The Costa Rican legislature is currently reviewing a proposed law to incentivize Baby Boomers and Investors to move to Costa Rica.
Costa Rica was a pioneer back in 1971 when it became one of the first countries in Latin America to create specific legislation to boost its tourism industry by offering incentives to foreign retirees that would move to Costa Rica. It worked, and Costa Rica consistently grew its tourism base and ex-pats. However, by 1992 the government had eliminated the incentives provided, and the program was eliminated.
Now it may be back. It took a severe financial deficit and COVID 19 for the Costa Rican government to finally realize that it was sitting on a gold mine which it was failing to develop properly. Costa Rica consistently ranks as one of the top tourism destinations globally, but it also ranks as one of the top ten top retirement destinations in the world. Costa Rica became an expensive alternative to what other countries were also offering, and it took its position for granted.
According to the International Livings list of the best places to retire in the world in 2020, Costa Rica is number three.
- Costa Rica
The United States alone has 70 million Baby Boomers retiring in the next ten years. In Canada, 250,000 Baby Boomers retire every year.
According to the US Embassy in Costa Rica, “It is estimated that approximately 100,000 private American citizens, including many retirees, reside in the country, and more than a million American citizens visit Costa Rica annually.” Source: US Embassy Costa Rica. https://cr.usembassy.gov/our-relationship/policy-history/
That is a lot of potential spending inside the country for goods and services used by ex-pats living in Costa Rica. The tourism industry has been devastated due to the impact of COVID 19 on international travel. It is clear that to recover Costa Rica will have to think outside of the box. Recently Barbados implemented a one year visa for those wanting to work remotely from the country. https://www.washingtonpost.com/world/2020/07/16/barbados-work-remote-coronavirus/ That was followed by Bermuda https://www.travelandleisure.com/jobs/bermuda-remote-work-visa . Other countries are also trying to figure out how to stimulate their tourism economies.
The Costa Rica proposal, which is pending approval in the legislature, provides for the following:
- Declaring the attraction of investors and retirees as a public interest. This declaration of public interest is symbolic but works to fast track programs among institutions that have to implement the law.
- Import Duty Tax Exemptions. The law reinstates the two tax exemptions previously eliminated. You will be able to bring in your household items into the country tax-free. You will also have the right to import one vehicle into the country duty-free.
- Income Tax Exclusion. The income that you reported as your basis for residency would be excluded from Costa Rican Income Tax. Currently, Costa Rica applies a territorial taxation system, so foreign-sourced income for foreigners living in Costa Rica is now tax-free. If Costa Rica changes to a global tax regime, then this exclusion would become very relevant to attract foreign retirees.
- Property Transfer Tax Discount. If you purchase real estate in your personal name, then you will receive a 20% discount from the Costa Rican real estate transfer tax. Currently, the government applies a 1.5% transfer tax on the value of the transaction.
- For the Resident Investor category, it drops the investment requirement from US$200,000 to US$150,000.
- Expedited Processing. The law indicates that they will create a specialized service window within the Department of Immigration to handle processing for Investor, Rentista, and Pensionado residency categories. A similar concept was implemented successfully years ago for companies setting up operations in Costa Rican and required residency status for their executives and employees. This will be based on the same concept.
I think the initiative behind the law is a positive one and a significant step forward in maintaining Costa Rica as a top retirement destination in the future. This program’s only catch is that it is valid for five (5) years from the date of approval. I imagine the government will measure the program’s cost/benefit at that time and then decide if it will continue with it.
I am attaching the full text of the proposed law as it is currently is drafted. The law does not come into effect untill it is
For more information about residency in Costa Rica, check out our Step by Step Residency Guide. https://costaricalaw.com/costa-rica-legal-topics/immigration-and-residency/how-to-apply-for-residency-in-costa-rica-a-step-by-step-guide/
For the most comprehensive guide on Costa Rican laws in English you can purchase the 2020 edition of The Legal Guide to Costa Rica on Amazon for US$9.99. https://bit.ly/legalguideCR
ARTICLE 1- Object of the law
The purpose of this law is to create the regulatory framework to encourage the attraction of investors, income recipients and pensioners, thus protected by the General Law on Migration and Foreigners No. 8764 of August 19, 2009, to contribute to Costa Rica’s economic recovery in a post-pandemic period Covid-19.
ARTICLE 2- Scope
This law will apply to all those persons who are authorized to enter our country under the immigration categories of investors, retired residents or residents with income.
ARTICLE 3- Declaration of public interest
The present law is of public interest for the development of the attraction of investors, renters and pensioners to the national territory. For its compliance, the institutions of the Public Administration may include economic contributions to support the fulfillment of their purposes through the ordinary and extraordinary budgets of the Republic.
ARTICLE 4- Rectory
The governing body of the matters protected by this law in matters of migration will be the Ministry of Government and Police; and in relation to tax matters it will be the Ministry of Finance.
ARTICLE 5- Incentives
The persons covered by this law, will enjoy the following incentives:
a) Tariff exemption and all import taxes present for one time only, for the import of their household goods. In the applications they will be able to include their dependents, for immigration purposes. Household goods are understood to be the household items necessary for the installation of the foreigner in this country, including household furniture, electrical appliances, home decoration items, kitchen and bathroom utensils, and bedding.
If the beneficiary transfers these goods within the three years following his entry into the national territory, he must pay the taxes from which he was exempted. The regulations may establish very qualified exceptions in cases of total loss of household goods.
b) Beneficiaries may import a motor vehicle, for personal or family use, free of all import, tariff, sales and economic stabilization taxes, which may be sold or transferred to third parties, exempting them from such taxes after three years have elapsed from the date of entry of the vehicle into the country.
The interested parties may import another vehicle with the same benefits stipulated herein, at any time, upon payment of the taxes corresponding to the exonerated vehicle.
In case of loss of the vehicle, due to theft or total destruction by fire, collision or accident, occurred within the period of three years, the beneficiary of this law may acquire another vehicle free of the taxes indicated.
c) The amounts declared as income to become a creditor of the benefits of this law, will be exempt from Income Tax.
d) Exemption of 20% of the total transfer tax, in those real estate properties acquired within the term of this law, as long as the beneficiary is the registered owner of the property.
If the beneficiary transfers these assets within the three years following their acquisition, he must pay the taxes from which he was exempted.
ARTICLE 6- On the waiver of the status of Resident Annuitant or Resident Pensioner
If the beneficiary renounces his or her “Resident Pensioner” or “Resident Annuitant” status within the term of this law, he or she must cancel the taxes from which he or she was exempted.
ARTICLE 7- About the investors
For the category of investors, for the term established by this law, a new range of investment is established, with a capital of not less than US$150,000.00 (one hundred and fifty thousand dollars) according to the official exchange rate of sale determined by the Central Bank of Costa Rica, either in real estate, registrable goods, shares, securities and productive projects or projects of national interest. In those cases where the investment is regulated by special laws, it will be analyzed individually.
ARTICLE 8- About the processing
The Ministry of Government and Police, through the General Directorate of Immigration and Foreigners, in accordance with the criteria of simplification of procedures, will have a window for specialized attention for the categories set forth in Article 2 of this law, regulated by the Law for the Protection of Citizens from Excess of Requirements and Administrative Procedures, Law No. 8220, of March 4, 2002, and its amendments.
In addition to the requests attended directly at the above-mentioned window, the Ministry may open a window under the same conditions of service in its different offices or dependencies.
ARTICLE 9- Falsification of documents
The falsity proven in the documents or reports provided for the granting of the benefits that this law confers, will be sanctioned by ordering the immediate payment of the exonerated taxes plus 10% as a fine and with the cancellation of the immigrant credential, which has been granted by the corresponding agencies.
ARTICLE 10 – Regulations
The Executive Branch shall regulate this law within sixty days following the date of its entry into force.
ARTICLE 11- Validity of the law
This law shall be effective for five years from its entry into force.
It is effective as of its publication.
Mileidy Alvarado Arias María Inés Solís Quirós
Silvia Vanessa Hernández Sánchez
Members of Parliament
September 2, 2020
This sounds like a great incentive! Do you have any idea on a timeframe of when this law may be passed or when a decision will be made? Thank you.
Thank you for your question. Hard to tell. There is a push to get it done and operational by the tourism season which runs from December – May. However, it depends on politicians in the legislature to pass the law.