Costa Rica

Corporate - Deductions

Last reviewed - 27 February 2024

In general, any costs and expenses that are useful, necessary, and pertinent to produce actual or potentially taxable income will be deductible from the company's gross income, as long as they are duly supported by documentation authorised by the law and they comply with the following requirements:

  • They are necessary expenses to obtain actual or potential income, taxed under the law.
  • Any withholding obligations, as stated in other sections of the law, have been carried out.
  • The supporting documentation is authorised by the Tax Administration.

However, the Tax Administration may reject or disregard the expense or cost, in whole or in part, if it is considered as excessive, inadmissible, or not indispensable to obtain taxable income.


The straight-line and sum-of-the-years-digits methods of depreciation are allowed over the following useful lives:

Assets Useful life (years)
Buildings 50
Machinery and equipment 10
Furniture and fixtures 10
Vehicles 10
Agricultural plantations 2 to 10

The Tax Administration, at the request of the taxpayer, can adopt technically acceptable special depreciation methods in cases duly justified by the taxpayer. In addition, the Tax Administration can authorise, through general resolution, accelerated depreciation methods on new assets acquired by corporations with monetary activities requiring constant technological updates, higher installed production capacity, and productive reconversion processes in order to maintain and strengthen their competitive advantage.


From an income tax perspective, the CIT Law states that goodwill is considered as a non-deductible expense.

Start-up expenses

A company’s organisational expenses may be deducted in the tax year in which they are paid or credited, or, if they accumulate, in five consecutive tax years, starting from the date of start of productive operations, until the balance is exhausted.

Organisational expenses are those costs and expenses that are necessary to initiate the production of taxable income that, in accordance with the law, are deducted from gross income.

Interest expenses

Interest and other financial expenses paid or incurred by the taxpayer during the fiscal year directly related to the management of their business and the creation of taxable income are deductible from gross income if those interest expenses are not capitalised.

Note that those interest expenses with rates that exceed the usual market rates will not be considered deductible expenses by the Tax Administration.

The new Law establishes a limit on the deduction of non-bank interest; said deduction is 20% of the earnings before interest, taxes, depreciation, and amortisation (EBITDA) for each tax period. 

There is a temporary provision stating that, for the first year, the above-mentioned limit will be 30%, decreasing 2% each year until it reaches the 20% ultimate floor.

Bad debt

Manifestly uncollectible unpaid debt will be deductible if this debt is originated in habitual operations from the taxpayer's business and all legal actions towards its collection have been exercised.

Charitable contributions

All donations duly supported by documentation that are given to the government, public institutions, municipal corporations, public universities, to the Social Protection Board, to the Educational Boards, to the Costa Rican Red Cross, and other institutions, such as those foundations and associations with non-charitable, scientific, and cultural ends that are authorised by the Tax Administration to receive deductible donations, among other entities, will be deductible from gross income.

The new Law establishes a limit on donations of 10% of the net income calculated by the donor contributor, without considering the donation.


With the exception of VAT, income tax, selective consumption tax, specific taxes over consumption, special duties established by law, penalties, and interest over any tax obligation; all other taxes that affect the goods, services, and negotiations of the company's habitual commercial activity will be considered deductible.

Net operating losses

With the changes in the Law, all companies that have fiscal losses in a fiscal period are allowed to deduct them in the following three fiscal periods. In the case of agricultural enterprises, the deduction may be made for the following five periods.

Payments to foreign affiliates

Corporations may claim deductions for royalties, technical and management service fees, and interest charges paid to foreign affiliates if they have withheld the proper tax (25% for royalties, franchises, and professional services and 15% for interest). However, the deductions for technical, management service fees, and royalties may not exceed 10% of gross sales in the aggregate if paid to the parent company.