Israel – Costa Rica Tax Treaty

UTC:
Capital City:
Language:
Population:
Currency:
Country Code:
Domain:

-6
San José
Spanish
5.2 million
Costa Rican Colon
+506
.cr

Israel – Costa Rica relations

As of 2024, Israel and Costa Rica have yet to sign a tax treaty. Costa Rica and Israel established diplomatic relations in 1963. In 1973, the two nations signed an agreement to enhance economic, cultural, technical, and scientific cooperation. In 2022, another memorandum of understanding on agriculture was signed, building on this agreement and highlighting their positive relationship. For the first time, the agriculture sector is the main area of collaboration, providing a great opportunity for Israeli agriculture and agro-tech in Central America.

Details about Israel’s embassy in Costa Rica

Address: Paseo Colon, Calle 38, Avenida 2, Colon Office Center, 11th Floor, San JoséMántica, Costa Rica
Phone: +506 2221 6444
Website: Click Here
Email: info@sanjose.mfa.gov.il

Details about Costa Rica Embassy in Israel

Address: 5-7 Shoham St. Paz Tower, Ramat Gan 52521 Tel-Aviv Israel
Phone: +972 3-613-5061
Website: Click Here
E-mail: embcr-il@rree.go.cr

Business Activity in Costa Rica

Costa Rica is a development success story. It is classified as an upper-middle-income country and has enjoyed a steadily growing economy for the past 25 years. This development results from a strategy of attracting foreign investment first and then gradually opening trade with other countries.

Costa Rica has generally built an ecosystem of export-oriented technology companies, suppliers, public institutions, universities, and a skilled workforce. A similar change happened in the tourism sector, with many small businesses managing an increasing number of tourists despite Costa Rica’s high prices. These two sectors are interdependent, as they need and promote English language skills, global engagement, and efficient government functions. Furthermore, Costa Rica supports and promotes the right of both foreign and domestic private entities to set up and own businesses and engage in most types of profitable activities.

Applicability of the MLI

Both Costa Rica and Israel have signed the “Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting” (MLI). Israel signed the agreement on June 7, 2017, and ratified it on September 13, 2018. Costa Rica also signed the MLI on June 7, 2017, and ratified it on September 22, 2020.

Residency for Tax Purposes in Costa Rica

Residence of an Individual

In Costa Rica, an individual is considered a tax resident if they stay in the country for more than 183 days, continuously or discontinuously, within the same fiscal period. This duration includes all departures and arrivals during that period.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

Costa Rican authorities consider the location where a company is incorporated as its official corporate residence.

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Costa Rica

Costa Rica Tax Authority is called Dirección General de Tributación which is part of the Ministry of Finance.

Income Taxation: 0% to 5%

Taxation of Companies and Branches: 30%

VAT: 13%

Capital Gains Tax: 2.25%/15%

Withholding Tax

	Costa Rica Internal Tax Rate	Israel Internal Tax Rate
Personal Income tax (Tax brackets)	CRN 0-4,181,000 0% CRN 4,181,000 – 6,244,000 *10%* CRN 6,244,000 – 10,414,000 *15%* CRN 10,414,000 – 20,872,000 *20%* Over CRN 20,872,000 *25%*	Up to 50%
Corporate income tax	5% to 30%	23%
Capital gains tax rate	2.25% or 15%	25%-30% (plus exceptional income tax for high earners at 3%)
Branch tax	30%	23%
Withholding tax (Non-Resident) Dividends	15%	25% or 30%
Interest	5.5% or /15%	15%/25%/23%
Royalties	25%	23%-40%
VAT	13%	17%
Inheritance Tax	NA	NA

Relocation to Costa Rica

Costa Rica’s focus on economic development and social progress has contributed to its economic diversification. The country now has a strong base in advanced manufacturing, medical appliances, services, and tourism. Consequently, Costa Rica is a unique product exporter and ranks among the top 30 global exporters of high-tech goods. Foreign investors are attracted by Costa Rica’s political stability and high levels of education.

Along with the natural beauty, the people of Costa Rica are attracted to its robust sense of community, excellent healthcare, and the tourism sector, which improves the economy. These positive points make Costa Rica a widely loved choice for those seeking to relocate and make business.

Costa Rica’s Jewish community have a historical presence in Costa Rica, and currently is home to 2500 Jews. They actively engage in the Costa Rican society and they are known for their hospitality.

Real Estate Taxation in Costa Rica

In Costa Rica, real estate taxation includes an annual property tax of 0.25% based on the registered value. Every five years, property owners must submit a declaration of their property’s value to the municipality. This ensures that property evaluations for tax purposes are accurate and consistent.

Transfer of Funds from Israel to Costa Rica

According to section 170(a) of the Israeli income tax ordinance, any transfer of payment to a non-Israeli resident is subject to 25% of withholding tax. The tax authority can allow, under certain circumstances, to reduces or dismiss the withholding tax. Our firm handles withholding tax matters with the Israeli Tax Authority.

In providing advice regarding the transfer of money abroad, in addition to the issue of withholding tax, our office handles the requirements of the foreign banks, such as an accountant’s approval regarding the payment of taxes and examines additional actions required in light of the uniform standard of CRS between the countries – automatic exchange of information between countries which is carried out first through the banks and then between the tax authorities of each two countries.

The banks raise many difficulties and charge high fees for converting shekels into other currencies, so it is important to consult before transferring the funds – Contact us.

For more information on money transfers abroad, click here.

Types of Business Entities in Costa Rica

Limited Liability Company

A simpler structure ideal for small businesses, where the liability of shareholders is limited to their capital contribution and the company can be incorporated with a minimum of two shareholders. Shares are called quotas, and there is no minimum capital requirement.

Limited Partnership

This entity has at least one general partner with unlimited liability and one or more limited partners with liability limited to their capital contribution.

Company in Collective Name

This type of company operates under a common business name, and all partners have limitless and group responsibility for the company assets and debts.

Incentive Laws in Costa Rica

Entities under the Free Trade Zone Law are exempt from import duties, income tax, VAT, export tax, selective consumption tax, real estate transfer tax, and withholding tax on payments abroad. They can also use foreign currency generated abroad. Since 2015, per World Trade Organization (WTO) rules, manufacturing companies can join the Free Trade Zone Regime regardless of whether they sell products within or outside Costa Rica, as long as they meet legal requirements.

Furthermore, industries that import semi-manufactured materials for assembly in Costa Rica and export finished products enjoy special benefits such as duty-free imports of raw materials and machinery used in manufacturing.