As of the last update in 2023, Costa Rica has specific regulations regarding rental income generated from platforms like Airbnb and VRBO. While tax law can evolve, here's an overview of the rules for rental income:
1. Income Tax on Rental Income:
Residents and Non-Residents: Both residents of Costa Rica and non-residents who generate rental income from property in Costa Rica are subject to income tax on that income. The tax rate for rental income is typically 15%, but this can vary based on how much income you generate.
Personal Income Tax: Costa Rican residents are subject to personal income tax on their worldwide income, which includes rental income from Airbnb/VRBO.
Non-Residents: Non-resident owners who rent properties in Costa Rica are taxed at a flat 15% rate on the gross income received from the rental. There are no deductions allowed for non-residents, so the tax is calculated on the total rental amount before any expenses.
2. Tourism Tax:
Costa Rica imposes a tourism tax for short-term rentals, such as those listed on Airbnb or VRBO. As of recent changes, properties rented for less than 30 days are subject to a 13% Value Added Tax (VAT). This tax is applicable to rental income and must be collected from the guest at the time of the booking.
The tax is collected by the property owner or platform (Airbnb/VRBO), who must remit it to the Costa Rican tax authorities.
3. Registration and Licenses:
National Tourism Registry: As of 2022, properties rented out for short-term stays (under 30 days) must be registered with the National Tourism Registry (Registro de Turismo). This is an official registry managed by the Costa Rican Tourism Institute (ICT).
Municipal License: Property owners must also obtain a municipal business license (patente municipal) from the local municipality in which the property is located. This applies whether the rental is short-term or long-term.
4. Tax Obligations for Hosts:
Hosts are required to file tax returns and pay taxes on their rental income. This includes the Income Tax and VAT. Failure to comply with tax obligations could lead to fines, penalties, and potential issues with the authorities.
5. Responsibility of Platforms (Airbnb, VRBO):
Airbnb and similar platforms are now required to assist with compliance by collecting and remitting the VAT tax on behalf of hosts. Airbnb, for example, collects the VAT (13%) directly from guests in Costa Rica and passes it to the tax authorities. However, this does not eliminate the host's responsibility to report rental income for income tax purposes.
6. Tax Deductions:
For residents of Costa Rica, certain expenses related to the rental property (such as maintenance, utilities, management fees, insurance, and property taxes) can be deducted from rental income before taxes are calculated. However, non-residents do not have the option to deduct expenses—taxes are levied on the gross income.
7. Filing and Payment:
Rental income taxes are typically filed annually through the Costa Rican tax authority (Dirección General de Tributación or DGT).
VAT payments are usually made on a monthly basis
8. Penalties for Non-Compliance:
Failure to comply with these tax regulations can result in significant penalties, including fines and back taxes. Costa Rica has been increasing enforcement on rental income from platforms like Airbnb and VRBO in recent years, so it’s essential for property owners to stay compliant.
Key Considerations:
Ensure proper registration with the Costa Rican Tourism Institute and your local municipality.
Collect and remit VAT (13%) on short-term rentals.
Declare your rental income and pay the appropriate income tax (15% for non-residents).
Non-residents cannot deduct expenses against their rental income.
Final Notes:
Since tax laws can change, and Costa Rican authorities continue to increase enforcement, it’s highly recommended to consult with a local tax advisor or accountant to ensure you're in full compliance with both national and municipal regulations.
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