What are the tax implications if I rent out a property?
A. CR Tax Authorities established the mandatory use of the electronic invoice system for all taxpayers, including real estate rentals, starting September 1st, 2018, otherwise, they will be subject to a penalty and fines. Income tax on rental properties will now be filed monthly.
i. 15% of expenses from the rental income is the maximum deduction
ii. The tax base will be 85% of the rental income
iii. The tax rate is 15% of the tax base (85% of rental income)
NOTE: Residential rentals will be taxed with 13% VAT if the rent amount exceeds 1.5 the average Costa Rica base salary income (around USD 1,085). Any commercial leases are subject to the VAT regardless of the amount of the monthly rent. Monthly, the owners will be withholding, filing, and paying the VAT (Value Added Tax), 13% of the rental income paid by the renter. Also, monthly, the owners must file and pay income tax.
VAT Tax that is applied for healthcare and education.
i. Four percent tax on private healthcare fees specific to doctors, hospitals and clinics approved by the Ministry of Health. Also, depending on your payment method (cash or credit card), that tax is handled differently.
ii. If you pay for your doctor's visit with a credit card, that 4 percent tax will be charged and subsequently reimbursed to you. If you pay with cash, the 4 percent tax will not be refunded to you, and any aesthetic procedures will be taxed at 13 percent.
B. Education related
i. Any school costs (public or private), as long as MEP or CONENSUP has approved the school, will be tax-exempt. If those government agencies do not authorize the school, there will be a 13 percent tax applied.
ii. After-school activities are taxed at 2 percent or 13 percent, depending on the specific activity. This applies to public and private schools, and it includes sports activities. This applies to anything you are paying directly to the school, as these activities are considered services.
There are many considerations when relocating to another country, and it's best to be informed of the laws. To know more about this, please go to our blog or feel free to contact us at firstname.lastname@example.org