US tax obligations while living in Costa Rica
Costa Rica is the only territorial-tax country in the Americas with a major US expat community. Combined with stable democracy, universal healthcare, English widely spoken in tourist areas, and proximity to the US, it has been the leading Latin American destination for US retirees for decades. The 2022 Digital Nomad Visa added a route for working-age expats.
TL;DR
Where Americans live in Costa Rica
Costa Rica hosts an approximately 70,000+ US expat population. The community concentrates in several cities with established expat infrastructure — international schools, English-speaking medical providers, American-style amenities, and active social communities. Below are the primary destinations.
Costa Rica's local tax — what you need to know
Costa Rica taxes only Costa Rican-source income (territorial system). Foreign-source income — including US salary, US business income, US investments — is NOT taxed in Costa Rica. PIT on local-source income is progressive up to 25%. This makes Costa Rica exceptionally clean for US expats whose income stays US-source.
Special tax regime details
Territorial taxation — foreign-source income is NOT taxed in Costa Rica regardless of remittance. This means US salary paid into a Costa Rican bank is still not Costa Rican-source income (the work was performed via remote / virtual presence). Crystal clear for digital nomads and remote employees.
✗ No US-Costa Rica income tax treaty
Without a tax treaty, double taxation is mitigated only through the unilateral Foreign Tax Credit (Form 1116) and FEIE (Form 2555). Withholding on US-source passive income (dividends, interest, royalties) is at the default 30% rate (rather than a treaty-reduced rate), which can materially affect investment returns for residents of Costa Rica. The treaty's absence does not mean no relief — FTC and FEIE still work — but planning is more constrained.
Social Security totalization agreement
The US does NOT have a Totalization Agreement with Costa Rica. This means if you're self-employed and a US citizen / Green Card holder, you owe US Self-Employment Tax (15.3% on net SE earnings up to the Social Security wage base) IN ADDITION to any {country} social security contributions. This is a significant compliance cost — planning should consider whether to incorporate locally to avoid SE Tax exposure.
Residency and visa pathways to Costa Rica
Pensionado (retirement, $1,000+/month pension), Rentista (passive income, $2,500+/month), Inversionista (investment $150,000+), Digital Nomad Visa (since 2022)
Banking and FATCA notes for Costa Rica
Costa Rican banks (BAC Credomatic, Banco Nacional, Scotiabank) onboard expats with residence. Many US expats keep US bank accounts and brokerage and transfer as needed. FATCA reporting in place. Wise / Revolut work well for transfers. Note: large cash transactions face stricter AML scrutiny than in many other expat destinations.
FAQ — US Expats in {country}
If your question isn't here, message me on Telegram for a personal reply.
Get your US taxes handled while you live in Costa Rica
Book a consultation to discuss your situation, get an exact price, and start filing or catching up.