Introduction:

Costa Rica has increasingly earned a reputation as an attractive jurisdiction for individuals and businesses seeking tax efficiency and a favorable environment for cross-border investment. At the heart of its appeal lies the country’s territorial tax system, under which only income generated within Costa Rica is subject to taxation, while foreign-sourced income remains entirely exempt. This framework provides significant advantages to expatriates, digital entrepreneurs, and multinational corporations alike, as it allows them to structure their affairs in a manner that minimizes global tax liability without the need for complex offshore mechanisms.  

From an economic perspective, Costa Rica offers a stable democratic setting, consistent GDP growth, and a steady influx of foreign direct investment, particularly in services, technology, and tourism sectors. Combined with its membership in the OECD since 2021, the country demonstrates a commitment to international cooperation and transparency while simultaneously preserving the competitiveness of its territorial system. This balance enhances Costa Rica’s positioning as a reliable yet advantageous base for international operations.  

Moreover, the government has reinforced its international tax framework through bilateral double taxation agreements (DTAs). Notably, Costa Rica has concluded treaties with Germany, Austria, and Switzerland, which are highly relevant for European investors and expatriates from these countries. These agreements provide mechanisms to prevent double taxation of income and capital gains, reduce withholding tax burdens on dividends, interest, and royalties, and strengthen legal certainty for cross-border activities. As a result, business owners and private individuals from German-speaking Europe are able to benefit not only from Costa Rica’s domestic tax advantages but also from treaty-based protections that promote efficient tax planning and compliance across jurisdictions. 

Altogether, Costa Rica’s blend of territorial taxation, sound economic fundamentals, and a growing network of international agreements underscores its status as a modern “tax paradise”—not in the superficial sense of secrecy, but in offering legitimate, transparent, and sustainable tax benefits to globally mobile individuals and enterprises. 

On the Map & What Others Say

Costa Rica sits strategically in Central America, bridging North and South America. To the north, it borders Nicaragua; to the south, Panama; to the west, the Pacific Ocean; and to the east, the Caribbean Sea. Its compact geography allows for remarkable biodiversity and cultural variety within a relatively small landmass, making it possible to experience misty cloud forests, volcanic terrain, and tropical coastlines all within a single day’s travel. The nation’s location also contributes to its popularity as both a tourism hub and a destination for expatriates seeking a balance of natural beauty and modern amenities.  

Travel writers and lifestyle commentators often highlight Costa Rica’s distinct blend of ecological richness and relaxed pace of life. For example, several travel magazines consistently rank the country among the top eco-tourism destinations in the world, noting its extensive network of national parks and dedication to environmental preservation. One popular travel blogger has described Costa Rica as “a place where mornings can begin with the sounds of howler monkeys in the jungle and end with sunsets over the Pacific,” emphasizing its extraordinary biodiversity and sense of connection to nature.  

Lifestyle publications frequently point to the country’s cultural ethos summarized by the phrase pura vida—literally “pure life.” This local expression captures more than just a greeting; it reflects an outlook centered on wellbeing, simplicity, and appreciation of everyday joys. Various expatriate-oriented magazines have commented that the friendliness of local communities, combined with a slower pace of living, makes integration into Costa Rican society unusually welcoming for newcomers.  

From a cultural perspective, international commentators often note Costa Rica’s success in fostering stability and peace in an otherwise turbulent regional history. Its lack of a standing army and strong emphasis on education and healthcare are seen as defining features of both its national identity and its appeal to visitors. In sum, the country is frequently described as an accessible yet profoundly enriching destination—both for short-term travelers and those considering a longer-term relocation. 

How the Tax System Works in Costa Rica

Costa Rica operates under a territorial tax system, which makes it particularly attractive to both individuals and businesses seeking to establish themselves in the country. Under this framework, only income that is earned within Costa Rican borders is subject to taxation. Income generated abroad—whether through investments, foreign employment, or international business operations—remains outside the scope of Costa Rica’s tax authorities. This principle distinguishes Costa Rica from many countries that tax residents on their worldwide income and is a cornerstone of the country’s fiscal environment.  

The tax structure in Costa Rica is overseen by the Dirección General de Tributación (DGT), the national tax authority, and is designed to balance domestic revenue collection with incentives for foreign investment. While not overly complex by international standards, it does include several layers that are important to understand if you are considering living, working, or doing business there.  

At the individual level, personal income tax applies progressively on locally-sourced earnings, with rates starting at modest levels and rising to approximately 25%. Corporate taxation, on the other hand, is levied on business profits generated in Costa Rica, with rates generally ranging from about 10% for smaller enterprises up to 30% for larger corporations, depending on company size and revenue. Beyond these primary taxes, there are also payroll contributions, value-added tax (VAT) on goods and services (currently set at 13%), and specific levies on assets like property and vehicles.  

In real-world terms, this means a full-time professional in San José earning the equivalent of USD $30,000 per year could expect to pay a modest share of that income to the DGT, while a mid-sized Costa Rican corporation generating USD $1 million in annual revenue could face a corporate tax bill of around $300,000, before accounting for deductions and allowances. Property taxes are comparatively low by global standards—typically around 0.25% of the registered value—so a home valued at USD $250,000 might incur only $625 annually.  

This section provides a high-level overview, setting the stage for a closer look at the main components of the Costa Rican tax framework. In the following sections, we will explore personal income taxation, corporate tax obligations, and other significant levies such as VAT, property tax, and social security contributions. Together, these pieces form the backbone of Costa Rica’s tax system and are essential knowledge for expatriates and businesses considering a presence in the country.  

Taxation of Individuals

Costa Rica applies a territorial tax system, meaning that individuals are taxed only on income sourced within the country. Foreign-sourced income, even if remitted to Costa Rica, is generally exempt from taxation. This principle is central to understanding how both residents and non-residents are treated under Costa Rican tax law.  

Tax Residency Rules

An individual is typically considered a tax resident in Costa Rica if they spend more than 183 days in the country during a calendar year. Residency status affects the applicable rates and the way income is assessed, although in both cases taxation applies only to Costa Rican–source income.  

Residents

Resident individuals are subject to progressive personal income tax rates applied on their annual income derived from Costa Rican sources. For 2024, the applicable brackets are approximately:

• Up to around CRC 4.1 million per year – exempt

• CRC 4.1 million to CRC 6.1 million – 10%

• CRC 6.1 million to CRC 10.2 million – 15%

• CRC 10.2 million to CRC 20.6 million – 20%

• Above CRC 20.6 million per year – 25%

These brackets are adjusted periodically to account for inflation. For example, a Costa Rican resident earning CRC 12 million annually from professional services would pay no tax on the first CRC 4.1 million, 10% on the next bracket, 15% on the following, and finally 20% on the portion exceeding CRC 10.2 million, resulting in an effective tax rate well below the top marginal rate.  

Non-Residents

Non-residents are taxed differently: rather than using progressive brackets, they are generally subject to withholding tax on Costa Rican-source income. The rates vary by type of income:  

• Employment income: 10–15% (depending on the nature of services rendered)  

• Dividends: 15%

• Interest: usually 15%, but may vary based on the payer  

• Professional and technical services: 25%  

This system means that for non-residents who perform short-term work or business in Costa Rica, the tax is withheld at source and often operates as a final tax liability.  

Deductions and Allowances

Resident taxpayers may benefit from certain personal deductions, which are not available to non-residents. Key examples include:  

• A standard deduction for dependents and spouse (adjusted annually by law)  

• Deductible social security contributions, which are mandatory in Costa Rica  

• Potential deductions linked to certain business expenses if income is derived from professional activity  

Non-residents, however, cannot claim personal deductions since their taxes are assessed at flat withholding rates.  

Special Regimes for Expats and Digital Nomads

Costa Rica has recently introduced a Digital Nomad Visa regime designed to attract foreign professionals working remotely. Holders of this status can stay in the country for up to one year (renewable once) and, importantly, their foreign-sourced income remains exempt from Costa Rican tax. Since Costa Rica’s system already exempts foreign income, this visa mainly provides immigration benefits and practical assurances that earnings from abroad are not taxable locally.  

Expatriates who qualify as residents under the 183-day rule will fall under the normal progressive income tax regime on Costa Rican-sourced earnings, while continuing to enjoy exemption on foreign income. For retirees or individuals relocating without locally sourced income, this system is often favorable compared with worldwide taxation applied in other jurisdictions.  

Summary

In practice, Costa Rica’s territorial model, combined with progressive rates for residents and withholding for non-residents, creates a relatively straightforward system. The tax burden arises only if an individual earns income within Costa Rica. For expats and digital nomads relying on foreign income, the regime is comparatively advantageous, while those conducting local business or employment will need to carefully consider applicable brackets, withholding taxes, and allowable deductions.  

Taxation of Corporations

Costa Rica applies a territorial tax system, meaning that corporations are generally taxed only on income derived from Costa Rican sources, while foreign-sourced income is not subject to corporate income tax. This approach makes Costa Rica particularly attractive to companies engaged in international activities, provided their revenue originates outside of the country.  

Corporate income tax rates in Costa Rica are progressive and depend on the company’s annual gross income:  

• For corporations with annual gross income up to roughly CRC 119 million (about USD 220,000), reduced rates between 5% and 20% apply.  

• Corporations with annual gross income above that threshold are taxed at a flat rate of 30%.  

This structure ensures that smaller businesses benefit from lower tax rates while larger enterprises shoulder a greater tax burden.  

As for deductible business expenses, Costa Rican law allows deductions for costs that are deemed necessary, normal, and directly related to income generation. This typically includes:  

• Salaries, wages, and social security contributions.  

• Rent, utilities, and professional service fees.  

• Depreciation and amortization of fixed assets, in line with regulatory limits.  

• Interest on loans used for business purposes (with anti-avoidance restrictions).  

• Certain marketing or advertising outlays.  

However, expenses must be properly documented and linked to Costa Rican-source income in order to be deductible.  

Costa Rica also incentivizes investment through special regimes, most notably the Free Trade Zone Regime (Régimen de Zona Franca). Under this program, qualifying companies—often exporters, technology firms, and service providers—may enjoy significant tax reductions, including:  

• Exemptions from corporate income tax for a fixed period (commonly 8 to 12 years).  

• Reduced income tax rates after the initial exemption period.  

• Exemptions from import duties, value-added tax on local purchases, and certain municipal taxes.  

These incentives aim to attract foreign direct investment, foster job creation, and promote high-value industries such as advanced manufacturing and shared services.  

In practical terms, a corporation operating outside of a special economic regime would face up to a 30% corporate tax on Costa Rican-sourced profits. A small business earning under USD 220,000 annually benefits from a reduced progressive rate, while companies qualifying for Free Trade Zone status could temporarily pay little to no corporate income tax at all.  

This blend of a territorial tax system, graduated rates for smaller firms, and generous incentives for strategic industries positions Costa Rica as a competitive jurisdiction for both local entrepreneurs and multinational enterprises seeking a gateway to Latin America.  

Other Significant Taxes

In addition to income taxation, Costa Rica imposes a number of other significant taxes that individuals and businesses should be aware of. These taxes cover a wide range of transactions and holdings, from investment income and real estate to everyday goods and payroll obligations.  

Capital Gains Tax

Since July 2019, Costa Rica applies a general capital gains tax at a rate of 15%. This applies to profits derived from the sale of securities, real estate (other than an individual’s primary residence, which may be exempt), and digital assets such as cryptocurrency. For example, if a taxpayer sells a property and realizes a gain of USD 50,000, approximately USD 7,500 would be due in taxes. An important distinction is that “habitual” real estate developers—those who frequently trade properties—are taxed differently, with gains treated as regular income subject to progressive personal income tax rates.

Tax on Dividends

Dividends distributed by Costa Rican corporations are generally subject to a 15% withholding tax, which is considered final. Thus, a shareholder receiving USD 10,000 in dividends would net approximately USD 8,500 after tax. Dividend taxation primarily affects investors, both domestic and foreign, who hold shares in locally incorporated companies.

Value-Added Tax (VAT)

Costa Rica introduced a comprehensive VAT in 2019, replacing its former sales tax. The standard rate is 13% and applies to most goods and services, with certain essential items either exempt or subject to a reduced rate. For instance, professional services and many digital platforms fall under VAT, meaning that purchasing a consulting service for USD 1,000 would include USD 130 in VAT. Basic food staples and essential healthcare services often enjoy reduced or zero-rated VAT treatment.  

Property Tax

Municipalities impose an annual property tax equal to 0.25% of the registered value of real estate. For example, a residential property worth USD 200,000 results in an annual municipal property tax of roughly USD 500. In addition, homeowners with luxury residential properties valued above approximately USD 230,000 (thresholds are adjusted annually) are subject to the so-called “luxury home tax,” with rates starting at 0.25% and progressively increasing, intended to fund social housing programs.  

Inheritance and Gift Taxes

Costa Rica does not levy inheritance or gift taxes. Transfers of wealth through succession or gifting are therefore not subject to a specialized tax; however, related transactions may still generate obligations under other tax categories (e.g., registration fees for property transfers).  

Wealth Tax

Costa Rica does not impose a general wealth tax beyond the luxury property contribution noted above. Individuals are not taxed annually on their worldwide net worth, a distinction worth noting for expatriates coming from high-tax jurisdictions.  

Social Security Contributions

Costa Rica’s social security system, administered by the Caja Costarricense de Seguro Social (CCSS), is robustly funded through mandatory payroll contributions. Both employers and employees are required to contribute. Typically, employers contribute around 26%–27% of gross salary, while employees contribute approximately 10.5%. For instance, on a monthly salary of USD 2,000, the employee’s contribution would equal about USD 210, while the employer’s contribution would exceed USD 500. These contributions finance healthcare, pensions, and other welfare benefits, forming a cornerstone of Costa Rica’s social model.  

Taken together, these taxes illustrate Costa Rica’s reliance on a mix of income, consumption, and social contributions, while notably lacking in wealth or inheritance-based levies. This creates a system that is relatively straightforward in structure but heavily protective of social welfare through payroll-based funding.  

Who Benefits Most from Moving to Costa Rica?

Relocating to Costa Rica can be highly advantageous for certain groups, but the country’s unique tax and residency structure means it is not equally beneficial for everyone. Understanding who stands to benefit most requires considering Costa Rica’s territorial tax system, cost of living, lifestyle offerings, and immigration framework. 

Beneficiaries of Costa Rica’s System

• Digital Nomads and Remote Workers: Because Costa Rica taxes only income generated within its borders (territorial taxation), earnings from foreign sources—such as freelance contracts, remote employment, or businesses located abroad—are generally exempt from Costa Rican income tax. This makes it particularly attractive for digital nomads and remote professionals, many of whom already have internationally derived income streams. The government has even introduced a specific “Digital Nomad Visa,” which facilitates legal residence for remote workers who can demonstrate a steady foreign-sourced income.  

• Entrepreneurs Serving International Markets: Entrepreneurs who establish companies that serve clients outside Costa Rica also benefit significantly. Foreign-sourced income is excluded from local taxation, allowing international business owners to operate in a favorable tax environment while enjoying the country’s relative political stability, developed infrastructure, and connectivity to North American and Latin American markets. However, entrepreneurs whose activities are heavily domestic—such as opening a local retail store—should expect standard taxation on Costa Rican-sourced profits. 

• Retirees with Foreign Pensions or Investment Income: Retirees are another major beneficiary group. Pension, annuity, or investment income that originates outside Costa Rica is not taxed locally. Coupled with a relatively lower cost of living compared to North America and Europe, retirees often find their retirement savings stretch further in Costa Rica. Residency pathways, such as the “pensionado” program, make it particularly accessible for retirees with a stable pension income.  

For Whom Costa Rica May Not Be Ideal

• Professionals Dependent on the Local Market: If your primary income will be generated inside Costa Rica—whether through local employment, a Costa Rican business reliant on domestic consumers, or property rentals to residents—you will likely face all applicable local taxes. In such cases, Costa Rica may not confer the same tax advantages as it does for those with foreign income streams.  

• High-Net-Worth Individuals With Complex Wealth Structures: While Costa Rica does not impose wealth or inheritance taxes, individuals with significant international assets may find that the country lacks the advanced financial services, estate planning tools, or specialized tax treaties offered in traditional wealth management hubs.  

• Anyone Expecting Extremely Low Costs: Although more affordable than many Western countries, Costa Rica is not the cheapest relocation destination in Latin America. Imported goods, vehicles, and certain services can be expensive, which may surprise individuals solely motivated by cost savings.  

In sum, Costa Rica’s tax and residency framework is particularly advantageous for individuals whose income originates abroad—especially digital nomads, entrepreneurs targeting international markets, and retirees drawing foreign pensions. Conversely, those reliant on domestic earnings or seeking ultra-low living costs may find other jurisdictions more suitable. The key is aligning your income structure and lifestyle expectations with Costa Rica’s incentives and limitations.  

Special Considerations for Relocation

Relocating to Costa Rica involves more than simply booking a ticket and finding housing. While the country is welcoming to expatriates, there are several practical considerations that should be carefully planned in advance to ensure a smooth transition. 

Residence Permits and Visas

Costa Rica offers a range of residence options depending on the individual’s circumstances. Common categories include the Pensionado Program (for those with a lifetime pension of at least USD 1,000 per month), the Rentista Program (for individuals with a guaranteed fixed income or deposit of at least USD 2,500 per month for at least two years), and Inversionista Status (for investors who commit a qualifying investment, generally starting at USD 150,000 in real estate, business, or certain projects). For many expatriates, one of these residency categories provides a structured path to long-term legal stay. Temporary residence permits can be renewed, and eligibility for permanent residence usually arises after three years of maintaining temporary status. Applicants should be aware that documentation requirements are rigorous, often requiring apostilled or authenticated documents such as birth certificates, marriage certificates, and police background checks.  

Healthcare System

Costa Rica is known for its strong healthcare system, which includes both public and private options. Residents are generally required to enroll in the public health system through the Caja Costarricense de Seguro Social (CCSS or simply “Caja”). Contributions are based on declared income and provide access to comprehensive care. Many expatriates also maintain private health insurance, which allows for greater flexibility and shorter wait times, particularly in private hospitals and clinics. When budgeting for relocation, incoming residents should consider both mandatory contributions to the Caja and the potential benefits of supplementing with private coverage.  

Banking and Financial Access

Opening a bank account is an important step in establishing financial stability in Costa Rica. While foreigners can open accounts, proof of legal residency status will generally expand the types of accounts and services available. Some public banks may allow accounts with only a passport, but such accounts typically have more limitations. Applicants should expect thorough documentation requirements, including proof of income sources, due to strict anti-money laundering regulations. It is advisable to open an account once residency has been secured in order to streamline deposit, withdrawal, and transfer processes.  

Importing Personal Items

Many expatriates choose to bring personal belongings when relocating. Costa Rica allows the duty-free importation of household goods under certain residency categories, though this benefit must be carefully coordinated to meet customs requirements. Shipping valuables can be costly, and all items must be properly documented with detailed inventories. Certain goods, such as electronics or vehicles, may be subject to import duties and taxes, making it worthwhile to compare import costs with local purchase prices. Vehicles in particular are subject to high import taxes, which leads some expatriates to buy locally instead.  

In short, successful relocation to Costa Rica requires navigating immigration procedures, integrating into the healthcare system, establishing financial footholds, and making careful decisions about what personal items to import. With proper preparation and attention to documentation, expatriates can make the transition smoothly and begin enjoying life in Costa Rica with fewer surprises.  

The 'Boris Becker Trap': Avoiding a Sham Relocation

The most critical aspect of an international move for tax purposes is demonstrating that one has genuinely transferred their “center of vital interests” to the new country of residence—in this case, Costa Rica. Several high-profile cases, particularly in German-speaking jurisdictions, illustrate the risks of failing to make that relocation substantive. One of the most cited is the case of Boris Becker, the German tennis player who claimed to have been living in Monaco while, in reality, German authorities proved that his personal and economic life remained centered in Germany. The courts ruled that his purported move was nothing more than a façade, leading not only to severe tax liabilities but also to reputational damage and criminal penalties.  

European tax administrations, particularly in Germany, Austria, and Switzerland, are highly vigilant in scrutinizing so-called “sham relocations.” They recognize that taxpayers may attempt to claim residence in a low- or territorial-tax jurisdiction, like Costa Rica, while still effectively living, working, and maintaining their primary ties back home. Merely renting an apartment in San José or visiting a few times per year is insufficient. Authorities place significant weight on where a person’s family resides, where children attend school, the location of main business operations, the use of household staff, the ownership of personal property, and even the frequency of physical presence in the former home country.  

If a relocation is deemed a sham, the consequences can be severe. Tax authorities may disregard the claimed foreign residence, continue taxing the individual as a domestic tax resident, impose back taxes for multiple years, assess interest and penalties, and in more serious cases pursue criminal tax evasion charges. A taxpayer may also be publicly exposed, with lasting reputational damage.  

For individuals relocating to Costa Rica, therefore, it is essential to substantiate the move with objective, verifiable facts. Acquiring a proper residence permit, spending a majority of time physically present in Costa Rica, shifting business and investment management activities there, enrolling children in local schools, and integrating into Costa Rican society are all strong indicators of a genuine transfer of residence. In short, the move must be real. Otherwise, one risks falling into the “Boris Becker trap”—where a paper relocation fails to withstand scrutiny, and the taxing rights of the original home country persist.  

By carefully structuring the relocation and transparently aligning a person’s life with Costa Rica, one can benefit from Costa Rica’s territorial tax system without exposing themselves to the serious liabilities that accompany a sham.

What Makes Costa Rica an Attractive Place to Live?

Costa Rica’s appeal as a place to live extends far beyond its tax system, rooted instead in a lifestyle and environment that consistently attract expatriates, retirees, and digital nomads from around the world. The country is widely celebrated for its natural beauty, relaxed pace of life, and strong social values, all of which contribute to a high quality of living.  

One of Costa Rica’s foremost draws is its exceptional natural environment. With over a quarter of its territory protected as national parks or ecological reserves, it is internationally recognized for its biodiversity and commitment to conservation. Residents enjoy year-round access to pristine beaches, lush rainforests, volcanoes, and abundant wildlife. The tropical climate—warm and sunny along the coasts, with cooler temperatures in the Central Valley—offers a variety of living environments, allowing individuals to choose between beachside living or temperate highland communities.  

The cultural experience adds another dimension to life in Costa Rica. The local ethos of pura vida—literally “pure life”—captures a national spirit of optimism, simplicity, and enjoyment of everyday living. This mindset is visible in the friendliness of Costa Ricans (often referred to as Ticos), the emphasis placed on family and community, and the relatively stress-free pace of daily activities. For many expatriates, this cultural warmth provides a welcoming environment in which to settle.  

Costa Rica also benefits from a reputation for safety and political stability that is rare in the region. The country abolished its military in 1949, choosing instead to invest in education, healthcare, and social development. This commitment has fostered a stable democracy with strong institutions and a relatively low crime rate in comparison to some of its Central American neighbors. Access to healthcare is also a notable advantage: Costa Rica offers both a public universal healthcare system and a high-quality private healthcare sector, making medical services accessible and affordable.  

From an infrastructure perspective, Costa Rica provides modern amenities that support a comfortable lifestyle. In the Central Valley, which includes the capital San José, residents have access to reliable internet, international schools, universities, hospitals, shopping centers, and cultural venues. Transportation networks have improved in recent years, with expanding highways and regional airports connecting different parts of the country. While rural regions may offer a more rustic lifestyle, they are increasingly accessible due to ongoing infrastructure development.  

Together, these elements—unparalleled natural beauty, a welcoming culture, political and social stability, and modern infrastructure—combine to create an environment that many find deeply appealing. For individuals considering relocation, Costa Rica offers not simply a place to live, but a way of life centered on balance, community, and connection to nature.  

Cost of Living

Costa Rica offers a cost of living that is generally lower than that of most Western European countries, although the gap has narrowed in recent years, particularly in urban and tourist-heavy areas. For expatriates considering relocation, it is important to distinguish between local costs in non-tourist regions and the higher prices found in coastal or metropolitan zones where demand is strong.  

Housing and Rent:

Rent is one of the most notable areas of savings in Costa Rica when compared with Western Europe. A modern one-bedroom apartment in central San José or Escazú, popular with expatriates, generally ranges from USD 600 to USD 900 per month, while similar accommodations in smaller towns can be found for USD 300 to USD 500. By contrast, rentals in cities like Madrid, Paris, or Berlin often range from USD 1,200 to USD 2,000 for comparable spaces. Large family homes in Costa Rica’s Central Valley, equipped with gardens and ample space, may be secured at a fraction of the price of similar properties in Western European suburbs.  

Food and Groceries:

Daily essentials in Costa Rica follow a mixed pattern. Locally produced fruits, vegetables, rice, beans, and poultry are inexpensive, often 30–50% cheaper than in Western Europe. For instance, a kilo of bananas may cost under USD 1, while fresh tropical fruits such as papayas and mangoes are abundant and inexpensive relative to European supermarkets. Dining at a simple local restaurant, known as a soda, typically costs USD 5 to USD 8 per meal, compared with USD 12 to USD 20 for a casual restaurant meal in many European Union capitals. However, imported goods—such as wine, cheese, and packaged foods—can be significantly more expensive in Costa Rica, sometimes exceeding Western European prices due to high import tariffs.

Services and Utilities:  

When it comes to services, Costa Rica enjoys an advantage. Household help, childcare, and routine services such as cleaning or gardening are accessible to many expatriates at rates far below Western European standards. Hiring a full-time domestic worker might cost USD 400 to USD 600 per month, whereas a comparable arrangement in Western Europe could easily exceed USD 1,500. Utilities, including electricity, water, and internet, average around USD 100 to USD 150 per month for a modest household—comparable to or slightly lower than many European urban settings. Healthcare is another area where Costa Rica stands out: private consultation fees and medical treatments are often 40–70% less costly than in most of Western Europe, although public waiting times can be considerable.  

In sum, Costa Rica’s cost of living provides significant savings in housing, local food, and services, though not necessarily in imported goods or high-demand urban districts. Compared with Western Europe, expatriates in Costa Rica can expect a more affordable lifestyle overall, particularly if they adapt to local consumption habits and housing markets outside the prime tourist and expatriate enclaves.  

Tax Aspects of Leaving Your Home Country (e.g., Germany, Switzerland, Austria)

When planning a move from a country such as Germany, Switzerland, or Austria to Costa Rica, one of the most important considerations is the tax treatment of your departure. European jurisdictions often impose specific rules designed to secure their taxing rights on assets or income that have accumulated during your period of residence.  

Germany and Exit Taxation

Germany applies an “exit tax” (Wegzugsbesteuerung) primarily aimed at individuals holding significant shareholdings in corporations. If you own at least 1% of shares in a corporation and move your tax residence abroad, Germany generally treats you as if you had sold those shares at the time of departure, triggering a deemed capital gains tax on the unrealized appreciation. Certain deferral options can apply, particularly if you are moving within the EU/EEA and maintain certain obligations, but relocation to Costa Rica (a non-EU/EEA jurisdiction) usually reduces the availability of such relief. This means that entrepreneurs, founders, and individuals with family-held company shares need to carefully evaluate the financial consequences before leaving.  

Continued Limited Tax Liability  

Even after emigrating and severing tax residency, Germany—and similarly Austria and Switzerland—may continue to tax specific categories of income sourced in the country. This is known as “limited tax liability” (beschränkte Steuerpflicht). For example, German-sourced dividends, rental income from property located in Germany, or pensions may remain taxable in Germany regardless of your new residence status. Double taxation agreements (DTAs) between Germany and Costa Rica are limited in scope (currently, no comprehensive DTA exists), which increases the risk of taxation without relief. This contrasts with moves within Europe, where strong treaty networks and EU law can mitigate such challenges.  

Practical Implications for Expatriates

For expatriates contemplating Costa Rica, this means careful forward planning is required. Business owners should consider potential restructuring or timing strategies before departure to reduce the exit tax burden. Individuals with continuing income ties (such as real estate or investment portfolios) need to understand how ongoing German or Austrian withholding rules interact with Costa Rican residency. In Switzerland, rules vary by canton, but emigration often triggers a "departure taxation" on deferred wealth or assets, and withholding at source can apply to certain Swiss income streams.  

Ultimately, leaving a high-tax jurisdiction in Europe is more than a matter of simply changing residence. The transition involves disentangling from exit taxation rules, understanding continued limited taxation on domestic income, and anticipating how Costa Rican residency will interact—or fail to interact—with European treaty protections. Proactive advice from cross-border tax advisors is strongly recommended to avoid unexpected costs and to structure the expatriation efficiently.  

Correct Preparation for the Move

Before relocating to Costa Rica, careful planning is essential to ensure both a smooth transition and compliance with immigration and tax-related obligations. Below is a practical checklist of steps to consider when preparing for the move:  

1. Clarify Your Immigration Pathway

• Determine the appropriate visa or residency category. Options include temporary residency (pensionado, rentista, or investor programs) or permanent residency (usually available after sustained residence or through family ties).  

• Review required documentation. Most residency applications require a birth certificate, police clearance from your home country, proof of financial means, and official translations into Spanish.  

• Confirm entry and processing rules. Some documents must be issued within six months of your application and may need an apostille or consular legalization.  

2. Finalize Tax and Financial Planning Before Departure  

• Review tax residency rules in Costa Rica. Income tax generally applies to Costa Rican–sourced income only, but foreign assets must still be evaluated for reporting or estate-planning purposes.  

• Address tax obligations in your home country. Some countries tax on worldwide income until formal expatriation or deregistration occurs. Confirm exit tax or continuing filing requirements if applicable.  

• Consider timing your move. Aligning the move with the beginning of a tax year can simplify reporting obligations in both countries.  

3. Manage De-registration in Your Home Country

• De-register from residency status where required. Certain jurisdictions (particularly in Europe) require individuals to notify the municipal or national authority when leaving for permanent residence abroad.  

• Close out or update records with social security, health insurance, and election authorities. Failing to formally deregister may lead to ongoing assessments or obligations.  

• Confirm pension and social security arrangements. Some benefits are portable, while others may require filing for transfer or special reporting. 

4. Prepare Health and Insurance Coverage  

• Secure interim health coverage. Costa Rica’s public health system (Caja Costarricense de Seguro Social) requires contributions from residents, but private or international insurance can be critical until enrollment is complete.  

• Evaluate long-term healthcare needs. Private policies may offer broader coverage, particularly in areas outside San José.  

5. Organize Practical and Legal Affairs

• Update wills, powers of attorney, and estate planning documents. Ensure recognition of these documents in both your home jurisdiction and Costa Rica.  

• Arrange for banking and international transfers. Some banks require proof of residency before opening an account, so plan for interim access to funds.  

• Gather educational and medical records. These may be needed for dependents’ enrollment in schools, healthcare, or residency processes.  

6. Plan the Logistics of the Move  

• Review customs rules. Costa Rica permits duty-free import of certain household goods under specific conditions, but paperwork must be carefully completed.  

• Coordinate housing needs. Some expats delay purchasing real property until gaining familiarity with local laws and the housing market.  

By following this checklist, prospective residents can significantly reduce administrative friction and financial surprises, ensuring that their transition into Costa Rican life is both compliant and well-organized.  

Automatic Information Exchange (CRS)

Costa Rica is a participant in the OECD’s Common Reporting Standard (CRS), formally known as the Automatic Exchange of Financial Account Information (AEOI). The country signed the Multilateral Competent Authority Agreement (MCAA) and began exchanging information in 2018. Under this framework, Costa Rican financial institutions are required to identify account holders who are tax residents outside of Costa Rica and report relevant financial account data—such as account balances, dividends, interest, and proceeds from the sale of financial assets—to the Costa Rican tax authority. This information is then automatically shared on an annual basis with the tax authorities of other CRS-participating jurisdictions.  

For individuals holding foreign bank accounts in Costa Rica, the practical implication is that financial secrecy can no longer be relied upon as a means of avoiding tax obligations in one’s home jurisdiction. If a person is a tax resident in a country that participates in CRS, their local tax authority will likely receive data on their Costa Rican financial accounts without the need to submit a specific request. Conversely, Costa Rica will also receive information from other jurisdictions regarding financial accounts held abroad by Costa Rican tax residents.  

This system significantly increases transparency and reduces the opportunity for offshore tax evasion. Expatriates and foreign investors should therefore ensure compliance both with Costa Rican tax rules and with the reporting obligations in their home jurisdictions. Failure to declare offshore holdings where required could carry significant legal and financial consequences, given the level of international cooperation fostered by CRS. In practice, this means that foreign bank accounts in Costa Rica are not hidden from tax authorities abroad, and investors must integrate proper reporting into their broader tax planning strategy.