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5.1. Tax Base for Resident Entities

Costa Rica applies a territorial system whereby corporate tax is due only on income sourced from Cost Rica. Income deemed as sourced in Costa Rica, includes all income arising from services rendered, capital invested or property owned in Costa Rica. Capital gains are not taxable unless of a habitual nature or made on depreciable assets. Dividends received from a Costa Rica company are also exempt.

Net taxable income is defined as gross income from sources in Costa Rica, unless exempt, as reduced by expenditure and other allowances wholly and exclusively incurred for the production of taxable income. Payments to parent companies for technical services, franchising, the use or the right to use intellectual property rights and similar are deductible typically only up to 10% of turnover. There is also a limitation to deductible interest expenses (see Sec. 13.2.).