Tax Benefits for Real Estate Investors in Costa Rica

Published on October 30, 2025 and written by Cyril Jarnias

Investing in Real Estate in Costa Rica

Investing in real estate in Costa Rica isn’t just an opportunity to benefit from stunning landscapes and rich culture—it’s also a unique chance to take advantage of attractive tax benefits and grow your wealth.

As the country attracts more and more foreign investors, particularly due to its incentive-based tax policies and favorable legal framework, it’s crucial to understand how these elements can transform an investment into a genuine goldmine of opportunities.

With highly competitive real estate income taxation and no capital gains tax on property, Costa Rica stands out as a haven for those looking not only to diversify their portfolio but also to enjoy solid long-term financial returns.

Local Tax Benefits for Investing in Costa Rica

The main tax incentives offered by Costa Rica to foreign investors come in several attractive components designed to stimulate investment and support local economic development:

• Tax Exemptions on Real Estate Investments
  • Foreign investors benefit from a very favorable tax regime: only income generated within Costa Rican territory is taxed, while income from abroad is not subject to taxation.
  • The annual property tax is low (0.25% of the registered property value).
  • Property transfer taxes upon acquisition remain moderate (1.5%).
  • There is no generalized wealth tax or capital gains taxation on real estate for certain specific cases.
• Residency Programs for Retirees and Investors
  • The investor visa is accessible with a minimum investment of $150,000 USD in real estate or local productive projects.
  • This program grants a renewable temporary residence, which can become permanent after three years.
  • Temporary residents enjoy a tax environment where their pensions or other income received outside Costa Rica are not subject to local taxation.
• Special Economic Zones (“Free Zones”)

Benefit	Description
Corporate Tax Exemption	Initial period (8 years): reduced rate down to zero
VAT Exemption	On imports of equipment and raw materials
Social Security Contribution Reductions	Depending on sector and geographic location

These zones primarily target technology, industrial, or logistics sectors. They encourage the creation of skilled local jobs and contribute to technology transfer.

How Do These Measures Stimulate Foreign Investment?

• By significantly reducing the tax burden on newcomers as well as established foreign companies, the government creates a climate conducive to entrepreneurial risk-taking.
• The absence of taxation on worldwide income particularly attracts wealthy retirees and digital entrepreneurs looking to optimize their tax situation while enjoying Costa Rica’s stable environment.
• The Free Zone provisions directly promote regional industrial development and local skills enhancement through the large-scale establishment of international companies.

Comparisons with Other Latin American Countries

Country	Taxation of Non-Residents	Major Exemptions/Incentives
Costa Rica	Tax only on national income	Investor visa from $150,000 USD; Free Zones; low property taxes
Panama	Territorial tax system	“Friendly Nations Visa”; exemption on foreign taxes; free trade zones
Mexico	Partial worldwide taxation	Investor residency >$200,000 USD; sometimes high property taxes
Colombia	Worldwide taxation	Investor Visas (>$160,000 USD) but global taxation

Costa Rica stands out for superior administrative transparency, internationally recognized legal stability, and a proactive policy focused on sustainable development—all factors that strengthen its competitiveness compared to its neighbors.

Costa Rica’s territorial tax system combined with its targeted exemptions places the country among the preferential destinations for those seeking legal security, real tax relief, and an environment conducive to real estate or entrepreneurial development.

Avoiding Double Taxation: An Advantage for International Investors

Costa Rica has established Double Taxation Avoidance Agreements (DTAAs), providing a major advantage for international real estate investors. These agreements prevent multiple taxation on the same real estate income, thereby reducing the overall tax burden and enhancing the country’s appeal for foreign investment.

Main Tax Treaties Signed by Costa Rica

Partner Country	Year Signed	Main Scope
Spain	2010	Income and capital gains, corporate and individual taxes
Mexico	2014	Various income, dividends, interest
Germany	2016	Business income, dividends

• Costa Rica also applies certain provisions of the MLI (Multilateral Instrument), strengthening its anti-abuse measures in treaties with Spain and Mexico.
• The treaties typically cover personal and corporate income taxes as well as property taxes related to real estate.

How Do These Agreements Minimize the Tax Burden?

• Elimination of Double Taxation: A foreign investor resident in a country with a DTAA with Costa Rica does not pay tax twice on the same real estate income. Generally:
  • Tax paid in Costa Rica is deducted or credited in the country of origin.
  • Certain types of income even benefit from partial or total exemption according to the applicable treaty.
• Reduction of Withholding Taxes: The withholding rates applied to distributions (rents, capital gains) paid to non-residents can be capped or even eliminated based on the specific provisions of the relevant bilateral treaty.

Concrete Example
A Spanish citizen receiving rental income from a property located in Costa Rica:

• Will normally pay local Costa Rican tax on this income.
• Thanks to the Spain–Costa Rica DTAA, they can credit this tax paid against the tax due in Spain for the same rental income.
• If their Spanish marginal rate is higher than the Costa Rican rate paid, they will only settle the residual difference; otherwise, no double charge is incurred.

Positive Tax Implications for Foreigners

List of main advantages:

• Legal limitation of cumulative taxation between partner states
• Administrative simplification via issuance of tax certificates proving effective residence
• Increased legal security regarding cross-border tax treatment
• Potential lowering of total tax cost upon resale or regular receipt of rental income

Practical Case
A Mexican investor acquires a tourist apartment in Guanacaste:

1. They regularly rent their property to international tourists.
2. The tax paid on local rental income can be accounted for in their Mexican tax return thanks to the Mexico–Costa Rica DTAA—thus avoiding full secondary taxation in Mexican territory.

The adopted measures significantly improve the international attractiveness of the Costa Rican real estate market:

By strongly limiting cross-border tax risk through signed international tax treaties (Spain, Mexico…), Costa Rica positions itself as a preferred destination for foreign real estate investment seeking legal stability and legal tax optimization.

Understanding Property and Residence Taxes in Costa Rica

The property tax in Costa Rica (Impuesto sobre Bienes Inmuebles) applies to all property owners, whether residents or foreigners. It is levied by the municipality where the property is located.

Element	Detail
Applicable Rate	0.25% of the fiscal value of the property
Calculation Basis	Value declared to the town hall (often 2 to 3 times lower than market value); mandatory revaluation every 5 years
Payment Deadlines	Payable in advance for the entire year starting January 1st, or quarterly
Procedures	No notice is automatically sent; it is the owner’s responsibility to initiate payment with their municipality

Important points for property owners:

• Non-payment can lead to penalties and potentially seizure.
• The absence of an official notice does not exempt from payment.
• The tax is relatively low compared to international standards.

There is no separate “residence tax” in Costa Rica.
Only exception: specific cases like maritime concessions may generate additional fees but, as a general rule, only one annual property tax is due on each property.

Regarding foreign investors:

• No special treatment or specific exemption is provided for them regarding this tax.
• No reduction applies specifically to standard real estate investments. However, incentive regimes sometimes exist in certain strategic sectors or under very specific conditions.

Regional Comparison

Country	Rate/Main Characteristics
Costa Rica	Fixed rate 0.25% on low fiscal value; five-year declaration; absence of residence tax
Panama	Progressive scale up to 2.1%, possible exemptions for properties

Global Comparison: Costa Rica vs. Other Destinations

Costa Rica: Tax Benefits for Real Estate Investors

• No Capital Gains Tax: Individuals are not taxed on real estate capital gains, provided they do not make more than three sales per year (beyond that, the activity is considered professional and may be taxed).
• No Wealth Tax, Inheritance, or Gift Taxes.
• Territorial Taxation: Only income generated in Costa Rica is taxed; foreign-source income is not.
• Tax on Rental Income: 15% rate on net income after deduction of eligible expenses.
• Annual Property Tax: 0.25% of the cadastral value of the property.
• Incentives for Retirees: Residency programs (“Pensionado”, “Rentista”) allow obtaining residence with moderate financial requirements, without specific taxation on foreign pensions.

International Comparison of Tax Regimes

Country	Real Estate Capital Gains	Wealth Tax	Inheritance/Gift Taxes	Rental Taxation	Retiree Incentives	Foreign Income Taxation	Other Assets
Costa Rica	Not taxed (≤3 sales/year)	No	No	15% on net income	“Pensionado”/”Rentista” programs	Not taxed	Stability, simplicity
Panama	10% on capital gain	No	No	10% on gross rents	Retiree visa, tax benefits	Not taxed	US Dollar, free zone
Portugal	28% (non-habitual residents: 0% on certain income)	No	Yes	28% on rental income (excluding NHR)	NHR regime: low taxation on pensions	Variable	Climate, EU access
United States	15-20% (residents), 30% (non-residents)	Yes (some states)	Yes	Progressive federal+state rates	No specific advantage	Worldwide taxation	Deep market, stability

Examples and Recent Data

• In Costa Rica, observed gross rental yields range from 7% to 11% per year in residential, up to 17% in beachfront hospitality.
• Panama appeals for the simplicity of its retiree visa and the use of the US dollar.
• In Portugal, the influx of foreign investors was stimulated by the NHR regime, but benefits are gradually being reduced (end of “Golden Visa” for real estate).
• In the United States, the market is solid but capital gains tax and inheritance taxes can be high for non-residents.

Non-Tax Factors Affecting Attractiveness

• Political and Economic Stability: Costa Rica is recognized for its stable democracy, absence of a military, legal security, and steady growth in the tourism sector.
• Administrative Simplicity: Streamlined procedures for property purchase, transparency of land titles.
• Accessibility: Direct flights from North America and Europe, attractive climate, good quality of life.
• Portugal: Security, access to the Schengen Area, Mediterranean climate.
• Panama: International financial hub, dollarized economy, modern infrastructure.
• United States: High legal security, but administrative complexity and higher management costs.

Visual Summary of Costa Rica’s Strengths

Key Advantage	Detail
No Capital Gains Tax	Up to 3 sales/year
Moderate Rental Taxation	15% on net income
No Inheritance/Gift Taxes	Facilitated transfer
Political and Economic Stability	Democracy, no military
Attractive Residency Programs	Retirees, rentiers
Simplified Procedures	Limited acquisition procedures and costs

Costa Rica particularly attracts real estate investors seeking light taxation, political stability, and a privileged living environment, clearly distinguishing it from Portugal, Panama, or the United States on these criteria.