How taxes work in Costa Rica
Costa Rica taxes only what you earn inside the country — here's what that means for expats, retirees, remote workers and US citizens.
Costa Rica taxes on a territorial basis
Only Costa Rica-source income is taxed. Foreign-source income is generally not.
This is the single most important thing to understand about taxes here. US pensions, Social Security, a foreign salary and foreign investment income are generally not taxed by Costa Rica. That makes it attractive whether you're moving to Costa Rica or investing in Costa Rica. Your Costa Rica visa options can also affect how your income is treated.
Costa Rica taxes at a glance
The main taxes you may encounter as a resident, property owner or business owner. Figures are general and rounded — confirm current rates with a professional.
| Tax | Rate | What it applies to |
|---|---|---|
| Personal income tax | Progressive brackets | Only on Costa Rica-source income (e.g. a salary or business earned inside Costa Rica). Foreign income is generally not taxed. |
| Property transfer tax | ~1.5% of value | Paid once at purchase, calculated on the registered transfer value of the property. |
| Annual property tax | 0.25% of value | Paid each year to the local municipality, based on the property's registered value. |
| Luxury home tax | Additional annual tax | An extra annual tax on high-value homes above a set threshold, charged on top of the standard property tax. |
| Corporate / business tax | Progressive brackets | Applies if you run a registered Costa Rican company or business; only Costa Rica-source profits are taxed. |
| VAT / IVA | 13% | Value-added tax charged on most goods and services purchased inside Costa Rica. |
You still file US taxes — wherever you live
The US taxes its citizens on worldwide income regardless of residence. Here's how to stay compliant and avoid double taxation.
- You must still file a US federal tax return every year on your worldwide income, even if you owe nothing and live full-time in Costa Rica.
- The Foreign Earned Income Exclusion (FEIE) can exclude a large portion of foreign-earned income from US tax if you meet the residence or physical-presence tests.
- The Foreign Tax Credit lets you offset US tax with income taxes you've paid to another country, which helps avoid being taxed twice.
- Foreign bank and financial accounts can trigger FBAR and FATCA reporting requirements once balances cross certain thresholds.
- Because cross-border rules are complex and change often, work with a tax professional who specializes in US expat returns.
Digital nomads
Costa Rica's Digital Nomad visa holders are exempt from Costa Rican income tax on their foreign-earned income. Because the work is done remotely for clients or employers outside the country, that income is foreign-source and sits outside Costa Rica's territorial system. You may still owe tax in your home country — US citizens, for example, keep filing US federal returns.
See the Costa Rica visa options →Property owners
If you buy a home, budget for a one-time transfer tax of around 1.5% of the value at purchase, plus an annual property tax of 0.25% of the registered value paid to your municipality. High-value homes above a set threshold also owe an additional annual luxury-home tax. Factor these — along with legal and closing costs — into your purchase budget.
Learn about investing in Costa Rica →Costa Rica tax questions, answered
Does Costa Rica tax foreign income?+
Generally no. Costa Rica uses a territorial tax system, which means only income earned from a Costa Rican source is taxed. Foreign-source income — such as a US pension, Social Security, a foreign salary or investment income from abroad — is generally not subject to Costa Rican income tax. This is one of the main reasons Costa Rica is popular with retirees and remote workers.
Do US citizens pay taxes in Costa Rica?+
US citizens living in Costa Rica are taxed by Costa Rica only on their Costa Rica-source income, because of the territorial system. However, they must still file US federal taxes on their worldwide income every year, no matter where they live. Tools like the Foreign Earned Income Exclusion and the Foreign Tax Credit help avoid double taxation, and foreign bank accounts may trigger FBAR and FATCA reporting. A cross-border tax professional is strongly recommended.
What is the property tax in Costa Rica?+
The standard annual property tax in Costa Rica is 0.25% of the property's registered value, paid to the local municipality. When you buy property you also pay a one-time transfer tax of around 1.5% of the value. High-value homes above a set threshold owe an additional annual luxury-home tax on top of the standard property tax.
Do digital nomads pay tax in Costa Rica?+
Holders of Costa Rica's Digital Nomad visa are exempt from Costa Rican income tax on their foreign-earned income. Because they work remotely for clients or employers outside Costa Rica, that income is foreign-source and falls outside Costa Rica's territorial tax system. They may still have tax obligations in their home country — US citizens, for example, must continue to file US federal returns.
Is there a sales tax in Costa Rica?+
Yes. Costa Rica charges a value-added tax, known locally as IVA, of 13% on most goods and services. It is usually included in or added to the price you pay at shops, restaurants and for many services, so it's worth budgeting for as part of your cost of living.
This page is general information, not tax or legal advice. Tax rates, thresholds and reporting rules change and depend on your individual situation — always confirm your obligations with a licensed cross-border tax professional before making decisions.
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