Tax structure in Costa Rica

Saturday, 10.22.11

Costa Rican taxes are really complex. We will try to give a bit of an overview of their ‘system’.

They have a 13% sales tax that doesn’t apply to staples, such as flour, sugar, milk, school clothes and books.  It also doesn’t apply to souvenirs as they don’t want to discourage tourism.  Oddly, coffee is considered a souvenir.  The sales tax on alcohol and tobacco products is 14%.  The extra percent goes directly to the Red Cross and to EMT services.  Nice idea.

There is an import tax on cars, new and used that are brought into the country.  (No cars are made in Costa Rica.)  The import tax on a new car is 65%, on a used car it is 85%.  So, a new car that should cost $10,000 would cost $16,500.00.  Nice revenue source…makes our little tax at home seem more reasonable.

Property taxes change depending on length of ownership.  For the first 3 years, it is 1.6% of the sales price.  For years four and five, it drops to .9% and from then on it is .6%, of the original sales price, not of an appraised price.

Income tax is on a sliding, but simple, scale.  The rates are 10%, 15%, 20% and 25%.  The first $5,000 is tax exempt.  Up to $8,000 is taxed at 10%, which means a $300 tax, since the first $5,000 is exempt.  Up to $14,000 the tax is 15%, meaning $900 tax added to the $300 and so on.  Top tax is 25%. 

There is a medical tax of 9% on all employees and a matching 9% on the employer.  Then all health care is free.  But, Costa Rica doesn’t like idle people, so the unemployed do not qualify for health care.  The disabled, blind even, can work for the government selling tickets for the national lottery and then pay the 9% and have health care.  Roughly 25% of people in Costa Rica are there illegally and if they don’t pay the 9%, they don’t get health care.  But, if they or the unemployed need emergency services, they receive them.  But they owe the government the money spent on care and are put to work selling lottery tickets until the bill is paid.

The average income in Costa Rica is $500.00 a month, $6,000.00 a year, which means that the average person pays only $100.00 in income taxes!  The high sales tax and medical tax take a pretty good bite out of income (as well as the car tax and property taxes) and for that they get what?

No military, it is against their constitution.  They do receive a pension at 62 years of 66% of the average of their last six years of work.   The newer roads are toll roads, not paid for by taxes.

Colleen & John