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Let me make sure I have this straight. You want me to give you money (VIP Membership) for the privilege of giving you my work at no cost? Gee, I’ll need to crunch the numbers on that deal.
In response to replies on another forum, I am asking ARCR to post a clean version on their website. I will also look to publish this article through some other outlet in the near future.
FYI – Nigüentas make great gifts for your Costa Rican friends. The trick is to find an attractive model. There are some truly ugly examples out there. The central market in San José has a good selection.
I’ll try to get this in the right place this time. I was incorrect in my earlier post – the Foreign Tax Credit is limited to the LESSER of 1) Foreign tax paid or 2) US tax allocated to foreign earnings. Thus, if we were assessed tax on just US source earnings, there would be no credit. You need to have a US tax liability for foreign income to use the credit. There is a carry-forward provision.
However, I doubt there will be a tax on non-CR income for non-citizens. Even the US does not tax the foreign earnings of aliens, even resident aliens (different rules for joint filing with a citizen) – only the US source income.
First, I would be very surprised if any tax applied to non-CR income of non-citizen residents. If it were to do so, the credit is generated from Form 1116 and you do not need to file Schedule A. Although 1116 generally is used to gain a credit for foreign tax paid on foreign income, I believe it allows for a credit on any taxation of US based income as well.
A longstanding problem in Latin America is the very low percentage of GNP that is collected in taxes. This greatly limits their ability to invest in infrastructure, security, education, etc. Surprisingly, Costa Rica ranks near the bottom (lowest % of GNP collected) of countries in this category.
Correction
Posted Saturday, September 17, 2011 at 1:49 PM from 186.4.52.241
I stand corrected, although I still doubt that any CR income tax would be levied on non-CR income of non-citizens. However, the foreign Tax Credit (Form 1116) is limited to the LESSER of; 1) Foreign tax paid or 2) US tax allocated to foreign source income. Thus, if CR were to tax you on US source income, you would not be able to claim the credit. You could still take it as an itemized deduction, but that would not help the many people who take the standard deduction.
