With respect to taxes in Costa Rica for expatriates, a person will be a resident of Costa Rica for tax purposes if they live in Costa Rica for more than six consecutive months during the tax year. For people who are employed, a shorter length of stay may apply. No, you must file your tax returns directly with the IRS or your state tax office. For more information on filing your state taxes, see the list of State Revenue Service websites below. Residents pay Costa Rican income tax at relatively low rates on a scale of 1% to 25%. Non-residents (including Americans who spend less than 183 days a year in Costa Rica) are also subject to a withholding tax on any Costa Rican income they have, either 10%, 15% or 25%, depending on their type of income. Costa Rica is one of the top destinations for Americans who want to live abroad for a plethora of good reasons — the sublime natural environment, temperate climate, hospitable people, and quality of life, to name a few. While the U.S. and Costa Rica have not signed a tax treaty to prevent double taxation, Americans living in Costa Rica can file their U.S.

tax returns, claim the U.S. tax credit, which gives the U.S. tax credits of the same value as the Costa Rican taxes they pay. To claim the foreign tax credit, expats must complete IRS Form 1116. It is important to note that a common but dangerous mistake is to assume that if no tax with tax benefits is due, a U.S. tax filing requirement does not apply. Americans who live and work in Costa Rica can benefit more by claiming the exclusion of foreign earned income on IRS Form 2555 as a foreign tax credit. Note: You should carefully review the specific treaty articles that may apply to find out if you qualify for a: No, the United States does not currently have a tax treaty or tabulation agreement with Costa Rica. As for Costa Rican taxes for expatriates, residents and non-residents are subject to taxation of the income they earn in the country. Income from foreign sources is not subject to Costa Rican tax. The rule is that any American who has a total of $10,000 or more in their financial accounts outside the United States (including joint accounts, retirement accounts, and corporate accounts) at any time of the year must file an FBAR with the financial Crimes Enforcement Network (FinCEN) online.

Foreign banks and investment companies report the same information directly to the U.S. Treasury. If you are a resident of the United States and another country under the tax laws of each country, you are a dual-resident taxpayer. If you are a dual-resident taxpayer, you can still enjoy the benefits of a tax treaty. The tax treaty between the two countries must contain a provision that provides for the resolution of conflicting residency claims. Thus, all Americans living in Costa Rica must still file a U.S. tax return if their global income exceeds the MINIMUM IRS thresholds set for the 2020 tax year: The U.S. has tax treaties with a number of countries. Under these contracts, residents (not necessarily citizens) of foreign countries may be eligible for a tax reduction or exemption from U.S. income tax on certain items of income they receive from U.S. sources. These reduced rates and exemptions vary by country and income.

The agreement with Mexico sets out the conditions under which income is to be taxed. In Costa Rica, the convention applies to income tax. In Mexico, it applies the federal income tax system and deals with the tax treatment of benefits, capital gains, dividends, interest, royalties and wages. U.S. citizens and lawful permanent residents of the United States are taxed on their worldwide income. Every U.S. citizen or permanent resident must file a U.S. tax return when certain income levels are reached. The income for the purposes of the solicitation is determined without taking into account the exclusion of income acquired abroad.

To determine whether you need to file a U.S. tax return, you need to look at the levels of income for filing that appear in IRS publications, including Publication 17 (Tax Guide for Individuals) and Publication 54 (Tax Guide for the United States). Nationals living abroad and persons authorized to stay abroad are: Argentina, Australia, Belgium, Brazil, Canada, Costa Rica, Denmark, Finland, France, Georgia, Greece, India, Indonesia, Italy, Japan, Mexico, Moldova, Netherlands, Norway, Poland, Portugal, Russian Federation, Slovenia, South Africa, Spain, Sweden, Turkey, Ukraine, United Kingdom and United Kingdom. Historically, Costa Rica has concluded very few double taxation treaties. The government signed a tax agreement with Spain in 2004, which entered into force in March 2011. In 2014, Costa Rica signed treaties with Germany (in force in August 2016) and Mexico (in force on 10 May 2019). If you have disclosed foreign financial assets that exceed certain thresholds, you must also report those assets to the IRS on Form 8938. In some cases, you can report the same accounts twice. However, it is still necessary to submit both forms, including your U.S. investment in Costa Rica.

Foreign tax authorities sometimes require a certificate from the U.S. government attesting that an applicant filed a tax return as a U.S. citizen or resident as part of the proof of entitlement to contractual benefits. For more information, see Form 8802, Application for Certification of Residency in the United States – Additional Certification Applications. Also note the discussion on Form 6166 – Certification of U.S. Tax Residency. Living in Costa Rica is a great adventure – so much so that many Americans forget to file their U.S. tax returns. However, this can have significant consequences.

Tax Samaritan is a company focused on preparing and resolving tax returns in the United States (federal) and states. As a company that specializes solely in U.S. federal and state taxes, we believe that while we`re trying to find a company that offers U.S. and Costa Rican income tax expertise and preparation, it doesn`t exist with a single tax professional. On the contrary, such expertise can be found in large international tax companies that have separate tax specialists for the United States and Costa Rica. It is rare to find a tax expert in a single country, let alone with the expertise of several countries. For the convenience of having returns from both countries created by a single company, there will be a significant premium with little or no benefits (apart from a few amenities). The standard tax rates in Costa Rica are as follows. .