Understanding Costa Rica's Territorial Tax System & Foreign-Source Income

Costa Rica taxes on a territorial basis. In simple terms, the country generally taxes income generated inside Costa Rica and leaves genuinely foreign-source income outside its net — a feature that makes it attractive for international business.

Costa Rica offers two main corporate vehicles: the joint-stock company (Sociedad Anónima, or S.A.) and the limited liability company (Sociedad de Responsabilidad Limitada, or SRL). Both can be owned by foreigners and non-residents, and the SRL can be formed with a single member, making it especially practical for international founders.

How territorial taxation works

Under the territorial principle, income arising from a business activity carried on within Costa Rica is subject to Costa Rican corporate income tax. By contrast, where a company's activities and transactions genuinely take place outside Costa Rica and the income arises abroad, that income is generally not taxed in Costa Rica. The distinction turns on where the income-producing activity actually occurs, so structuring and documentation matter.

The rates

• The standard corporate income tax rate is 30%.
• Smaller companies, measured by gross income thresholds, benefit from a reduced headline rate and a progressive scale on lower bands.
• Capital and other taxes may apply depending on the activity and assets involved.

Compliance obligations

A Costa Rican company must maintain a resident agent and a registered address in the country. Information on the company's ultimate beneficial owner must be filed each year with the Central Bank of Costa Rica. The company is required to keep accounting records, prepare financial statements and file an annual tax return — although financial statements do not generally need to be audited.

Why founders choose Costa Rica

Beyond the tax treatment, Costa Rica offers political and economic stability, a respected legal system and a credible international profile. For founders running genuinely cross-border operations, the combination of territorial taxation, flexible company forms and full foreign ownership is compelling — provided the structure reflects the commercial reality of where business is actually done.