2021 New Law Passed to Attract Foreigners to Reside and Invest in Costa Rica

by PuraVidaRentals on September 28, 2021

On July 14th, 2020, a law went into effect that greatly benefits foreigners wishing to invest in and/or move to Costa Rica.

Foreign investors, renters, and retirees who become approved for temporary residency before July 14th, 2025 can take advantage of some tax exemptions that have been made newly available. Once your temporary residency has been approved, these benefits can be realized during a 10-year period starting on the date of your approval.

There is also a separate new law for digital nomads, or those who work remotely, to do their work in Costa Rica. That will be discussed in more detail at the end.

First, here is a basic look at the three temporary resident categories:

• Investor (Inversionista) – before, the requirement was that you invested at least $200,000 into property and/or business. Now that minimum has been lowered to $150,000. The sum can be a combination of, but not limited to, property assets (real estate and vehicles), shares of a business, and venture capital in Costa Rica. The temporary residency is good for 2 years and can be renewed once as long as you still own the investments. You also have to spend at least 6 months out of the year in the country. After 3 years you can apply for permanent residency. Includes spouse and children under 25 years of age. There are other less popular options for investment that require less capital such as $100k in a forestry project or others that are “beneficial to Costa Rica’s vital interests”. These can be discussed with your lawyer.
• Rentista – This is for those who have at least $2500 in “unearned” income per month. This income can be derived from sources such as rental properties, investments (stocks, bonds, mutual funds, 401k), that are stable, but does not include income from salaries, employment, or tips. You have to show proof of this unearned income and deposit it each month in a Costa Rican bank account for 2 years. It can be renewed for additional 2-year periods, and permanent residency can be applied for after 3 years. With this you can include a spouse and children under 25.
• Pensionista (Pensioner) – those on retirement income can show that they receive payment of at least $1000 per year and this has to be deposited in a Costa Rican bank account. This can be renewed yearly and after 3 years, permanent residency can be applied for. This can include a spouse.

These 3 types of residency do not allow one to work and earn a salary. Even if you own a business, you are not legally allowed to do work that an eligible worker is able to do, except for the overall management. There are exceptions, such as specialty work that can’t be replaced by an eligible employee. For example, if you work as an artist or writer. Also, there are other requirements in the application process such as background checks and other required documents that are considered for acceptance.

So, now you fit into one of the three types of temporary residents, what are the new tax exemptions that you can benefit from after officially receiving your temporary residency? Import taxes in Costa Rica can be pretty high so these new benefits are something to be taken advantage of without a doubt.

• Import personal and household goods- Used (at least 6-months old, not new) household furniture, appliances, TVs, décor, and more can be imported tax free. This can be done only once during the 10 years after you have received your temporary residency.
• Vehicles – 2 vehicles can be imported tax free anytime during the 10 year period. These include cars, boats, and/or aircraft.
• Professional Equipment – items such as computers, cameras, etc. needed for your work can be imported tax free. Reasonable proof has to be shown that the equipment is related to your economic activity.
• 20% Real Estate Transaction Tax Discount – This discount applies to the tax charged for transferring property from seller to buyer. This can only be claimed by an individual buyer, not buying under a corporation. This applies to all property purchased during the 10-year period after residency.
• Foreign Income Exemption – any income from sources outside of Costa Rica will not be taxed during the 10 year period.

Unfortunately, the new law is not retroactive. So those who received their temporary residency before July 14th are not eligible. It is also not clear if those who applied before July 14th but have or did not receive their approval on or after July 14th are eligible.

Digital Nomads – Costa Rica is also trying to attract those who can work remotely from anywhere in the world. A new law allows digital nomads to apply for a 1-year visa which can be renewed once. Your driver’s license is valid during this period. You can also import equipment necessary for your work tax free. Here are some of the requirements:

• For an individual, you will need to prove that you earn at least $3000 per month as a stable monthly salary for at least 12 months prior and can work remotely. To include your spouse and family, the earnings have to be at least $4000, which can be a combined total from the income of your spouse.
• Obtain private medical insurance during your stay in the country. All family members would need to be covered also, if applicable.
• Payment for Visa approval, the amount has yet to be determined as well as the application process.

If you have been thinking of making the move to Costa Rica, do it now. Consider that temporary resident applications can take more than 12 months to process. If your temporary residency is approved after July 13th, 2025, you may not be eligible for these benefits. You can save a lot of money by taking advantage of these exemptions!

Pura Vida Rentals & Sales can help you make the move and find you a rental or property to purchase. Call or WhatsApp +506 8447-0781 or email [email protected]

Although research was done for the accuracy of this blog, please consult an attorney or do our own research before considering a move to Costa Rica as laws can commonly be modified.