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Taxes

Costa Rica — Tax: Income Tax

Costa Rica taxes only Costa Rican-sourced income on a territorial basis — the AI draft's implication of worldwide taxation is incorrect (see the Tax Residency page). For 2026, salaried employees are exempt up to ₡918,000/month; above that, progressive rates on annual income run 0% up to ₡6,244,000, then 10%, 15%, 20%, and 25% on income above ₡20,828,000 (~$37,500). Self-employed individuals have a separate schedule with the same ₡6,244,000/year exempt threshold, and a 2026 reform introduced a 25% flat deduction for independent workers/freelancers without needing receipts. The tax year runs January 1-December 31, with returns due by end of April (self-employed/business filers; employees are generally taxed via payroll withholding).

VerifiedGovernment / official sourceCosta Rica Ministerio de Hacienda's 2026 income tax bracket update (Executive Decree, reported via Orbitax, BDO Costa Rica, and garciabodan.com), cross-checked with PwC Tax SummariesLast reviewed: 2026-08-29

Why this matters

The territorial system is the single most important fact here — foreign-sourced income (a foreign pension, foreign investment returns, remote salary from a non-Costa Rican employer) is generally exempt from Costa Rican income tax, which the original AI draft did not make clear, and getting the 2026 bracket figures right (rather than a vague '10-25%' description) helps with real budgeting.

Key facts

  • Costa Rica's income tax is territorial: only Costa Rican-sourced income is taxed, not worldwide income (see Tax Residency page for detail).
  • 2026 salaried-employee exempt threshold: ₡918,000/month; above that, progressive rates on annual income are 0% (up to ~₡6,244,000), 10%, 15%, 20%, and 25% (above ~₡20,828,000, roughly $37,500).
  • Self-employed individuals/businesses are taxed under a separate schedule with the same ₡6,244,000/year exempt threshold as a starting point.
  • A 2026 tax reform introduced a 25% flat deduction for independent workers/freelancers/consultants — they can deduct 25% of gross income without needing receipts, reducing effective tax burden.
  • The tax year runs January 1-December 31; employees are generally taxed via employer payroll withholding, while self-employed/business filers must file returns, commonly due by the end of April.

Steps

  1. Determine if your income is Costa Rican-sourced — Only Costa Rican-sourced income is taxable; foreign-sourced income (foreign employer salary, foreign pensions, foreign investment income) is generally exempt under the territorial system.
  2. Calculate taxable income and applicable bracket — For Costa Rican-sourced income, apply the 2026 progressive brackets (0%/10%/15%/20%/25%) after the exempt threshold; self-employed filers should also check eligibility for the 25% flat deduction.
  3. File or rely on payroll withholding — Salaried employees are generally covered by employer withholding; self-employed/business filers must file a return, commonly by the end of April.

Timelines

  • Tax year: January 1 to December 31
  • Filing deadline (self-employed/business): Commonly end of April, following year

Required documents

  • Cédula/DIMEX or taxpayer identification number
  • Tax return form (for self-employed/business filers)
  • Supporting documentation of income and deductions

Common mistakes

  • Assuming Costa Rica taxes worldwide income like the US — it taxes only Costa Rican-sourced income under its territorial system
  • Using outdated bracket figures instead of the 2026-updated thresholds (which are adjusted annually for inflation)
  • Self-employed filers missing the 2026 25% flat deduction option, which can meaningfully reduce their effective tax burden

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