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Costa Rica tax expert Randall Zamora and I have discussed this topic at length this week and again we would like to confirm a few extremely important points:
1. There is no “proposed fifteen percent tax on funds brought into Costa Rica from other countries”. The proposed 15% tax is for interest, dividends and rental income earned inside Costa Rica. It does NOT apply to interest, dividends and income earned from outside of Costa Rica.
2. There is no proposal for the “taxation of foreign source funds” so whatever monies are sent to Costa Rica by corporations or individuals (Costa Rican or otherwise) do NOT pay a 15% tax.
After that money comes into Costa Rica, if it is then invested and generates the payment of interests or dividends or earn rental income then the dividend, interest or rental income will be taxed at 15% .
3. Costa Rica signed the WTO agreement specifically to avoid double taxation and unlike US citizens, residents and citizens of Costa Rica are not NOT taxed on their worldwide income now and, even if these new proposals were eventually implemented ‘as is’ at some point in the future, residents and citizens of Costa Rica would NOT be taxed on their worldwide income.
4. Finally, as you will find in the bill itself, there is no intention whatsoever of taxing the money that comes into Costa Rica:
Todas las rentas del trabajo están gravadas, pero no sucede lo mismo ni con las rentas de capital, ni con las ganancias y pérdidas de capital, que muchas veces están exentas, o bien gozan de un tratamiento favorable. Así por ejemplo, el rendimiento de los títulos valores, dependiendo de quién sea el emisor y de la moneda en que estén denominados, pueden estar gravados con una tasa del 0%, del 8% o del 15%; la distribución de los excedentes de las cooperativas están gravadas al 5%, mientras que los ingresos que los no residentes pagan por bienes o servicios brindados en Costa Rica pueden ir desde un 50 por ciento hasta el 0 por ciento, en el caso de las remesas para el pago de intereses sobre préstamos concedidos por bancos domiciliados fuera de nuestro país. Esta situación es corregida por el presente proyecto, que somete a todas las rentas pasivas del capital, sean mobiliario o inmobiliario, así como a las ganancias de capital, a un tributo uniforme del 15%.
Dos comentarios son necesarios en relación con esta propuesta: en primer lugar, como es obvio, la alícuota impositiva de un 15% es considerablemente más baja que la que se impone sobre las utilidades o sobre los ingresos más altos de personas físicas con fines de lucro. En estos dos últimos casos, sin embargo, los impuestos se cobran sobre la renta neta, una vez rebajados de la renta bruta los gastos deducibles, y habiéndose calculado, para las personas, un mínimo no exento. En contraste, en el caso de las rentas del capital, el impuesto se cobra sobre la renta bruta. Por otra parte, la propuesta que presentamos es un avance significativo con respecto a la situación actual, en que muchas rentas del capital tributan por debajo del 15% propuesto. En tercer lugar, esta propuesta, aunque avanza hacia una tributación más equitativa, es realista al reconocer que las condiciones de la competencia internacional y la movilidad del capital financiero ponen límites a la capacidad de imponer tributos más allá de ciertos límites. Estimamos que nuestra propuesta combina, de manera balanceada, las exigencias de la equidad y las del realismo.
I hope that this clears up some serious misunderstandings.
Written by Costa Rica tax expert Randall Zamora and Scott Oliver.
PS. You can download the new, 60 page 2011 tax law proposal ‘Proyecto de Ley de Solidaridad Tributaria 17959’ which is in Spanish as a .pdf file from the Download Library at:
[ https://www.welovecostarica.com/members/programs/fileinfo.cfm?id=113&action=display ]
This forum is terrific for precisely the reasons addressed in this particular subject. I have traveled to CR a dozen times in the past 7 years and multiple occasions viewing properties for an eventual home. I’ve taken my time and been patient and just last week made an offer on a nice home in Grecia. I am going to retract my offer because this new tax issue only adds another uncertainty as to whether this is the proper time to invest on a property. We can all speculate and guess what the eventual outcome may be but truth is nobody really knows or has a clue and only time will tell. Therefore, prudent for me to simply remain patient until the picture is clearer. I do, however, get the sense the CR is becoming less attractive as a retirement alternative with all these new and increased fees..taxes…etc.
[b]bogino[/b] hope you can get your deposit back if indeed you made one.
Rent in the same area, then wait and see if everything lives up to your expectations.Scott –
Thanks to you and randall for your ongoing research into this subject. I hope that the new taxes, if approved, turn out no more onerous than you report.I must confess that I find it quite puzzling that people are getting their “knickers in a twist” (as my old Mum would say) about some fairly trivial new tax proposals in Costa Rica when the US has already passed a law – that goes into effect on Jan. 1, 2013 – that imposes a 30% withholding tax on many types of U.S-source income and gross sales proceeds to foreign financial institutions (FFIs).
In case you missed it, you can see Mark Nestmann’s article about this at:
[ https://www.welovecostarica.com/members/Congress_Enacts_Obamas_AntiOffshore_Jobs_Bill.cfm ]
Written by the same author, you might also want to read:
Secret Treasury Agency Wants to RETROACTIVELY Expand Offshore Reporting Requirements – Part I at:
As well as:
Secret Treasury Agency Wants to RETROACTIVELY Expand Offshore Reporting Requirements – Part II at:
[quote=”bogino”]I am going to retract my offer because this new tax issue only adds another uncertainty as to whether this is the proper time to invest on a property…[/quote]
Forgive me for being flippant but if you are going to wait for “certainty”, you might as well not bother making offers to buy real estate anywhere in the world …
We are living in very uncertain times.
IMHO – There’s more “certainty” and stability in the Costa Rican real estate market, the Costa Rican economy and the overall political situation than there is in the USA.
Scott
[quote=”Scott”][quote=”bogino”]I am going to retract my offer because this new tax issue only adds another uncertainty as to whether this is the proper time to invest on a property…[/quote]
Forgive me for being flippant but if you are going to wait for “certainty”, you might as well not bother making offers to buy real estate anywhere in the world …
We are living in very uncertain times.
IMHO – There’s more “certainty” and stability in the Costa Rican real estate market, the Costa Rican economy and the overall political situation than there is in the USA.
Scott[/quote]
I thought you were supposed to have some kind of background in investment banking? If that’s the case then you of all people should understand the concept of “good timing”. The CR real estate market is an “inefficient” market and therefore makes it very easy for someone to get sucked in at a bad price. I have my objectives and on a significant investment I am going to make sure that that whatever decision I ultimately make will be strategically the best possible decision I make and if that means altering my timing or adjusting my price target based on changing dynamics then so be it.
I realize you have an agenda to tout the RE market in CR but….COME ON DUDE…..lets face it….it’s not as if the CR RE market is “on fire”. The market is soft there too just as it is in many places and if I see an opportunity to capitalize as a result of current disruptions then better believe I will do whatever it takes to make sure I get the best possible deal for myself.
I also reserve the right to change my mind without notice!
So if my pea-sized brain understands correctly, besides fretting about them finding all my offshore accounts 😆 about all I’d care about is that rent [i]might[/i] go up around 15% due to the landlords being taxed?
I have much more serious worries with the governor of IL right here in the US who is now threatening to slash the retirement benefits I have worked 31+ years to earn, and have 2 years left before I get to see. He already cut retirement & health benefits for new hires (ok, at least they have a choice weather to sign on or not, I’d advise against it…) Now he wants to cut health & retirement for us who have worked & believed in IL government all these years! They have been “borrowing” from our retirement account for years and not repaying it. Where I come from, if you borrow something and don’t pay it back, YOU STOLE IT!
I understand that we in the US have it better than most, but I’d rather live in an atmosphere of hope and optimism about the future than feeling the walls closing in from all sides the longer I live.
Let ’em raise the rent, I’m still packing!
[quote=”Scott”]
IMHO – There’s more “certainty” and stability in the Costa Rican real estate market, the Costa Rican economy and the overall political situation than there is in the USA.
Scott[/quote]This thread inspired me to ask for comments and observations from the list on a related source of uncertainty for the many gringos who are contemplating moving to C.R.: a perceived deterioration of the advantages that many of you pensionados & residents came for. I bet there are many lurkers who are thinking about a translocation but hesitate for the usual reasons of uncertainty. So, I’m not looking for an answer to “Should I move to C.R.?” but rather, have the advantages you came for changed for better or worse.
I lived in C.R. (in Cinco Esquinas de Tibas) for a large part of 1979 and have visited maybe a dozen times since, most recently last May. I believe my perception of C.R. life for extraneros is correct: it’s going from great to OK to not so good.
The same is clearly true in the U.S. of course. We have had a total ignoramus (or is it ignorama?) as a v.p. candidate, and this morning I saw that Donald Trump is thinking about a presidential bid. How bad can it get. Further deterioration in U.S. political, economic, and social life is a valid reason to depart (as I see a long time contributor here did, after the ’04 presidential election).
As I read the many laudatory testimonials in this forum and elsewhere, I am almost ready to pack my bags. But then I start reading A.M. Costa Rica and its focus on criminality, not to mention misguided letters from readers, and I’m thinking “wait a sec – things sound pretty bad there”. I accept that bad roads [but better than in the past],stifling bureaucracy, and petty crime are pretty much a given. But the uptick in major crime, and the seeming decrease in “welcomeness” to gringos at the official government level, in the form of new laws and regulations, seems contrary to the Pura Vida spirit.
I [and probably other lurkers] would really like to hear how people feel about this.:?:You must be very wary about what you read in A.M. Costa Rica. I read a recent account of murders there, too. One of the incidents on their list was over a year old. Had they stuck to that trend, they could have regaled us with incidents going back to the 1950s.
Is there crime in Costa Rica? Of course there is. But in fact the officially-published rate (as compared to A.M.Costa Rica’s anecdotal reporting) was down in 2010. And the rate is much lower than in many American cities and in many places around the world.
You’re right, however; things do sound pretty bad here, but is that an accurate reflection of the reality on the ground? I’m not convinced.
Too, while the roads, the public and private bureaucracy, etc are not up to our preferences, they’re really not that bad. And while the government is not whoring after foreigners as residents, they’re hardly throwing up major obstacles either. What are the concrete examples that you’re concerned about?
[quote=”DavidCMurray”]
Too, while the roads, the public and private bureaucracy, etc are not up to our preferences, they’re really not that bad. And while the government is not whoring after foreigners as residents, they’re hardly throwing up major obstacles either. What are the concrete examples that you’re concerned about?[/quote]David,
Well, that’s one of the tidbits of info I’m interested in – Are there concrete examples, or is it just bad press?
Some of the recent regs seem discouraging to gringo relocation. Whether they turn out to be major or minor is all about perception, of course. Ditto, crime [are those stats online?].
The roads are not a big deal to me. Over the years of my visits, three things stand out: dropping a suspension in a pothole while swerving to avoid a cow in the road at night (Siquirres); rounding a sharp curve in the mountains on the [old] road to Puntarenas and seeing cars & a bus at the bottom of the cliff, that didn’t quite make the curve; and backing inextricably into an open drain near Quepos, and having four nearby Ticos who [when the laughing subsided] lifted the back end out of the drain for me.
I suppose the exasperating bureaucracy can be easier dealt with if one has the companionship of knowledgeable Ticos or the paid-for skills of a connected lawyer.Pharg, you wrote, “Are there concrete examples, or is it just bad press?” Well, what are those examples that are making you nervous? And what is the source of them?
If you’re talking about the recent increase in income requirements for legal residents, I guess I’d say that they’re not out of line with the minimum cost of living here anyway, so what’s the big deal?
If you’re talking about banking hassles, some of those (at least) are directly attributable to the influence of the United States.
Having spent my work life in bureaucracies, both public and private, I can tell you that the bureaucracies in Costa Rica, both public and private, are neither better nor worse than in the U.S. They’re just different. If you need to accomplish something complex and don’t speak Spanish, dealing with daily life may be a bit of a challenge, but with our very limited command of the language we get along just fine.
But please, tell us specifically what’s on your mind.
I LOVE living here and even I feel like drinking bottles of poison, slitting my wrists, blowing my brains out while sitting in a full bath (just in case) after reading a few pages of AMCostaRica but …
It’s fascinating that with all the really positive news that comes out of Costa Rica that most of the English language “news” sources here only focus on the negative, if-it-bleeds-it-leads type news. I simply can’t understand why anyone wastes their money advertising with them.
You can see ‘Costa Rica’s Good News’ at:
[ https://www.welovecostarica.com/public/Costa_Ricas_Good_News.cfm ]
And… for crime, please see:
All Costa Rica Crime Figures Lower in 2010
[ https://www.welovecostarica.com/public/All_Costa_Rica_Crime_Figures_Lower_in_2010.cfm ]
Scott Oliver – Founder
WeLoveCostaRica.com
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