Costa Rica Tax Reform Law Part Two

2.  Income Tax Reform

The Tax Reform Law would modify certain provisions of the existing income tax law as follows:

The Tax Year

Currently the Costa Rican tax year ends on September 30th.   This would change to a calendar based tax year so that it would run from January to December.

The Tax Rates For Corporate Entities

The corporate tax rates would be as follows:

Corporate Tax rate is 30% 

If Gross Income is less than 106 million colones/ $185,964 during the fiscal year then the following tax rates apply:

  •  5% on the first ¢ 5 million/ $8,771 annual net income.
  • 10% on the excess of ¢ 5 million/$8,771 and ¢ 7.5million/ $13,157 of annual net income.
  • 15% on the excess of ¢ 7.5 million/ $13,157 and up to 10 million/ $17,543 annual net income.
  • 20% on the excess of ¢ 10 million colones/ $17,543 of annual net income.

Small businesses which are registered before the Ministry of Economy, Industry and Commerce, or before the Ministry of Agriculture , may apply the following scales:

  • 0% of the tax on the profit tax in the first year of commercial activities;
  • 25% of the tax on the profit tax in the second year of commercial activities;
  • 50% tax on the profit tax in the third year of commercial activities.

The Tax Rate For Individuals

  • Income of up to ¢ 3,339,000/ $5,857 per year, will not be subject to tax.
  • On the excess of ¢ 3,339,000/ $5,857 per year and up to ¢ 4,986,000/ $8,747 per year is 10%
  • On the excess of ¢ 4,986,000/$8,747 per year and up to ¢ 8,317,000/ $14,591 per year is 15%
  •  On the excess of ¢ 8,317,000/$14,591 per year and up to ¢ 16,667,000/ $29,240 per year is 20%
  • On the excess of ¢ 16,667,000/ $29,240 annually is 25%

Once the tax has been calculated, the individuals who carry out lucrative activities will be entitled to the following tax credits:

  • For each child the tax credit will be ¢ 16,920/ $29.68 per year

For the spouse the tax credit will be ¢ 25,320/ $44.42 per year

Credit to CostaRicaLaw.com

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