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[i]”No country can TAX the income you make in investments outside that country. You make a dollar in China and pay the taxes in China, regardless of if you live in Japan.”[/i]
Uh, huh . . . Try explaining that to the U.S. Internal Revenue Service.
The ability, the legal power, of the U.S. Treasury to tax the income of U.S. citizens regardless of the source of their income (domestic in the U.S. or foreign outside the U.S.) is the whole concept of “universal taxation”.
Trust me on this . . . If you, a U.S. citizen, earn a dollar in the U.S., a yen in Japan, a euro in France or Germany, or a colon in Costa Rica or anywhere else in the world, inside the U.S. or outside, it’s taxable under the IRS Code.
And life will be better if you comply.
Costa Rica collects sails tax. Foreigners bring new money into the country. Everything they buy with that money they pay tax too. So foreign income when spent in CR is being taxed.
In Canada: Foreigners (tourists or not) pay sales tax on what they buy. That’s ok. Though they used to get a return of the gst
(federal portion of our sales tax) if they sent in a form after they left Canada which, by the way, disgruntled Canadians.Be very careful folks in accepting ANY new tax be it for the right reason or some misguided duty to pay your fair share for living in paradise! It starts small and NEVER decreases… and most times in NOT used for the purpose proposed! Expats do pay their share, be it sales tax, property tax or the money they put into the local economy.
All governments, including Costa Rica’s, are looking for ANY new revenue streams… and they’re getting creative. Look at the tax on corporations they’re looking to pass… a cute move. Just to hold property, or a car, or have an electric account… you’ll be taxed. No economic activity or income yet you’re taxed! For the average expat that has 3 or 4… that’s a quick $450-$600 per year no matter how much you have in retirement earnings. Not bad… the ultimate flat tax! Do they care how much you earn… nope… just pay it!
And how about the “temporary” luxury home tax that very quietly became permanent a few months ago? And of the money collected how much was used for the proposed purpose???
And how about all the benefits they use to allow for folks relocating to CR… all gone now! Import a quality car… and you’ve just been TAXED more the most Ticos make in a year! And remember, you paid taxes on that car in the states. Use twice as much electricity as the average Tico… more tax.
Face it… tourist and expats are seen as cash cows… remember we’re all millionaires or have money trees growing back in the states… just go shopping for a car on your own and you’ll see that! LOL If you allow them to start picking your pocket as they have started to do they will keep coming back for more!
What I have noticed… is that CR seems to shy away from the normal “sin” taxes that most other governments impose. How much is a pack of cigarettes here? Or a bottle of hard liquor? For a place that prides itself on a healthy lifestyle and longevity they don’t seem to make an effort to keep folks from hurting themselves! In NY where a pack goes for over $10 (YES $10!!!) they like to make folks believe it’s all done to keep folks from smoking and improving society’s overall health…. but we know it’s ALL about the tax income… for if everyone stopped smoking tomorrow governments all over the US would fail! I think there’s plenty of room to impose some sin tax in CR… since most of the folks I see smoking are expats anyway! Besides perhaps I can enjoy a few more meals without some gringo lighting up and ruining a wonderful night out! Driving by the local bar at night there’s NO shortage of gringos sitting at the front table (8 or more) EVERY NIGHT smoking and drinking for hours… seems like a fair place to impose some taxes on foreign income! LOL
Scott is right… nothing has passed YET… but the very fact that these ideas are floating around out there means they have a chance.. and for that very reason alone we should all be very concerned!
Just an opinion… replies welcome!
I totally agree with IMxploring. Costa Rica will keep looking for ways to tax foreigners without taxing their own people. However, as I understand this discussion, Costa Ricans working in the US would also be taxed on income that they made in the US. This would not be fair to this group of people either because that income would have also been taxed by the US. Double taxation in any form is totally unfair. Income should be taxed in the country in which it was earned -period. Foreigners making income in Costa Rica (by owning a business or investments) should pay income tax on that money to Costa Rica and that same income should be exempt from taxes from the US or any other country.
By the way, I do not consider my Social Security as income. It is a benefit due to me because I paid into the system for more than 35 years with money that was not tax exempt. Every Social Security and Medicare payment that I made was never deducted from my taxable income. So the taxes on the SS that I am now receiving has already been paid.
As to Social Security income…What many folks don’t realize is that if you have enough “other” income from a pension or such…. Uncle Sam taxes up to 75% of your SS payments in the US… Yep… do the right thing… save… invest… be lucky enough to have a pension plan… and they TAX your SS check thus reducing your payments… even if you’ve maxed out your SS contributions for years!
Since things are so bad for most folks… and pensions plans are fewer these days most folks don’t get hit with this tax on their SS income. But for those of us that have worked hard to save, invested, and planned our retirements… Uncle Sam reduces what he pays you in SS income by taxing it! If Uncle Sam does it… why wouldn’t CR? So as for CR I wouldn’t be surprised if they tried the same thing! Remember, many expats give up their income information to get residency… so dipping into that revenue to tax would require no income information assistance from any other government or added effort on the part of the CR tax officials. They just go back to all that information you gave up on your residency application!
Imx, what you describe about the taxation of Social Security benefits by the IRS is, in effect, a means test. If you’re affluent enough in retirement, some part of your Social Security benefit becomes taxable.
This is part and parcel of one of the changes that are being proposed by liberals and conservatives alike. Just how some new “means test” might differ from what happens today under the IRS Code isn’t clear, but the concept has wide support.
I’m not suggesting that you embrace it but only that what’s being proposed is, in effect, already in place. One way or another, those more affluent among us (regardless how they came to that condition) are and will be paying somewhat more or receiving somewhat less. In the end, it’s a wash.
Once again it would appear that we think we are all way more important to the Costa Rican economy than we actually are and, I do not agree for a second that “Costa Rica will keep looking for ways to tax foreigners without taxing their own people.”
All of the existing and the new, proposed taxes affect Costa Ricans far more than they affect us ‘expats.’
Answer me this!
Apart from a minimal property tax and a sales tax, what other taxes do retired expats in Costa Rica pay?
How much do you pay in taxes to the Costa Rican government right now?
And buckle your seatbelt if you think times are tough now, it’s going to get much worse than 99% of people imagine in North America and across Europe which will affect us.
Scott
Dow Jones Industrial Average Index ($INDU)10,798.57 -326.27 (2.93%)
SDAQ Composite Index ($COMPX)2,480.82 -57.37 (2.26%)
S&P 500 INDEX ($INX)1,136.76 -30.00 (2.57%)
ave. loss between those 3 is (2.586%) OR you lost 2.586 cents out of a dollar
as off 10:35 AM, today in the USA
and in Europe the situation is in CRISIS because of Greece
Next STOP is Portugal and Spain
make sure your AIR BAGS are working, you will need them besides your seatbelt
Best part is South America is not participating in this nightmare
[quote=”aguirrewar”][quote=”waggoner41″]
I do know that there are in excess of 100,000 Americans living here and the number of Canadians is probably near 15% of that. I have no idea how many Europeans are living in Costa Rica.I also know that if all expats were taxes at a fair rate that we, whether our incomes are great or small in our eyes, could contribute much to improve what we see as the shortcomings of this society.[/quote]
1. None of the above makes me qualify in your opinion
[/quote]Your situation leaves you unqualified to “have a dog in this fight” but your response is quite correct in your situation. My comments are directed toward those of us who legally live here full time.
When you visit Costa Rica you have the choice of accommodations with a cost range from the $100+ per night American hotels to the local B&B hostels at as little as $35 per night. You have options available to you that can put the cost of a two-week stay in Costa Rica below the cost of the round trip flight. Even as a visitor, you realize that the cost of living here can be well below the cost of living in the States.
The point of my original post is that the sales tax is a regressive tax that puts the burden of financing government services on the poor.
Regarding the Ticos themselves, those at the bottom of the income scale spend their entire income to support their families and pay a sales tax on all of it, those who are able to earn more have the benefit of saving a part of their income and pay sales taxes only on that part of their income that they spend. In addition, the working poor and their employers are subject to a 31% tax to cover government services (health care, education, etc.)
As expats we enjoy special consideration where taxes are concerned in that, although we pay the sales tax, we pay very little for the social services that are available to us whether we use them or not.
In our situation, we use the Caja and have learned how the system works, work within those parameters and the care we have received has been as good as we received in the States. We also realize that these government services are severely underfunded.Those expats who live here and complain about the poor condition of the infrastructure, the Caja, the educational system and other government programs are also aware that these services are underfunded but they protest if it is suggested that they pay a fair share to make improvements.
They would rather pay the cost of overpriced private health care insurance for the services of private doctors and hospitals and complain about malpractice in the Caja system as if malpractice never existed in the States or the private health care system here.
In the end no one can deny that the income of the average expat is well above that of at least 80% of the Ticos. We do not have to spend all of our income thus avoiding taxation on that portion that is set aside as savings and investment.
Pura Vida 😀
[quote=”aguirrewar”]Dow Jones Industrial Average Index ($INDU)10,798.57 -326.27 (2.93%)
SDAQ Composite Index ($COMPX)2,480.82 -57.37 (2.26%)
S&P 500 INDEX ($INX)1,136.76 -30.00 (2.57%)
ave. loss between those 3 is (2.586%) OR you lost 2.586 cents out of a dollar
as off 10:35 AM, today in the USA
and in Europe the situation is in CRISIS because of Greece
Next STOP is Portugal and Spain
make sure your AIR BAGS are working, you will need them besides your seatbelt
Best part is South America is not participating in this nightmare[/quote]
THe problems in the U.S. and Europe are self inflicted.:cry:
[quote=”Imxploring”]As to Social Security income…What many folks don’t realize is that if you have enough “other” income from a pension or such…. Uncle Sam taxes up to 75% of your SS payments in the US… Yep… do the right thing… save… invest… be lucky enough to have a pension plan… and they TAX your SS check thus reducing your payments… even if you’ve maxed out your SS contributions for years!
Since things are so bad for most folks… and pensions plans are fewer these days most folks don’t get hit with this tax on their SS income. But for those of us that have worked hard to save, invested, and planned our retirements… Uncle Sam reduces what he pays you in SS income by taxing it! If Uncle Sam does it… why wouldn’t CR? So as for CR I wouldn’t be surprised if they tried the same thing! Remember, many expats give up their income information to get residency… so dipping into that revenue to tax would require no income information assistance from any other government or added effort on the part of the CR tax officials. They just go back to all that information you gave up on your residency application![/quote]
The point that most Americans are missing is that Social Security, as the name implies, was enacted as a safety net not a savings program. As such I have to wonder why a person with a $100,000 retirement income feels that he is owed Social Security.
Because he paid into it for 40 or more years????? if i had invested all i put into SSA over my working career, i would have a lot more money than i get now from SS.
I agree with waggoner;
IF you have a retirement income of $100,000 a year you should not collect SSA, even if you paid for it.
Bob Hope paid every year for more than 50 and never collected a penny from his SSA. John MCcain collects his SSA and he is worth millions.
I pay property taxes and part is for the Library; which I never use, another part goes to the school district when my kids graduated 10 years ago.
The tax system is unbalanced and needs a major overhaul. When Warren Buffett pays less taxes than his secretary (diferent brakets) you know something is not right.
[quote=”BeeJ”]Costa Rica collects sails tax. Foreigners bring new money into the country. Everything they buy with that money they pay tax too. So foreign income when spent in CR is being taxed.
In Canada: Foreigners (tourists or not) pay sales tax on what they buy. That’s ok. Though they used to get a return of the gst
(federal portion of our sales tax) if they sent in a form after they left Canada which, by the way, disgruntled Canadians.[/quote]I can guarantee you that the taxes I pay in Costa Rica are less than 2/3 what I paid on my income in the U.S. That includes Costa Rican property taxes and sales taxes.
The cost of our health care is less than 1/10 of the cost of our health care in the States.If your retirement income rises above $69,000 the taxes you pay in Costa Rica are then just over 1/2 of the federal marginal income tax rate.
I live in a beautiful country among wonderful people and the taxes I pay for the priveledge would be the envy of all Americans.
So again, when you consider that the average Tico pays the sales tax on the entirety of his income are we not living here at the expense of the Ticos in this tax system?
Any income that we bring to Costa Rica that is taxed elsewhere should be immune to taxation here. We are taxed on every purchase to support the government here leading me to believe that a progressive income tax would better serve Costa Rica even if it comes to taxing the untaxed income of expats.
I know that I am going to get argument against it but rather than complaining about the services we use, such as the poor roads, a better system of financing needs to be in place.
[quote=”maravilla”]Because he paid into it for 40 or more years????? if i had invested all i put into SSA over my working career, i would have a lot more money than i get now from SS.[/quote]
Your congress at work…The Social Security Act contains a stipulation that the trust fund can only invest in instruments that carry “the full faith and credit” of the U.S. government. This limits the trust fund to investing ONLY in instruments issued by the U.S. Treasury Department and they, in fact, pay the lowest return there is.
Had congress allowed 10% of the trust fund to be invested elsewhere our SS income would be greater and SS would not be facing this imaginary shortfall due to the baby boom generation. I call the shortfall imaginary because, even at this late date, it is correctable.
Your comment still misses the point that Social Security was created and intended as a safety net rather than a savings plan.
My SS income is well above the average monthly check of $1,177 and I have a small pension but I still fall below the level required to pay an income tax in the U.S.
We still live comfortably here. How much would it hurt to pay a 10% tax on our untaxed income?
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