Q COSTARICA — With the publication of a new law in the official gazette, La Gaceta, self-employed workers in Costa Rica will pay less income tax starting in January 2026.
This is a reduction in the income tax brackets for lower-income workers, and was promoted by the Frente Amplio party.
The new legislation establishes these new parameters, according to Grant Thornton:
- Incomes up to ¢6,244,000 colones annually will not be subject to income tax
- On incomes exceeding ¢6,244,000 colones annually and up to ¢8,329,000 colones per year, a 10% tax rate will apply
- On incomes exceeding ¢8,329,000 colones annually and up to ¢10,414,000 colones annually, a 15% tax will apply
- On income exceeding ¢10,414,000 colones annually and up to ¢20,872,000 colones a 20% tax rate will apply
- On incomes exceeding ¢20,872,000 colones annually, a 25% tax rate will apply
In Costa Rica, self-employed workers navigate a tax system that requires them to manage their own income reporting and contributions, unlike salaried employees whose taxes are typically withheld by employers.
Being self-employed in Costa Rica means taking on the responsibility of managing taxes independently, understanding the income tax structure, the Impuesto al Valor Agregado (IVA) – a value-added tax requirement – social security contributions, and filing deadlines, while staying compliant and optimizing financial outcomes.
Self-employed individuals in Costa Rica must register with the tax authorities (Dirección General de Tributación) and file an annual income tax return.
Many self-employed workers face challenges in tax compliance due to the complexity of the system and the need for diligent record-keeping. Seeking professional advice or using accounting services can help navigate these obligations effectively.
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