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August 21, 2020

Costa Rica Rental Income Taxes

Costa Rica’s recent overhaul of its tax laws contains one important provision that affects anyone who benefits from rental income, including property owners who work with Special Places of Costa Rica.

Under the old rules, expenses such as maintenance were deducted from rental income, and taxes were paid on the difference. These taxes were based on net income at various percentages listed in tables published by the Directorate General of Taxation (Dirección General de Tributación).

Also, under the old system these taxes were paid only once a year.

The new system is arguably simpler but not necessarily easier. It assumes that in all cases, expenses total 15% of rental income, so it imposes taxes only on the remaining 85%. And it imposes a flat rate of 15% on that 85%, eliminating the various tax rates under the old system.

Some call this the 15/15 tax, because you deduct 15% of rental income and pay 15% on the rest.

When to pay Costa Rica rental income taxes

In addition, the new system requires filings and payments once a month rather than once a year. But it eliminates the need to file a traditional income tax return because there is no need to list expenses.

There’s one wrinkle to complicate matters just a bit more: whether the property owner has at least one employee (like a housekeeper or a watchman). Property owners with no employees must choose the new system, paying 15% on 85% of their income every month.

So here’s the wrinkle: Property owners with at least one employee can choose between the new system and the old system! Obviously, it’s a complicated calculation to determine which option is best, and it’s not a decision to be made without the advice of a good accountant or tax lawyer.

We at Special Places of Costa Rica have a team of accountants and lawyers to keep us abreast of rapidly changing tax laws, and we are able to put their expertise at your disposal. If you have any questions about your obligations to pay tax on rental income, please feel free to contact us.


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Category: Taxes

9 thoughts on “Costa Rica Rental Income Taxes

  • John
    on May 12, 2023

    Apart from doing tax fillings do i need my accountant to do financial statements. I have only one rental property

  • Jeff
    on November 14, 2022

    Hi. In addition to paying the 15/15 CR tax on my rental income from the property in CR… do I also have to report that income back home in the US (where I mostly live) and pay a US tax too (e.g. double taxed by CR and the US)? Thank you! Jeff

    • Karl Kahler
      on November 14, 2022

      Jeff, it’s a good question, and I don’t know the answer, but I would hope not! I would suggest consulting with a tax attorney or accountant on this. Or maybe someone else who monitors this page can answer.

  • Michael Hall
    on April 17, 2022

    If my rental income does not touch Costa Rica banking for example my renters pay me directly to a Canadian bank account. Am I liable for Costa Rica income tax? How would they track it? Or is it on a goodwill basis?

    • Kenny Segers
      on August 4, 2022

      Hi! As the economic activity is being done in Costa Rica, it should be declared in Costa Rica. But as you say, on a good will basis.

  • Carla Devlin
    on March 23, 2022

    I’f we use a booking agency and management company who collects the rental revenue then deducts their fees before paying us the owners., what is taxed as income? What the renters pay or what we we the owners receive? Thanks!

  • Louis Meduri
    on July 9, 2021

    Does the 15/15 tax apply if the property is owned by a Costa Rican corporation?

    • Kenny Segers
      on July 29, 2021

      Hi Louis,
      this would apply if the property is owned by a corporation or under personal name. There is no difference!

  • Andy
    on March 7, 2021

    Hi Karl, Nice piece on rental taxes! I am wondering if residential rentals in Costa Rica are considered under law a commercial activity?


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