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Corret Income Tax for Foreigners Investing in Costa Rica Stock Market Is 8%

The Office of the Attorney General confirmed to the Ministry of Finance that the 8% tax on foreigners, the same paid also by nationals, is the correct one.

Since September 25, foreigners who acquire securities from the local stock market will have to pay 8% tax on the dividends generated, just like the tax paid by nationals, and not the 15% set previously.

The differences that had arisen regarding how much and in what form the tax on dividends generated from investments made by foreigners in securities on the local stock market should be collected, have been resolved, and the Ministry of Finance confirmed that the tax will be collected from September 25th.

“… The Directorate General for Taxation considered that the amendment to article 59 of the Income Tax Law (artículo 59 de la Ley del Impuesto sobre la Renta), which was implemented by the Law on Development Banking (Ley de Banca para el Desarrollo), implied that foreigners should pay 15% and nationals 8%. Therefore, Taxation issued a directive, in 2015, establishing a 15% withholding rate for interest or financial gain obtained by foreign investors who do not live in Costa Rica.”

La Nacion explains that “… On the other hand, the General Superintendent of Securities (Superintendente General de Valores), Carlos Arias, consulted the Attorney General of the Republic on the rate of the tax that had to be applied to foreigners, to which they responded to him by means of a ruling of 16 February 2017.”

In the end, the Attorney General’s Office concluded that the collection of a 15% of interest income generated by investments in securities to non-residents in the country is incorrect and that the rate is 8%.

The Deputy Minister of Finance (Viceministro de Hacienda), Fernando Rodríguez explained that the criterion Attorney General’s Office is binding for the Treasury, on Monday, September 25, 2017, Hacienda issued a relevant fact explaining that the tariff applied to foreigners is 8%.

Asked about what will happen to the investors who had already been charged 15%, Rodriguez said that is an issue under study by the tax department.