Declaring income made in Costa Rica to IRS, etc.

[pranaspakeywest]

Sorry if I missed the info if this was already gone over. I am looking for advice.

We are US citizens, and are about to get our one room “retreat spa” off and running here in Manuel Antonio.
We have a day spa back in Key West, and we are working with our accountant there to figure out how to keep this all legal AND to our best advantage.

Our question to our accountant, and now to you brilliant people, is how we should take payments for our business here.

We are getting ready to launch our website, and take reservations. To do this we will of course take deposits and payment using credit cards, most of the time.

Our question is weather or not to just put it all through our spa (a corporation) up in the States, or will it be “more proper” to treat these payments as their own entity?
Our accountant is aware of a client of his who ran a guesthouse here in C.R., and somehow or another the IRS got after him for not declaring it, and he ended up in a whole heap of trouble.

I am hoping that IF we need to treat this as income through the IRS ( and we do want to do this properly) then I can only hope that we will be able to also show massive deductions for all of the expenses that went into building our business here in CR.

So, to list my two clearest questions:

Is there someone (a professional) here in CR who will guide us through these issues?

And, what is the best way to take credit card payments on a business operating here in Costa Rica?

I know that the IRS is “evil” and of course some of us love or hate the current administration in the US, but for now I would LOVE to get some information that will help us know what to do.

Thanks!

[maravilla]

you need the advice of a good tax consultant and maybe a lawyer. you have a complicated situation, so i would get the best advice you can so you don’t have the taxman on your doorstep.

[watchdog]

There are some offshore business income exemptions which exist for U.S. Citizens for income (approx. $90,000.00 U.S. annual income) from an active offshore business, as opposed to investment income from a passive source (non-exempt).

I don’t know how much longer these exemptions might continue, but it would be one thing to investigate with a U.S. Tax Consultant or Attorney.

The basic position for U.S. Citizens with the IRS is that you have to declare your World income and pay income tax accordingly.

Note from Scott: ‘WatchDog’ is the username for my friend and attorney Richard (Rick) Philps who is a Canadian citizen, naturalized as a citizen of Costa Rica. Rick practiced law in Canada as a member of the Law Society of British Columbia, for fourteen years, prior to moving to Costa Rica in 1998. Mr. Philps the earned his Bachelor of Laws and Licensing Degrees (Civil Law), and a Post-Graduate Degree in Notary and Registry Law, from the Escuela Libre de Derecho University, in San Jose, is a member of the Costa Rica College of Lawyers, and has practiced law in Costa Rica for six years. Mr. Philps practices law in the areas of real estate and development, corporate, commercial, contract, immigration, and banking.

To contact attorney Rick Philps and his associate attorney Roger Petersen, please use the Contact Form at the bottom of: https://www.welovecostarica.com/members/417.cfm

[camby]

[quote=”watchdog”]There are some offshore business income exemptions which exist for U.S. Citizens for income (approx. $90,000.00 U.S. annual income) [/quote]

is that up to 90K or 90K and above? will look into article, was wondering if someone had the Cliff Notes and for life of me, cannot 😆 get a hold of Mitt Romney…:roll::D

[DavidCMurray]

[quote=”camby”][quote=”watchdog”]There are some offshore business income exemptions which exist for U.S. Citizens for income (approx. $90,000.00 U.S. annual income) [/quote]

is that up to 90K or 90K and above? will look into article, was wondering if someone had the Cliff Notes and for life of me, cannot 😆 get a hold of Mitt Romney…:roll::D[/quote]

The “foreign earned income exemption” is just that, an exemption from U.S. income taxes for income [u]which is derived from [b]actual work[/b][/u]. The exemption increases a bit every year. Right now, it’s around $93,000US. That is, the first $93,000+/- you earn from actual work performed outside the U.S. can be exempted from U.S. income tax. You must still report the income to IRS with your annual income tax return and you must complete the forms required to claim the exemption.

[b]BUT[/b] [b]it is critical to understand[/b] that the exemption only applies to income derived from your own work. [b]It does not apply[/b] to rents, dividends, interest, profits from business activity or sales, or other forms of income that do not involve your own work.

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