Costa Rica's 15% Foreign Income Tax Bill: What We Know So Far

Costa Rica’s government has sent parliament a bill proposing a 15% tax on foreign-sourced income — interest, dividends, royalties, rental income and gains from selling assets abroad — for the country’s tax residents, but for now it remains a proposal, not law.

In short

• The bill proposes a flat 15% rate on interest, dividends, royalties, rental income and gains from selling foreign assets.
• A tax resident is anyone who spends more than 183 days a year in Costa Rica — consecutively or added up across stays.
• Foreign tax isn’t fully credited — it’s only deducted from the base, so the real burden can reach nearly 28%.
• Salary, business income and pensions aren’t covered by the new tax.
• The law hasn’t passed yet: parliament hasn’t voted on it, and the president promised this summer not to introduce new taxes.

How foreign income is taxed in Costa Rica today

Costa Rica has traditionally taxed only income earned inside the country — a system known as the territorial principle. Rental income from an apartment in Europe, interest on a foreign bank account, dividends from an overseas brokerage account: none of this has drawn the attention of Costa Rica’s tax authority. For private individuals, this kind of income has simply been outside the scope of the fiscal system.

The one exception appeared in 2023, when Costa Rica introduced a tax on foreign capital income — but only for companies belonging to international corporate groups. Private individuals were not affected. The government had already proposed extending the rule more broadly back then, but parliament rejected it.

So as things stand today, foreign-sourced income for private individuals in Costa Rica remains untaxed — whether it’s rental income from property abroad, interest on foreign deposits, or dividends from an overseas account.

What the 15% foreign income tax bill would change

In September 2026, Costa Rica’s government submitted a bill to parliament that would introduce a 15% tax on interest, dividends, royalties, rental income and gains from selling property abroad. The law would apply to anyone who qualifies as a Costa Rican tax resident and holds income-generating assets abroad.

Until now, this kind of tax only applied to people within international corporate groups — a private individual with a deposit account in Frankfurt or a rented-out apartment overseas wasn’t affected. The new bill removes that distinction entirely: group membership no longer matters: what matters is tax residency status and the existence of income-producing property abroad. The rule would cover both individuals and companies, including passive structures such as foundations and trusts.

The tax would apply to interest, dividends, royalty payments, rental income and gains from selling foreign assets — shares or real estate, for example. The bill sets a single flat rate of 15%.

Losses on such foreign sales aren’t factored in: the bill explicitly bars offsetting a loss on one asset against a gain on another — there’s no loss-relief provision in the text.

Losses on such foreign sales aren’t factored in: the bill explicitly bars offsetting a loss on one asset against a gain on another — there’s no loss-relief provision in the text.

What stays outside the new tax: salary, business income, pensions

Employment salary and income from running your own business aren’t covered by the bill — the government is leaving the existing tax treatment in place for both. Pensions aren’t mentioned separately in the bill either, which suggests they would fall outside the new rate. The cabinet itself has stressed that Costa Rica isn’t turning into a country that taxes any income regardless of where it was earned.

That said, the bill’s text doesn’t yet spell out in full how individual types of payments would be classified in practice — assuming a specific pension or payment will definitely stay tax-free would be premature.

Who counts as a Costa Rican tax resident

Tax residency isn’t determined by a visa — it’s determined by the actual number of days spent in the country. Holding a residence permit or a stay authorization doesn’t by itself settle your tax status. Under Costa Rica’s rules, a person becomes a tax resident after spending more than 183 days in the country within a tax year — whether consecutively or added up across several stays. That threshold is what decides whether the new foreign income tax bill would apply to a given person.

Counting on 180 days instead of 183 to automatically stay outside the tax is risky: in borderline cases, the authorities look at the center of vital interests. If someone has a home, a household, a family and children attending local school in Costa Rica, the authorities can still treat them as a tax resident even with fewer days spent in the country — despite falling short of the formal 183-day threshold.

A worked example: how much tax you’d actually pay once foreign tax is factored in

The bill’s weak point is how it handles tax already withheld abroad. A lot of foreign income gets taxed before it ever reaches Costa Rica. The problem is that foreign tax isn’t credited against the Costa Rican tax — it’s only deducted from the income amount before the 15% rate is applied.

The difference shows up clearly in an example. An investor receives $10,000 in dividends from abroad — roughly €8,600 at the exchange rate used in the source material — and $1,500 in tax has already been withheld on that amount overseas. Costa Rica deducts that $1,500, leaving $8,500, and taxes it at 15% — another $1,275. The total comes to $2,775 out of $10,000, or nearly 28% of the overall burden.

The total comes to $2,775 out of $10,000, or nearly 28% of the overall burden.

If foreign tax were credited directly instead — as already happens today for many companies under current law — the burden would stay at $1,500. It’s precisely this deduction-instead-of-credit mechanism that tax experts in Costa Rica are already sharply criticizing.

Double taxation: Germany, Austria and Switzerland

Germany has signed a double taxation agreement with Costa Rica, and it’s already in force. Austria and Switzerland have no such agreement. In practice, this means German tax residents may be able to have tax paid in Costa Rica credited at home under the terms of that agreement, while Austrian and Swiss residents have no such protection in place.

But one rule applies equally to residents of all three countries: as long as tax residency is retained back home, the home country keeps claiming the right to tax the same income. That’s why the first step in any planning isn’t the Costa Rican tax itself — it’s correctly terminating tax residency in Germany, Austria or Switzerland.

Double taxation for residents of Germany, Austria and Switzerland

Table scrolls sideways

Criterion	Germany	Austria	Switzerland
Double taxation agreement with Costa Rica	Yes, already in force	No	No
Crediting Costa Rican tax at home	Possible under the agreement’s terms	No protection in place	No protection in place
Risk of double taxation	Lower	Higher	Higher
First step when planning	Correctly terminate tax residency	Correctly terminate tax residency	Correctly terminate tax residency

As long as tax residency is retained back home, the home country keeps claiming the right to tax the same income.

Bill status: has the law actually taken effect

The law hasn’t passed yet: the document remains a bill sitting in Costa Rica’s parliament, and there has been no vote on it so far. Lawmakers can approve it, reject it, or rewrite it substantially — the text isn’t final. There’s already a precedent for this: in 2023, parliament stalled a government initiative on the same topic. This past summer, the country’s president publicly promised not to introduce new taxes, which adds further uncertainty to the bill’s fate. If the bill is eventually passed as currently written, it would take effect on the date of publication.

This past summer, the country’s president publicly promised not to introduce new taxes, which adds further uncertainty to the bill’s fate.

Until a decision is made, it’s worth doing the following:

1. Don’t rush to sell assets abroad — nothing in the rules has changed as of today.
2. Draw up a list of all foreign income — interest, dividends, rent, sale proceeds — and record how much tax is already being withheld on each abroad.
3. If you’re still planning a move to Costa Rica, factor this tax question into your calculations before you relocate.
4. Keep an eye on how parliament revises the bill’s text — the wording may still change.

Frequently asked questions

What happens if I’ve already sold a foreign asset at a loss — can that loss be used to offset the tax?

No, the bill explicitly bars offsetting a loss from one sale against a gain from another — there’s no loss-relief provision in the text. This means losing and profitable trades involving foreign assets would be calculated separately, with no netting between them.

Would Costa Rica’s tax authority even find out about my foreign accounts and income?

Yes: Costa Rica has participated in the automatic exchange of banking information between countries (CRS) since 2018, so information about foreign accounts and income can become known to local authorities without a separate request.