Costa Rica

Corporate - Income determination

Last reviewed - 20 December 2019

Inventory valuation

Inventories are generally stated at cost and can be valued using the compound average-cost method, first in first out (FIFO), retailer method, or specific identification method. Since all entities must keep legal records, any adjustment resulting from different methods of inventory valuation for tax and financial purposes should be recorded.

Capital gains

With the new Law, capital gains are taxed at 15%, which will be paid either through withholding at source or, when the tax cannot be withheld, it must be declared by the taxpayer. In addition, a global system is established that allows taxes that were withheld to be applied as payments on account of the tax on profits when said profits come from goods or rights that are used in the lucrative activity of the taxpayer.

Special rules apply for the 'first sale', and there are certain exemptions listed in the law (e.g. corporate reorganisation).

Dividend income

With the new Law, dividends are taxed as income from movable capital at 15%. The distribution of dividends is exempt when the parent company is another capital company domiciled in Costa Rica, when the latter develops an economic activity subject to income tax, or in the case of a controlling company of a group or regulated financial conglomerate.

Stock dividends

Dividends paid in the form of stock of the distributing company are allowed and are exempt from taxes.

This exemption is maintained in the new Law.

Interest income

In the new Law, interest is taxed as income from movable capital at a rate of 15%, unless considered the result of the usual economic activity, in which case it would become part of the global income with a maximum ordinary rate of 30%.

Interest coming from investments abroad is considered non-Costa Rican-source income and is not taxable.

Royalty income

Royalty income coming from sources related to normal business activities is taxable.

In the new Law, royalty is taxed as income from movable capital at a rate of 15%, unless considered the result of the usual economic activity, in which case it would become part of the global income with a maximum ordinary rate of 30%.

Foreign income

Foreign-source income is not taxable in Costa Rica.

The new Law establishes withholdings for capital gains obtained by non-domiciled persons when it comes to the transfer of real estate located in Costa Rica, or when it deals with other assets or rights located in Costa Rica when the acquirer is a taxpayer of the tax on profits.

Additionally, from a VAT perspective, cross-border digital services will be subject to a 13% tax rate.