Important Disclaimer: This guide is for informational purposes only and does not constitute legal or tax advice. Tax laws change frequently, and this information reflects our understanding at the time of writing. Consult a qualified Costa Rican attorney or tax professional (contador público autorizado) before making any decisions based on this information.

Costa Rica Rental Income Tax Guide: What Property Owners Need to Know

Owning rental property in Costa Rica can be a rewarding investment. Whether you have a vacation home in Tamarindo, a condo in Jaco, or a villa in Manuel Antonio, the Costa Rican rental market offers strong potential for income. But with that income comes tax obligations that every property owner needs to understand.

Costa Rica’s tax system has specific rules for rental income, and these rules differ depending on whether you’re a resident or non-resident, whether you own property as an individual or through a corporation, and whether you’re renting short-term or long-term. This guide breaks down what you need to know.

Tax Residency and Your Obligations

The first question many property owners ask is whether they need to pay Costa Rican taxes on their rental income. The answer depends on your tax residency status.

Costa Rica operates a territorial tax system, which means you only pay taxes on income derived from Costa Rican sources. This is important for foreign owners: if you live in the United States or Europe and rent out a Costa Rican property, you may still have Costa Rican tax obligations on that rental income, even though you’re not a resident.

You’re considered a tax resident of Costa Rica if you maintain a primary residence in the country for more than 183 days per year, or if your vital interests (family, business, economic ties) are primarily located in Costa Rica. As a resident, you’re taxed on your worldwide income. As a non-resident, you’re only taxed on Costa Rican-sourced income, which includes rental income from Costa Rican property.

For vacation rentals specifically, if you’re renting through platforms like Airbnb, Vrbo, or Booking.com to tourists, the income is considered commercial income from a Costa Rican source, and you’ll need to comply with Costa Rican tax requirements regardless of where you live.

Income Tax Rates for Rental Property

Costa Rica uses a progressive income tax system for individuals. The current tax brackets for rental income (as of 2025) are:

Annual Taxable Income (CRC)	Annual Taxable Income (USD approx)	Tax Rate
0 - 4,181,000	$0 - ~$7,600	0%
4,181,001 - 6,244,000	~$7,600 - ~$11,400	10%
6,244,001 - 8,977,000	~$11,400 - ~$16,400	15%
8,977,001 - 13,465,000	~$16,400 - ~$24,600	20%
Over 13,465,000	Over ~$24,600	25%

These brackets apply to your net rental income after deducting allowable expenses. For example, if your rental property generates 15 million CRC (approximately $27,000) in gross rental income and you have 4 million CRC in deductible expenses, you’d pay tax on 11 million CRC at the applicable rates.

If you own your rental property through a corporation (Sociedad Anónima or Sociedad de Responsabilidad Limitada), the corporate income tax rate is a flat 20% on net income. This can be advantageous for higher-income properties because the corporate rate is lower than the top individual rate of 25%.

VAT/IVA on Rental Income

Costa Rica’s value-added tax (known as IVA in Spanish, or VAT in English) applies differently to short-term and long-term rentals.

Short-term tourist rentals (properties rented for periods typically under 30 days to tourists) are subject to 13% IVA. This applies whether you rent directly, through a property manager, or through platforms like Airbnb. The 13% is added to the rental price, and you have obligations to collect, report, and remit this tax to the Tax Administration (Ministerio de Hacienda).

Long-term residential rentals (renting to a tenant for residential purposes for periods typically exceeding one month) are generally exempt from IVA. However, if you provide additional services beyond just the space (like meals, cleaning, or transportation), those services may still be subject to IVA.

There’s also an important threshold to know about. If your annual gross rental income exceeds 4,124,000 CRC (approximately $7,500 USD), you must register for IVA and begin collecting and remitting it. If you’re below this threshold, you may not be required to register, though voluntary registration is sometimes beneficial.

For vacation rentals specifically, because they’re considered commercial activity under Law 9742, most operators are required to register for IVA regardless of income level.

Deductible Expenses

One of the most important aspects of tax planning is understanding what expenses you can deduct from your rental income. In Costa Rica, you can reduce your taxable rental income by subtracting reasonable business expenses related to the property.

Common deductible expenses include:

• Property management fees: Fees paid to property management companies, typically 15-25% of rental income
• Maintenance and repairs: Costs to maintain the property in good condition, though improvements that increase property value may need to be capitalized
• Utilities: Electricity, water, internet, and other services used for the rental property
• Insurance: Property insurance and liability coverage
• Property taxes: The annual municipal property tax (impuesto territorial) you pay
• Depreciation: You can deduct a portion of the property’s value over time. The standard depreciation rate for buildings is 20 years (5% per year)
• Advertising and marketing: Costs to list your property on rental platforms
• Professional fees: Accountant (contador) fees, legal fees related to the rental activity
• Bank fees: Transaction fees for receiving international payments

Keep detailed records and receipts for all expenses. The Tax Administration can request documentation to verify your deductions.

Filing Requirements and Deadlines

If you earn rental income in Costa Rica, you have specific filing obligations with the Ministerio de Hacienda.

For individuals, the income tax return (Declaración de Impuesto sobre la Renta) must be filed by December 15th of each year for the previous tax year. If you’re an employee with rental income as a secondary source, you may have different reporting requirements.

For corporations, the filing deadline is March 15th of the following tax year. Corporations also need to make quarterly estimated tax payments if they expect to owe more than 1.5 million CRC (approximately $2,700) in annual tax.

All rental property owners with commercial activity should also file IVA returns. The frequency depends on your income level: monthly, bimonthly, or quarterly. Most vacation rental operators file monthly.

You’ll need to register with the Tax Administration and obtain a tax identification number (Identificación Tributaría or NIT) if you don’t already have one. Many property owners work with a contador (public accountant) to ensure compliance with filing requirements.

Corporation vs. Individual Ownership

A significant tax planning decision is whether to own your rental property as an individual or through a Costa Rican corporation. Each structure has implications.

Individual ownership is simpler. You’re directly responsible for reporting rental income on your personal tax return. The progressive tax rates (0-25%) apply, and you can deduct expenses directly against your rental income.

Corporate ownership (through a Sociedad Anónima or SRL) offers potential benefits:

• The 20% flat corporate tax rate is lower than the top individual rate of 25%
• You can potentially retain earnings in the corporation at a lower tax rate
• Liability protection between your personal assets and the business
• Some flexibility in how you distribute income (salaries, dividends)

However, corporations also have additional requirements, including separate accounting, corporate tax filings, and potential complications if you want to withdraw funds. The corporate structure also doesn’t provide any additional benefits for VAT purposes.

For many property owners, especially those with multiple properties or higher rental income, the corporate structure makes sense from a tax planning perspective. But this is a decision that requires professional advice specific to your situation.

Municipal Taxes and the Patente

Beyond national taxes, rental property owners must also consider municipal taxes. These are taxes paid to your local canton (municipality) and vary depending on where your property is located.

The most significant municipal requirement is the patente (business license). If you operate a vacation rental, you need a patente from your local municipality. The cost varies widely by canton and is typically based on your gross rental income or a fixed fee schedule.

In popular rental areas like Tamarindo, Playas del Coco, Jaco, and Manuel Antonio, the patente for a vacation rental typically ranges from 50,000 to 200,000 CRC annually (approximately $90-$360 USD), though this varies and can be higher for larger properties.

You’ll also pay the impuesto territorial (property tax) to your municipality, which is 0.25% of the registered value of your property as assessed by the National Registry. This is separate from income tax and is an annual obligation.

Common Mistakes Foreign Owners Make

Many foreign property owners in Costa Rica make similar mistakes when it comes to taxes. Being aware of these can help you avoid problems:

Assuming no tax is due because you don’t live in Costa Rica. As mentioned, Costa Rica’s territorial system means you’re taxed on Costa Rican-sourced income regardless of residency. If you rent property in Costa Rica, you likely have Costa Rican tax obligations.

Not registering with the Tax Administration. Operating a vacation rental without the proper tax registrations (NIT, IVA registration) can result in penalties and fines.

Failing to collect and remit IVA. If you’re running a short-term rental, you must charge 13% IVA and remit it to the government. This isn’t optional.

Mixing personal and business expenses. Keep your rental finances separate. Mixing personal and business expenses creates complications and raises red flags with tax authorities.

Not keeping adequate records. The Tax Administration can request documentation for your deductions. Maintain organized records of all income and expenses for at least five years.

Assuming a corporation solves everything. While corporate ownership can provide tax benefits, it’s not a magic solution. Corporate structures have their own costs and compliance requirements.

Conclusion

Understanding your tax obligations as a rental property owner in Costa Rica is essential for operating legally and avoiding penalties. The system involves income tax at progressive rates (0-25% for individuals, 20% for corporations), IVA at 13% for short-term rentals, municipal taxes including the patente and property tax, and specific filing deadlines throughout the year.

The details matter: whether you’re a resident or not, whether you own individually or through a corporation, and whether you’re renting short-term or long-term all affect your specific obligations.

This guide is for informational purposes only. Tax laws change, and your specific situation may involve considerations not covered here. We strongly recommend working with a qualified Costa Rican accountant (contador público autorizado) or tax attorney who can advise on your particular circumstances.

Related Guides for Property Owners

• Vacation Rental Regulations in Costa Rica — ICT registration requirements, permits, and licensing process for short-term rentals.
• Holding Companies for Costa Rica Property — Corporate vs. individual ownership and the tax implications of each structure.
• Choosing a Property Manager in Costa Rica — Many managers handle tax compliance; learn what to ask and what to expect.
• Property Management Fees in Costa Rica — Understanding what you’re paying for and what should be included.
• Airbnb vs Long-Term Rental in Costa Rica — Tax treatment differs for short-term and long-term rentals; here’s the comparison.

If you’re looking for help managing your Costa Rica rental property, Nest Stays offers comprehensive property management services including tax compliance support. Visit our owners page to learn more about how we can help you navigate the requirements of owning rental property in Costa Rica.