US expats need to pay taxes when it Costa Rica or when it any other country around the world. The US is one of the few countries that have this type of expat tax in a bid to avoid its residents leaving the country during financial hardship.
This law is in place since 1860 and it’s likely it will not change in the near future as US residents will still be required to pay taxes both at home and in Costa Rica.
The taxes you have to pay in Costa Rica
When you are in Costa Rica for more than 6 months or when you arrive in the country into employment, you have to start paying income tax. Most people pay standard employee tax.
But many US citizens open businesses in Costa Rica and they need to pay different taxes. Here are the main types of taxes you have to pay in Costa Rica, depending on how you make money.
- Employment tax
- Self-employment tax
- Business tax
- Investment tax
- Capital gains fees
The good news is taxes are generally low in Costa Rica if you are employed. You will pay a maximum of 15% tax for your wage as an employed person. At the same time, you will pay up to 25% tax as a business.
US citizenship taxation
As a US citizen, you will also pay tax in your home country. You pay income and estate tax if you have a home back in the US even if you are a resident of Costa Rica. This is one of the exceptions of the US as it’s one of the few states asking its citizens to pay various types of tax even when abroad.
If you come to Costa Rica from other countries of the world, there are high chances you’re only going to pay taxes in this country and not in your home country.
You will pay wage taxes that cover good public healthcare as well as other types of tax if you’re self-employed. Taxes on homes and cars also apply in Costa Rica. If you decide to buy a motorbike, you will also pay taxes for it if it has a large engine.
The types of taxes you pay in Costa Rica are similar to those of its citizens. You will begin paying taxes as soon as you start earning or when you purchase goods such as homes, apartments, or cars.
For most people, Costa Rica is a step up in terms of quality of life with its good weather, tasty food, low taxation, and affordable housing. You will only pay taxes as a local when you come here from outside of the US.
But when you’re a US citizen migrating to Costa Rica, you will still need to pay US tax.
Accountants and other tax return specialists can help you with yearly tax in the US. Otherwise, the tax will remain under your name adding up each year for you to pay when back in the US.