COSTA RICA
According to legend, in 1502 when Columbus happened upon Costa Rica during his last voyage to the Americas he dispatched an expedition to the Caribbean Cost and, impressed by the magnificent forests, fertile lands, and abundant wildlife, he gave his new discovery the name Costa Rica or "Rich Coast".
Costa Rica is a very small Central American country - located between Nicaragua and Panama - where North Americans feel very much at home. It is a country of law-abiding citizens, a place where you don't feel shivers of apprehension at the approach of a policeman or a heavily armed soldier. One reason North Americans are attracted to Costa Rica is that Costa Rican are so much like them: they think like them, act like them, and hold much the same values. They are open, friendly, and egalitarian.
People who have traveled all over the world affirm that Costa Rica's beaches are unsurpassed anywhere. Its varied climates off choices of weather as perfect as you could hope to find anyplace on earth (unless you are a skier, of course). Steep-sloped mountains - topped by cloud forests, ferns, and exotic wildlife - tower over fertile farmland dotted with hundreds of neatly maintained homesteads. Flowers bloom everywhere, often trees bear so many colorful, scented blossoms that green leaves are hidden. As if this weren't enough, the small towns are every bit as neat and clean as the countryside and are blessed with friendly Costa Rican hospitality. This is truly a country of superlatives.
One of the more common descriptions of Costa Rica is " the Switzerland of the Americas ". Both countries are of similar size, peaceful and progressive countries where democracy and stability are hallmarks. Although Costa Rica's tropical beaches are incongruent with the Swiss terrain, the high mountains rival the rugged beauty of the Alps. Even closer similarities between the two countries appear in their philosophy of life and economic structures. Both are places of small farms and small businesses, with an air of prosperity and a feeling of equality among citizens. Both countries have renounced aggressive militarism, diverting resources toward education, medical care, and services for the good of all. In short, both places are affluent, happy, and tranquil. Both are locations where North Americans can feel at home, safe and welcome. There are differences, of course. Costa Rica is closer to the United States and Canada, making it somewhat more accessible than Europe. Costa Rica also enjoys a dramatically lower cost of living than Switzerland. And best of all, Costa Rica has a climate that can be enjoyed year-round by those of us who hate wearing snow boots and earmuffs.
Costa Rican legislation has always created favorable tax conditions for offshore operations, but the country's popularity as such has only caught on over the last few years. Banks are required by law to maintain absolute secrecy regarding the operations of their clients. Information about normal banking operations is not passed on to any government agency - including the Tax Department. Information given to local attorneys/notaries is protected by professional secrecy. The Tax Information Exchange Agreement between Costa Rica and the USA took effect in February 1991. This agreement allows the exchange of banking information between the two countries with express authorization of a Costa Rican judge. The exchange will only be permitted if it relates to a possible tax fraud matter as defined by Costa Rican law. To date, there have been very few, if any, requests from the U.S. for Costa Rican tax information.
U.S. Exemption on Foreign Income: The U.S. government grants a $74,000 tax exemption on income earned abroad. This exemption was increased to $76,000 in 2000 and shall be to $80,000, at which point it will be allowed to float freely with the consumer price index. This is note an automatic exemption, total foreign-earned income must be reported to the IRS and then the exemption applied for, using U.S. tax form 2555. To qualify you must be the legal resident of a foreign country who has not spent more than six months in the U.S. The stamps on your U.S. passport are generally proof enough of the length of your stay abroad. The $74,000 limit applies to individual, unmarried taxpayers. If you are married, you and your spouse can exclude up to $144,000 of foreign-earned income but you cannot combine the two exemptions. This exemption does not apply to dividends, pensions, and other similar forms of earnings. Because Costa Rica has no tax treaty with the U.S., any taxes paid to the Costa Rican government cannot necessarily be exempted from your U.S. taxes.
TIPS: Even if you earn no income in Costa Rica, it is still very important to file the standard tax form 1040. If you live here for a number of years and then decide to return to the United States, the record of regular filing may help to avoid overzealous scrutiny by the IRS.
Costa Rica has no capital gains tax; however the Income Tax Law establishes a conveyance tax at a single rate of 3 percent of properties valued above US$2,300. A 13 percent sales tax is levied on goods and some services.
For a variety of reasons, banking secrecy laws better as those in Switzerland noadays attract a great deal of interest among certain folks who have motives for hiding assets. Like Switzerland ,Costa Rica has strict rules on nondisclosure of bank accounts. An interesting angle of financial secrecy is the use of Costa Rican "offshore" corporations . Like bank accounts, these corporations can be started by anyone - citizen, resident, or tourist - and are supposed to be totally secret. Since there's no way of knowing just whose names are on the corporation books, it's almost impossible to discover who actually controls any of these corporations. In fact, the legal name is Sociedad Anonima or " anonymous society ". That's why corporation names are appended with " S.A. " instead of " Inc. " or " Ltd. "
Costa Rica's corporate structure allows any person (Costa Rican or not) to control a company without his or her name appearing in the public records. Our affiliated Costa Rican law office can set up your corporation without the real owner's name ever appearing in the record. Although there is a legal president, vice-president, secretary and treasurer (Finor nominees), the actual ownership of the corporation is invested in whoever physically has the stock certificates in his/her pocket or safe-deposit box. A Costa Rican S.A. is free to engage in many types of business activities, both in Costa Rica and in other countries and it pays little or nothing on what it earns outside of Costa Rica. Local laws require that a yearly tax report must be filed (we do the job); should there be no income to report, there are no tax consequences - but no filing the report makes the corporation liable for a large fine. More to read here!
If your are or are looking for:
- Escape the cold weather
- New business opportunities
- Make your retirement pension stretch
- Tired of the rat race
- Get more for your money
- Spiritual renewal
- Tired of high taxes
- Seeking adventure
- Escape from high crime
- Looking for a partner or spouse
- Learn a second language
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Then look no further...
Many first-time visitors to Costa Rica fall in love with the beautiful countryside, perfect climate and friendly people. And on the basis of this first impression, they decide to move here - just like that!
You can reside in Costa Rica as a pensioner or a foreigner with a guaranteed income or an investor. Although many wealthy U.S. citizens voluntarily renounce their native citizenship for the tax benefits of living abroad, accepting a temporary or permanent residence in Costa Rica in no way endangers U.S. citizenship. It will not be necessary to give up your U.S. passport. The country recognizes dual citizenship.
The most painless way for the average foreigner to acquire residency is by contacting us. For years we have via our affiliated law office at Costa Rica helped foreign residents understand the legal system, business law and residency requirements, as well as plan social activities.
While every effort has been made to ensure that the details contained herein are correct and up-to-date, it does not constitute legal or other professional advice. We do not accept any responsibility, legal or otherwise, for any errors or omissions.
