Why More and More Latin Americans Choose Moving to Costa Rica

Costa Rica is a country globally known for its tourist attractions. Its spectacular beaches, unique natural environment and highly developed hotel industry allow it to be considered by the World Economic Forum as the third most competitive tourist destination in Latin America, and the 41st on the planet.

In 2019 it received 3.1 million tourists —a not insignificant number for a country of 4.9 million inhabitants—, 4.1% more than in 2018, an increase that doubles the average increase of the American continent, according to the World Organization of Tourism.

What many do not know is that Costa Rica is, increasingly, a pole that attracts investors, professionals and even pensioners, who decide to move to the Central American country for the conditions it offers to people who want to prosper in its territory.

On the one hand, it is a nation that has a very competitive tax system, which in the last five years averaged 1.2% annual inflation, and GDP growth of 3.3% annually, and which is among the safest and politically stable parts of the continent. On the other hand, for a long time it has had an active policy of encouraging foreign investment and the establishment of citizens of other countries.

The pandemic affected tourism more than any other sector of the economy and Costa Rica is suffering the blow. However, the authorities are seeing this crisis as an opportunity to establish themselves as a magnet for people of different nationalities.

If there is a change that is here to stay, it is remote working, which not only allows you to work from home, but from another country. In this context, Costa Rica wants more and more companies and people to decide to settle there to do work for the rest of the world, under very favorable rules.

Win-win scenario

It is a system in which everyone wins. Those who decide to settle can enjoy the combination of a country with clear and stable rules of the game, with tax benefits that they do not have in their own countries, which is also a unique natural paradise in the world.

In return, Costa Rica perceives the advantages of a growing internal market, with new consumers with high purchasing power, who also contribute innovative ideas, and generate employment and development opportunities.

A very competitive tax system

Unlike many Latin American countries, which maintain tax systems that stifle private investment to finance an inefficient State, Costa Rica has a balanced scheme, in which the needs of the treasury are satisfied and, at the same time, investment is stimulated.

The main tax is the income tax, which has a progressive structure, which stipulates that you must have a salary greater than 1,300 dollars per month to be eligible to pay. For salaries between $1,300 and $2,000, the first scale, the equivalent of 10 percent is paid. For salaries over $2,000, the rate rises to 15 percent, the maximum for salaried employees.

Self-employed workers must exceed $6,000 a year to pay income tax. Between 6,000 and 9,000 dollars, 10% is paid; between 9,000 and 15,000 dollars, the 15%; between $15,000 and $30,000, 20%; and those who exceed that threshold pay the maximum tax, 25 percent.

But those who come from other countries and obtain their income from activities originating outside of Costa Rica, are exempt from paying income tax. For many years, this attracted American pensioners, who could move and continue to collect their pension without inconvenience.

The same happens with rentiers, who live by renting properties in other parts of the world, or with those who work in companies based in other countries. What’s more, they can even deposit their earnings in Costa Rican bank accounts and receive more than reasonable interest without paying any taxes.

Those who do not have tax residence but carry out economic activities in Costa Rica are charged a 10% rate on the gross income received in the country. In the case of independent workers, the percentage rises to 15% when it comes to professional services and 25% when it comes to technical advice.

To be considered a tax resident, a person must remain in Costa Rican territory for more than six months in the same fiscal year, that is, from October 1 of one year to September 30 of the next. However, there are certain exceptions.

For example, those who work for a Costa Rican employer are taxed as if they were residents. In the same way, those who arrive with work contracts for a term greater than six months, can pay taxes as residents from the initial moment.

The requirements to settle in Costa Rica

People who decide to retire in Costa Rica and live there from the state or private pension they receive in their country of origin must register a minimum income of 600 dollars per month. If that requirement is met, they can get the same status for their spouse and for their children under 18, or up to 25 years old and studying at university.

Those who live by collecting some type of rent, need documentation that certifies that they obtain at least 1,000 dollars per month for it. In addition, they require that a Costa Rican or foreign bank prove that they have deposited in an account in their name an amount that would allow them to have an income of 1,000 dollars per month for five years. Then, the money from the rent must be transferred to an account in Costa Rica.

To obtain the investor residence, the requirement is to invest at least 50,000 dollars in tourism or in some industry of the export sector. In the case of investments in a reforestation project, the minimum sum is $100,000. For those who want to participate in other areas, the amount to invest rises to 200,000 dollars.

Those who aspire to permanent residence need to maintain their residence for at least two years as pensioners, rentiers or investors. The procedures have few obstacles and, once it is obtained, it is enough to travel to Costa Rica once a year to keep it.