Costa Rica’s Proposed 15% Tax on Foreign Passive Income, Explained

October 16, 2026

Costa Rica’s executive branch has asked the Legislative Assembly to tax the foreign passive income of Costa Rican tax residents at a general 15% rate. The bill, file 25.796, was filed on 22 September, and the coverage we reviewed through 8 October shows no vote yet. We found no newer committee action in the last few days, so we treat the proposal as live but unsettled.

Key takeaways

The perimeter is residence-based, so Costa Rican-resident individuals, companies, funds and trusts holding assets abroad are in scope, while non-resident capital invested into Costa Rica is not the target.
Foreign tax is deducted from the base rather than credited, so the combined burden on a foreign dividend can be higher than the headline 15% suggests.
The one independent revenue estimate we found is small, and the text can still change in committee, so we would model scenarios rather than assume enactment.

What the bill says

Bill 25.796 was filed on 22 September 2026. It covers dividends, interest, royalties, rents and capital gains from assets located or used abroad, earned by Costa Rican tax residents.
The general rate is 15%. Banks, insurers and fund managers supervised by the superintendencies would instead add the income to their profits-tax base, at rates reported as up to 30%.
Taxes paid or withheld abroad are subtracted from the gross amount before the rate is applied, rather than offset as a credit. Capital losses generated abroad would not count.
Hacienda says territoriality remains the general rule and that this is not a worldwide-income regime. The bill would replace narrower 2023 rules that reach only entities without economic substance inside multinational groups.
Pension funds are reported as exempt, although advisers quoted by La Nación have asked for clearer drafting on that point.
A companion bill, 25.797, would trim many customs, VAT and other exemptions. The coverage we read says free zones are among those retained.
Economist José Luis Arce, in a CR Hoy report of 2 October, put a medium-scenario yield at about ₡64,800 million a year, or 0.13% of 2025 GDP. The report says no official estimate accompanies the bill.
Rate backdrop: La Nación reports the Federal Reserve raised its range to 3.75%-4% in September, while Costa Rica’s central bank held its policy rate at 3%.

Chart: Costa Rican private-sector foreign holdings, US$ millions, 2022 and 2025

Measure	Period	US$ millions
“Other sectors” portfolio holdings abroad	2022	4,833
“Other sectors” portfolio holdings abroad	2025	14,873
Private-sector external assets, excl. central bank reserves	December 2025	About 37,000

Source: CR Hoy report of 2 October 2026 citing economist José Luis Arce; single-source figures, not independently confirmed. The third row is a broader category than the first two.

Why It Matters for Costa Rica

Most of our readers invest into Costa Rica from outside it, and for them the bill does not change the tax on a local asset. Its reach is the tax resident: a family office, fund, trust or individual based in Costa Rica that earns dividends, interest, rent or gains elsewhere. Anyone planning a move, or setting up a Costa Rican holding vehicle for a regional portfolio, should treat residence as a pricing input.

The mechanics matter as much as the rate. An adviser quoted by El Mundo illustrated the stacking with a US dividend: on 100 of income, 30 withheld abroad leaves 70, and 15% of that is 10.50, for a combined burden of 40.5%. Because the foreign tax is a deduction and not a credit, high-withholding jurisdictions bite harder.

Central bank president Róger Madrigal told La Nación the tax could discourage investing abroad and invite tax arbitrage, but he judged the local financial market deep enough to absorb any capital that stays home. If that proves right, the second-order effect is more domestic supply of capital seeking yield, which is relevant to anyone raising money locally. That part is our read, not a forecast.

Where the Story Is Weaker

The evidence base is thin. The only revenue figure we found comes from one economist’s scenario, and the bill reportedly carries no official estimate. The chart above also mixes a narrow portfolio series with a broader asset total, so it shows scale, not the taxable base.

Political risk cuts both ways. El Mundo notes that the president said in February she did not intend to raise taxes on people earning abroad, and a separate opposition bill would restore an economic-link test instead. No effective date is stated in the coverage we read, and the treatment of pension funds and the deduction method could both change before any vote. Finally, a 0.13% of GDP yield suggests the fiscal case is modest, which may weaken or sharpen the incentive to compromise.

Investor Read-Through

Map every holder in your structure by tax residence before assuming the bill is irrelevant; the test is where the owner is resident, not where the asset sits.
Model net yield on foreign income under the deduction method and not a credit, using the actual withholding rate in each source country.
Run three cases: bill dies, bill passes as filed, bill passes amended. Our read, not a forecast: we would not price in enactment until a committee has reported.
Watch the committee text for pension-fund language, the credit-versus-deduction choice and any effective date, because each moves after-tax returns.

Run Your Own Numbers

For each foreign income stream a Costa Rican-resident vehicle receives, fill in the table below, then compare the result with your current after-tax yield. Repeat for each source country, since withholding rates differ.

Input	Your assumption	Effect on net yield
Gross foreign passive income (per year)
Tax withheld or paid abroad
Base after deducting foreign tax
Costa Rican tax at 15% of that base

Illustration only, not a forecast. Hypothetical: a resident vehicle earns 10,000 in foreign rent and pays 1,500 abroad. The base is 10,000 – 1,500 = 8,500; 15% of 8,500 = 1,275. Total tax is 1,500 + 1,275 = 2,775, or 27.75% of gross. Had the foreign tax been a credit against a 15% charge (15% of 10,000 = 1,500), it would have fully offset the Costa Rican tax in this example.

Questions to take to a sponsor, advisor or counterparty

Which entities in the structure would be Costa Rican tax residents, and is any foreign-source passive income earned there today?
Do our return projections assume a foreign tax credit, and what changes if only a deduction is available?
Who monitors the bill’s committee progress, and what is the trigger for re-running the model?

Data as of 16 October 2026. Figures marked preliminary will be revised. This is general market commentary, not investment advice.