Scope of Income Tax:

1. According to articles 1 & 2 of the “Renta” law of 1998, the profits of Costa Rican companies are not taxable in Costa Rica if their profits are obtained as a result of the maturation of international transactions or investments outside of the territories of the Republic of Costa Rica.
2. All business entities whatever their form and whether they be sole proprietorships, partnerships, branches, stock corporations or limited liability companies pay income tax on the profits of their trade only within Costa Rica. In addition,

Rate of Income Tax:

The income tax rates payable by a business are set out in Article 15 of the Income Tax Law. There are 4 business income tax rates, the rate payable varying according to the level of gross income. They are the following:

• Full Exemption (See 3&4)
• 10% tax for a business whose gross income is less than 13.2m colons (~$ 37,000);
• 20% tax for a business whose gross income is more than 13.2m colons but less than 26.86m colons
• 30% tax for a business whose gross income is more than 26.86m colons. (~$ 75,000)

Companies are subject to a further 10% tax on any brought-forward losses or investment allowances that are used to reduce chargeable income.

Local authorities levy an annual business license tax on all businesses engaged in profitable activities in their territory. The amount depends on the costs incurred by the local authorities in running basic services such as street lighting and rubbish collection. This tax is paid quarterly, varies according to the nature of the business and is based on the previous year's net taxable income.