Fiscal Advantages of a Costa Rica Company for Foreigners

Costa Rica has become an attractive destination for foreign investors and entrepreneurs due to its stable economy, business-friendly policies, and favorable tax system. Establishing a company in Costa Rica provides multiple fiscal benefits that can help businesses thrive in a competitive global market. In this article, we explore the key fiscal advantages of incorporating a company in Costa Rica.

1. Territorial Tax System

One of the most significant fiscal advantages of setting up a company in Costa Rica is its territorial tax system. This means that only income earned within Costa Rica is subject to taxation. Foreign-sourced income is not taxed, allowing international businesses to operate without being burdened by local income taxes on their global profits.

2. No Capital Gains Tax

Costa Rica does not impose capital gains tax on profits derived from the sale of assets unless such sales are part of the company’s regular business activities. This provides a significant advantage for investors looking to buy and sell assets without incurring additional tax liabilities.

3. Low Corporate Tax Rates

Small and medium-sized enterprises (SMEs) benefit from Costa Rica’s progressive corporate tax system. Businesses earning less than a specified threshold enjoy reduced tax rates, making it an attractive option for startups and growing enterprises.

4. No Restrictions on Foreign Ownership

Unlike many other countries, Costa Rica allows 100% foreign ownership in most business sectors. This enables international entrepreneurs to have full control of their businesses without the need for a local partner or sponsor.

5. Tax Incentives in Free Trade Zones

Companies operating within Costa Rica’s Free Trade Zones (FTZs) benefit from extensive tax incentives, including exemptions from corporate income tax, import duties, and municipal taxes. These incentives make Costa Rica an ideal location for businesses engaged in manufacturing, logistics, and service industries.

6. VAT Advantages

Costa Rica has a Value Added Tax (VAT) of 13%, but certain industries and transactions benefit from exemptions or reduced rates. Exported goods and services, for example, are subject to a 0% VAT rate, making Costa Rica an advantageous hub for international trade.

7. Double Taxation Agreements

Costa Rica has entered into multiple Double Taxation Avoidance Agreements (DTAs) with various countries, ensuring that businesses and individuals do not have to pay tax twice on the same income. These agreements enhance the overall tax efficiency of foreign-owned companies operating in Costa Rica.

8. Low Operational Costs

Besides tax advantages, Costa Rica offers lower business setup and operational costs compared to other Latin American countries. Affordable labor, competitive rental rates, and efficient infrastructure make it a cost-effective choice for foreign investors.

9. Ease of Business Setup and Supportive Regulations

The Costa Rican government has made business registration and incorporation processes straightforward and efficient. With digital incorporation services, streamlined bureaucratic procedures, and support from investment promotion agencies, establishing a company in Costa Rica is relatively easy and hassle-free.

Conclusion

Costa Rica’s territorial tax system, capital gains tax exemptions, and attractive incentives in Free Trade Zones make it a highly favorable destination for foreign investors. Combined with 100% foreign ownership rights, low operational costs, and a business-friendly regulatory environment, Costa Rica presents a compelling opportunity for entrepreneurs looking to establish a tax-efficient company in Latin America. Whether you are a startup or an established company, incorporating in Costa Rica could be a smart financial move.