Living in Costa Rica

Costa Rica (Spanish for Rich Coast) is located in Central America and is bordered by Nicaragua to the north, Panama to the southeast, the Caribbean Sea to the east and the Pacific Ocean to the west: an unbelievable dream location. Costa Rica has a surface area of 51,060 square kilometres (19,714 square miles), which means it’s slightly smaller than the Netherlands and Belgium combined. Most inhabitants are native speakers of Spanish and only a minority of people is able to speak English.

San José is the capital city of Costa Rica and houses the majority of the country’s population. San José is located on the Central Valley plateau at an altitude of 1,160 metres (3,806 feet) above sea level in central Costa Rica. Costa Rica has a huge variety of landscapes, including a series of volcanic mountain chains stretching from the northwest to the southeast. Many volcanoes are still active with the most active one being the Arenal volcano in the Tilarán mountains. When it’s nice weather, the Tilarán mountains can be seen from the Pan-American Highway.

The Arenal region is also known as the ‘Adventure Capital’ of Costa Rica. Here you can find multiple hot springs and several of them have been transformed into wellness centres. But there’s more: the volcanoes, mountains and rivers that surround the large Lake Arenal are undoubtedly the place to be if you’re an enthusiast eco-tourist. White water rafting, zip-lining through the rainforests, waterfall rappelling, hiking on various nature trails, horseback riding, and so on. Anything is possible.

The Caribbean coast consists of vast lowlands with swamps, mangroves and waterways behind a coastline of long, sandy, white beaches. The Pacific coast is hilly with many bays and cliffs interspersed with small sandy beaches. Along Costa Rica’s 1,290 kilometres (800 miles) of coast line, you can find endless white, sandy, untouched beaches where you can imagine yourself as a modern-day Robinson Crusoe. The seawater has a light turquoise blue colour, palm trees are blowing in the wind and gorgeous sunsets are melting into the horizon: a heavenly spectacle. But there’s more Costa Rica has an advantageous tax regime for fiscal refugees who are trying to escape the clutches of the (European) tax monster.

How to become resident of Costa Rica

As of the first of March 2010, a new immigration law became effective which distinguishes between several types of residence. As part of the law, a new ‘Reglamento’ came into effect on the 17th of May 2012: this ‘Reglamento’ contains guidelines, rules and the interpretation of the new immigration law.

Pensionado scheme

In principle, the pensionado scheme only applies to pensioners who already receive a pension. It’s sufficient to prove that you receive USD 1,000 per month from a pension fund in order to apply for a temporary residence permit (which can be transformed into a permanent residence permit after three years). Once qualified as a pensionado resident of Costa Rica, you aren’t allowed to work as an employee in Costa Rica. Instead, you’re allowed to own a company and derive income from it. The spouse and dependents under 25 years old of the pensionado applicant can also apply for a residence permit. One monthly pension income of USD 1,000 covers the applicant, his/her spouse and the children under the age of 25 who live with them in Costa Rica. As a pensionado resident, you’re not allowed to be absent in Costa Rica for a period of more than two consecutive years, which is certainly feasible.

The pensionado residence permit is a temporary residence permit which has to be renewed. After three years of temporary residence, the pensionado permit holder can obtain a permanent residence permit. When you’re going to renew your resident status at the end of each of the first two years, you’ll need to prove that, during the year, USD 12,000 was deposited on a savings account with a bank in Costa Rica (USD 1,000 x 12 months). The easiest way to comply with this requirement is to ask your Costa Rican bank to issue a letter which states that (1) you have an account with them and (2) you’ve exchanged the USD 12,000 required to retain the pensionado residence status.

The big advantage is that Costa Rica, like Hong Kong, Belize and Uruguay, only taxes income earned in Costa Rica itself (territorial tax system) and isn’t interested in what you’re earning outside Costa Rica. For Costa Rican residents (it doesn’t matter which residence scheme applies), this can undoubtedly lead to very creative but completely legal stories.

Rentista scheme

For those of you who aren’t retired yet, there’s also good news! The rentista scheme was designed for those who aren’t working or aren’t willing to work in Costa Rica but still dispose of their own income. An applicant for the rentista residence permit must prove the ability to receive at least USD 2,500 monthly income for a period of 2 years. This can be done with an official and certified letter, issued by a financial institution and stating that the applicant has a bank account with a balance of at least USD 60,000 (USD 2,500 x 12 months x 2 years). It’s not required to hold the funds in Costa Rica: for example, you can also have a savings account in Switzerland with a balance of at least USD 60,000. The ideal certified letter issued by the financial institution should state that the applicant will receive at least USD 2,500 per month in Costa Rica in a stable and permanent manner.

A rentista permit holder isn’t allowed to work as an employee in Costa Rica. However, the rentista permit holder can own a company and derive income from it. The spouse and dependents under 25 years old of the rentista applicant can also apply for a residence permit. Important to realise is that the rentista monthly income requirement of USD 2,500 applies to all sorts of applicants (whether or not the applicant is single, married, or married with children), no exceptions are made. The monthly income requirement of USD 2,500 covers the applicant, his/her spouse and the children under the age of 25 who live with them in Costa Rica. As a rentista resident, you’re not allowed to be absent in Costa Rica for a period of more than two consecutive years. Feasible of course.

Like the pensionado residence permit, the rentista residence permit is also a temporary residence permit which has to be renewed. After three years of temporary residence, the rentista permit holder can obtain a permanent residence permit. When you’re going to renew your resident status at the end of the first two years, you’ll need to prove that USD 30,000 was deposited on a savings account with a bank in Costa Rica (USD 2,500 x 12 months) during the year. The easiest way to comply with this requirement is to ask your Costa Rican bank to issue a letter which states that (1) you have an account with them and (2) you’ve exchanged the USD 30,000 required to maintain the rentista residence status. In the third year, you don’t have to transfer additional money into your savings account in Costa Rica because you already reached the minimum requirement of USD 60,000 at the end of the second year of residence. Therefore, one can conclude that it’s certainly feasible to meet the conditions of the rentista residence scheme. If you’ve USD 60,000 at your disposal, you can apply. And your money isn’t lost, it’s just transferred from one bank to another.

Inversionista scheme

This category is established for people who are investing an amount of no less than USD 200,000 in Costa Rica. In order to qualify, one can invest in any Costa Rican business or in certain sectors approved by the government of Costa Rica. An inversionista resident can claim income from investment projects and is allowed to own a company and derive income from it. The inversionista permit is also a temporary residence permit, which can be transformed into a permanent residence permit after a period of three years. As an inversionista resident of Costa Rica, you’re not allowed to be absent in Costa Rica for more than two consecutive years.

Permanent Residence scheme

The three schemes discussed above (the pensionado, the rentista and the inversionista scheme) all grant temporary residence permits. After a period of three years, temporary residence permits can be transformed into permanent residence permits. The main benefit of permanent residence is the absence of any financial requirements, as opposed to the temporary residence schemes. The spouse and dependents under 25 years old of the main applicant can also apply for the permanent resident status. A permanent resident can work as an employee in Costa Rica and is allowed to own a company and derive income from it. A permanent resident isn’t allowed to be absent in Costa Rica for more than four consecutive years.

You can also choose for the fast track to obtain the permanent residence status: you can skip the three year temporary residence period and become a permanent resident immediately by marrying a Costa Rican citizen.

Social security

All residents must participate in Costa Rica’s national social security and healthcare insurance system, also known as ‘Caja’. Proof of participation and payments for the entire term of the temporary residence are required to obtain a renewal of your temporary residence permit. To give you an idea of the costs of these contributions, let’s have a look at the rentista scheme. The amount of the contributions you pay is based on your reported income. This reported monthly income is at least USD 2,500 for a rentista resident. On average, we can say that a rentista resident will pay, on a monthly basis, USD 150 to the Caja.

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