Costa Rica has spent decades selling itself as a place where your foreign money stays yours. A bill now in the Legislative Assembly could change that calculus for anyone living there on foreign investments.
The Finance Ministry sent the proposal to lawmakers on September 22. It would impose a 15% tax on five categories of passive income earned abroad by Costa Rican tax residents: interest, dividends, royalties, rent and capital gains. Crucially, it applies to individuals as well as companies, trusts and investment funds, and it sets no minimum threshold — so a modest savings account in the US and a large portfolio would be taxed on the same terms.
This is a real break from tradition. Costa Rica has always taxed income where it is generated, not where the earner lives. A 2023 reform (Law 10.381) touched some foreign passive income, but only for entities inside multinational groups that lacked economic substance. The new bill repeals those limits and makes residency the trigger, while keeping the territorial rule for active income like salaries or business profits. The ministry's argument: the 2023 rules caught almost nobody, and residents were being treated inconsistently depending on their corporate structure.
Critics say the anti-double-taxation mechanism is weaker than it looks. Tax lawyer Gabriel Zamora Baudrit ran the numbers on $100 of US dividends already hit with $30 withholding: Costa Rica applies its 15% to the remaining $70, collecting $10.50 and pushing the total burden to 40.5%. Under a straightforward tax credit, the $30 already paid would wipe out Costa Rica's $15 charge entirely. Companies are arguably worse off — instead of the flat 15%, they fold foreign passive income into taxable profits taxed at up to 30%.
The people in the crosshairs are tax residents living off passive income from abroad — retirees drawing on foreign investment returns are the obvious group, says Marianela Masís of PwC Costa Rica. Open questions remain, including how pension funds would be treated. Central Bank President Róger Madrigal has flagged another risk: the tax could discourage residents from investing abroad at all.
The bill is early in its passage and the text could shift; it needs 38 votes if classed as a new tax, 29 if framed as a reform. With the government facing a revenue shortfall that has already cut the 2027 budget, the political will to raise money is real.
Why should a traveller care? If you're weighing a long stay, retirement or property rental income in Costa Rica — one of the region's most popular expat destinations — this could reshape the financial case. For short holidays, nothing changes. But anyone considering residency, or already living there and earning rental or investment income from overseas accounts, should watch this bill and get advice before assuming Costa Rica's famous territorial tax still covers them.
