New Law to Attract Baby Boomers and Investors to Costa Rica
The Costa Rican legislature is currently reviewing a proposed law to incentivize Baby Boomers and Investors to move to Costa Rica.
Costa Rica was a pioneer back in 1971 when it became one of the first countries in Latin America to create specific legislation to boost its tourism industry by offering incentives to foreign retirees that would move to Costa Rica. It worked, and Costa Rica consistently grew its tourism base and ex-pats. However, by 1992 the government had eliminated the incentives provided, and the program was eliminated.
It took a severe financial deficit and COVID 19 for the Costa Rican government to finally realize that it was sitting on a gold mine failing to develop properly. Costa Rica consistently ranks as one of the top tourism destinations globally, but it also ranks as one of the world’s top ten top retirement destinations. Costa Rica became an expensive alternative to what other countries were also offering, and it took its position for granted.
According to the International Livings list of the best places to retire in the world in 2020, Costa Rica is number three.
- Portugal
- Panama.
- Costa Rica
- Mexico.
- Colombia.
- Ecuador
- Malaysia
- Spain
- France
- Vietnam
The United States alone has 70 million Baby Boomers retiring in the next ten years. In Canada, 250,000 Baby Boomers retire every year.
According to the US Embassy in Costa Rica, “It is estimated that approximately 100,000 private American citizens, including many retirees, reside in the country, and more than a million American citizens visit Costa Rica annually.” Source: US Embassy Costa Rica.
That is a lot of potential spending inside the country for goods and services used by ex-pats living in Costa Rica. The tourism industry has been devastated due to the impact of COVID 19 on international travel. It is clear that to recover; Costa Rica will have to think outside of the box.
The Costa Rica proposal, which is pending approval in the legislature, provides for the following:
- It is declaring the attraction of investors and retirees as a public interest. This declaration of public interest is symbolic but works to fast-track programs among institutions implementing the law.
- Import Duty Tax Exemptions. The law reinstates the two tax exemptions previously eliminated. You will be able to bring your household items into the country tax-free. You will also have the right to import one vehicle into the country duty-free.
- Income Tax Exclusion. The income that you reported as your basis for residency would be excluded from Costa Rican Income Tax. Currently, Costa Rica applies a territorial taxation system, so foreign-sourced income for foreigners living in Costa Rica is now tax-free. If Costa Rica changes to a global tax regime, then this exclusion would become very relevant to attract foreign retirees.
- Property Transfer Tax Discount. If you purchase real estate in your name, you will receive a 20% discount from the Costa Rican real estate transfer tax. Currently, the government applies a 1.5% transfer tax on the value of the transaction.
- For the Resident Investor category, it drops the investment requirement from US$200,000 to US$150,000.
- Expedited Processing. The law indicates that they will create a specialized service window within the Department of Immigration to handle the Investor, Rentista, and Pensionado residency categories. A similar concept was implemented successfully years ago for companies setting up operations in Costa Rican and required residency status for their executives and employees. This will be based on the same concept.
The law’s initiative is a positive one and a significant step forward in maintaining Costa Rica as a top retirement destination in the future. This program’s only catch is that it is valid for five (5) years from the date of approval. I imagine the government will measure the program’s cost/benefit at that time and then decide if it will continue with it.
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