that in Costa Rica, instead of panicking about ‘what might happen’, sit back, relax and let’s wait and see what shape it’s in when it is officially announced. Only then can you make a sensible, educated and well thought out decision.
I know that may not help too much if someone is in the final planning stages of a business venture here but with people like Intel employing over 2,000 people here and investing HUNDREDS OF MILLIONS of dollars here, I don’t think Costa Rica will do anything too drastic.
A few years ago everybody was fretting about possible new income requirements for pensioners being changed to $3,000 per month – What happened in the end? No change.
There probably will be big changes with the new fiscal plan but we don’t yet know what is definite…
I’m sure there are some lovely places in Panama and Chile for people to live in but, basing your residency and ‘quality of life’ on the ‘possibility’ that you might pay slightly more in taxes doesn’t seem to be a very sensible idea to me… Especially since all Americans are taxed on their worldwide income anyway and if you’re not, you’re breaking US laws which would get you into really serious problems. (Don’t forget those computers at immigration mentioned above…!)
As in most countries, with the right professional advice, I’m guessing that even when the new fiscal plan is adopted, you’ll be able to conduct your affairs very profitably indeed in Costa Rica.
Lastly, please also do not underestimate the Ticos! Many people get all warm and fuzzy when they talk about Ticos as if they are just sweet, kind and very simple people which they are. However, it’s been my experience that when you get to know them (which can take years) you will discover that they are incredibly intelligent, well-read and know a lot more about the rest of the world than 95% of the expats that I meet.
I do not believe that they will do anything serious that will have a truly negative impact on the investment environment here.
Scott – Founder
WeLoveCostaRica.comI appreciate your response Scott, and agree that patience is certainly a virtue in a matter such as this. I also understand the politics and ‘co-operation’ with things like the computers and Intel and such. And I am quite confident that companies like Intel will miraculously have an exemption of some kind available to them in the final version, so I am not worried about them very much.
And, as far as the USA’s IRS taxing $$$ coming and going? I’ll NEVER defend that policy, in fact, I find that to be one of the most UN-American parts of our tax code.
My concern isn’t necessarily with a rational, or actual problem. If it turns out that the building sector has to increase the price of a project by 5-15% to cover the new taxes, then so be it – the customer will have to pay, as always when companies are taxed, and the customer may in fact decide to go north or south to Nicaragua or Panama instead. Rather, I am greatly concerned about the irrational and un-actual.
I am hearing bigger grumblings over this issue than any other, regarding how this might impact my particular future customer base and their feelings (and perceptions rather than realities) when it comes to this tax legislation.
And I am concerned about CR as well. I really do not believe that these methods of taxation work, any more than raising the pressure on the turnip press will get more (or enough) blood from the turnip. I happen to feel that the more nutrients the government feeds the turnip farm by reducing tax strangelholds, the more turnips will grow, yeilding more turnip juice to the government overall.
The present grumblings are always bigger and most disastrous – in our minds – than the last one…
And talking about turnips – let’s not started on our respective governments doing “irrational” things.
Scott
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