Costa Rica is in a difficult economic situation. The country’s economy contracted 4.5% in 2020 because of the effects of the restrictions in response to the coronavirus and reached the worst drop since 1982. For this reason, the government has focused on implementing measures and international agreements to reduce the impact of the decline of the economy in the Central American nation. Their solution? The Law of Attraction for Investors, Rentiers and Pensioners (Law 9996), which they enacted on July 14, 2021.
Its principal aim is to attract people who are confident in investing in properties, vehicles, and even creating companies or businesses that can generate new jobs, raise the consumption of goods and services and increase the movement in trade and thus help jumpstart the economy.
With this law, Costa Rica wants to rise to the same level as other countries in the region to compete as a destination for expats, jump-start the economy by encouraging foreign investment in the country.
What Are the Benefits of The Economic Law of Attraction?
This law provides incentives for foreign nationals intending to make Costa Rica more attractive as an economic destination. These exemptions will apply to all foreigners and their dependents.
Reduction of Minimum Capital Required for Investors
- Reduction of the minimum amount that a foreign investor must invest to get a 10-year residence in Costa Rica, reduced from the current $200,000 to $150,000.
- In addition, those who invest in venture capital funds or in sustainable tourism infrastructure projects become beneficiary investors.
The Law of Attraction: Tax Benefits
- Onetime 100% tax exemptions for the importation of household items.
- Applicants will also protect their dependents goods. When destruction or loss because of theft of household items occurs, the beneficiary may replace the assets tax-exempt. The regulator will develop the mechanisms for accreditation of the circumstances in which these qualified exceptions apply.
- 100% tax exemptions for the importation of up to two land, air and/or sea transportation vehicles for personal or family use, free of all import, tariff and value-added taxes. In case of a total loss of the vehicle, the owner may import a replacement vehicle tax-free.
- The declared income is exempt from income tax; Costa Rica does not consider immigrants under the Law of Attraction, tax residents. Money earned abroad (e.g. a U.S. pension) is not taxable. However, the income earned in Costa Rica resulting from investments made in the country will be subject to income tax.
- 20% tax exemption for transferring property for purchased real estate.
- Tax exemption for instruments or materials for professional or scientific practice, performed by the person with the migratory category of investor, retired resident or rentier resident.
Validity of the Economic Law of Attraction
Investors, rentiers or pensioners may opt for these benefits during the first 5 years of the Law of Attraction and keep the perks for 10 years.
Regular expat Costa Rican residents can also upgrade to an investor, rentier or pensioner status and apply for the benefits of the Law of Attraction.
In addition, Costa Rica also enacted a new law, called the Law to Attract Remote Workers and Providers of International Services. This legislation promotes the entry of digital nomads to Costa Rica; people who work remotely for companies that are located outside the country.
This is good news for those who are giving thought to Costa Rica as their potential expat destination. This new law could be a dream come true for some expats.
And you? Are you one of the potential investors? If you are interested in more information, why not get in touch with a TCI Alliance member? We are happy to help.
by: Roman Vergara