Costa Rica: the Pensionado still popular with retirees

Costa Rica has several categories of temporary residence. The retiree category is aimed at people who can show a regular pension paid by a foreign scheme.

We do not publish the monthly pension threshold required, the guarantee period requested or the renewal conditions: they do not appear in the official sources we have been able to verify. They must be established with the Directorate General of Migration.

What can be stated is that any Costa Rican temporary residence requires enrolment in the social security system, whose contribution is calculated on declared income.

This is a recurring charge, not an entry fee. It must be included in the budget from the first year, and it rises with income — which creates a tension with the requirement to show a sufficient pension to obtain the permit.

Failure to pay contributions is also one of the most frequent reasons the path to permanent residence breaks down, along with prolonged interruptions of stay.

Costa Rica applies territorial taxation: income from Costa Rican sources is taxed, meaning income from assets located or activities carried on in the country. Foreign-source income falls outside the tax base.

A French pension paid to a Costa Rican resident therefore escapes local tax. The applicable tax treaty, however, determines whether France retains a right to tax.

Public-sector pensions generally follow a different rule from private pensions, and they may remain taxable in France. The classification is made pension by pension, before departure.

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

It applies only to locally sourced income: a retiree who rented out a property in Costa Rica would fall under the standard rules for that portion.

It should be added that Costa Rican territorial taxation is part of the standard rules, not a special regime. It therefore cannot be closed to new entrants in the way Portugal’s non-habitual resident status or Spain’s residency by investment were.

Contrary to a widespread belief, Costa Rica is one of the most expensive countries in Central America. Political stability, the level of education and environmental protection come at a cost.

We do not publish a typical monthly budget: we have not found an official Costa Rican series measuring a basket of spending comparable to that of an expatriate.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; the social security contribution; electricity; and housing in the areas popular with foreigners.

In return, enrolment gives access to a public health system of a high regional standard, which clearly sets the country apart from its neighbours and matters particularly to a retiree.

1. Have each pension classified under the applicable tax treaty: public or private, the treatment differs.
2. Gather apostilled civil status documents and criminal record certificates, a lengthy step to start in France.
3. Include the social security contribution in the initial budget, along with how it will change with declared income.
4. For a coastal purchase, have the nature of the right — freehold or concession — established before any payment.
5. Deal with your departure from France according to its own criteria: Costa Rican territorial taxation settles nothing on that side.

The fourth point deserves particular emphasis. The maritime-terrestrial zone, which covers a strip along the coastline, is public property and can only be held under a concession. Yet that is precisely where most of the properties sought by foreign retirees are located, and confusing freehold ownership with a concession is the costliest mistake on the Costa Rican market.