Costa Rica: territorial taxation and nature, the “pura vida” option

Costa Rica applies territorial taxation: Costa Rican-source income is taxed, that is, income from property located or activities carried out in the national territory. Foreign-source income is not part of the tax base.

This is the basis of the country's appeal to retirees and remote workers. Like any territorial system, it protects the foreign source, not the person.

Income from an activity carried out from Costa Rica therefore requires a separate analysis, and that analysis should be secured before moving rather than after.

The scale applicable to employees, retirees and pensioners has several bands, with an intermediate rate of 10%¹ and a top rate of 25%².

Legal entities whose gross income exceeds a defined threshold apply a flat rate of 30%³, with reduced rates applying below it.

We do not publish the Costa Rican rules on capital gains, dividends or inheritance: they do not appear in the extracts available to us. The treatment of real estate capital gains in particular has been amended and must be checked before any sale.

Contrary to a widespread belief, Costa Rica is one of the most expensive countries in Central America. The political stability, level of education and environmental protection that make it attractive come at a cost, and it shows in prices.

We do not publish a typical monthly budget: we have not found an official Costa Rican series measuring a basket of spending comparable to that of an expatriate.

Four items shape a budget. Imported goods, which are heavily taxed — cars in particular, priced well above European levels. Social security contributions, compulsory for residents. Electricity, largely from renewable sources but expensive. And housing in the areas popular with foreigners.

Affiliation to the social security system is the obligation most often discovered after the fact. The contribution is calculated on declared income, and it is a recurring charge, not an entry fee.

In return, it gives access to a public health system of a high standard for the region, which clearly sets the country apart from its neighbours.

Purchase by a foreigner is unrestricted and requires no prior authorisation: a foreigner has the same rights as a national over private property. This openness is rare in Central America.

There is, however, a major exception: the maritime terrestrial zone, which covers a strip along the coastline. Land there belongs to the public domain and can only be held under a concession, and the granting of concessions to foreigners is restricted.

Yet this is precisely where most sought-after properties are located. Confusing freehold ownership with a concession is the most costly mistake on the Costa Rican market.

The exact nature of the right must be established by an adviser independent of the seller, on the basis of the National Registry, before any payment is made.

1. Choose the residence category: investor, from $150,000⁴, retiree or person of independent means.
2. Gather apostilled civil status documents and criminal record certificates, a lengthy step to start in France.
3. Include social security contributions in the initial budget.
4. For a coastal purchase, have the nature of the right established before any payment.
5. Handle the departure from France under its own criteria: territorial taxation settles nothing on that side.

Costa Rica illustrates a frequent confusion between cost of living and quality of life. The difference with France on a family budget is less spectacular than advertised. What the country offers lies elsewhere: long-standing institutional stability, an abolished army, a consistent environmental policy and territorial taxation enshrined in law. This comes at a price, and it is a deliberate trade-off rather than a bargain.