Costa Rica Economy Overview

Currency

Costa Rican Colón (CRC)

Working hours

48 hours/week

Public/bank holidays

13 public holidays

Capital

San José

Languages

Spanish

Population

5.2 million

Minimum hourly salary

11,738.83 CRC

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Costa Rica, like many other countries, treats self-employed individuals or contractors and full-time employees differently. Misclassification of contractors in Costa Rica may lead to fines and penalties for the offending company.

Fun fact

Costa Rica boasts no less than 12 unique ecological zones and has one of the greatest biodiversity’s in the world. The contrast of habitats has attracted more than 500,000 different species, making it the dream destination for spottting wildlife.

Overview of Costa Rica's Economy

Costa Rica uses the Costa Rican Colon (CRC), named after Christopher Columbus. This currency is valued much lower than the US dollar at about 525 CRC to one dollar.

Costa Rica’s economy has been steadily growing for decades and barely slowed down during the global pandemic. Since 2022, Costa Rica’s economy started to rebound and is now back to healthy levels of growth again. This growth and progressive social policies have allowed Costa Rica to produce one of the lowest poverty rates in Latin America.

The country’s GDP is supported by agriculture (4.14% in 2022) and industry (20.65%) but is mainly driven by services (67.28%). These services include digital marketing, IT, health care, customer service, engineering, and financial services, among others. Costa Rica’s main exports are:

  • Cameras, imaging equipment, and optics
  • Food products like soups and seasonings
  • Fruit and nuts
  • Chips and electronics
  • Plastics
  • Prepared fruit and vegetables
  • Coffee, tea, and spices

Foreign direct investment (FDI) also makes up a significant part of GDP at over 4.5% in 2023. Last year, the country reached a record FDI inflow of $3.921 billion, with the largest portion coming from the US companies (71%) and other significant investments from Belgium (11%), Switzerland (4%), and Panama (4%). 

FDI Distribution by Sector
Manufacturing: 55% Tourism: 7%
Services: 25% Real estate: 7%
Agriculture: 2% Agribusiness: 1%
Commerce: 1% Finances: 1%

Workers in Costa Rica are relatively highly skilled and well-educated, with a 98.04% literacy rate and steadily increasing rates of achieving higher education and training compared with its neighbors. The monthly minimum wage is as follows:

Minimum Wage (Monthly)

CategoryAmount
Generic Unskilled workers373,092.42 CRC (≈ 740USD)
Generic Skilled workers419,755.93 CRC (≈ 815 USD)
Average salary411,151 CRC (≈ 790 USD)
Employer social security contributions8.33% of salaries

The minimum wage in Costa Rica is based on skills and educational attainment. All told, Costa Rican employees can be highly affordable for most foreign-based firms.

Taxes

Employer Tax: 26.67%

Healthcare & Maternity (SEM)

9.25%

Basic Pension Scheme (IBM)

5.42%

Banco Popular Employer Fee

0.25%

Family Assignations

5.00%

Social Aid (IMAS)

0.50%

Training Fund (INA)

1.50%

Contribution from Banco Popular

0.25%

Labor Capitalization Fund

1.50%

Complementary Pension Fund

2.00%

National Insurance Institute (INS)

1.00%

Solidarity Association (optional, not included in total cost)

5.00%

Employer Tax: 10.67%

Healthcare & Maternity (SEM)

5.50%

Disability, Old Age & Death Benefits (IVM)

4.17%

Contribution from Banco Popular

1.00%

Income Tax

Costa Rica applies a progressive income tax ranging from 0% to 25%, with rates based on annual income brackets and additional taxes on certain benefits.

Gross Income

Up to 918,000.00

918,000.00 – 1,347,000.00

1,347,000.00– 2,364,000.00

2,364,000.00 – 4,727,000.00

More than 4,727,000.00

Tax Rate

Exempt

10.00%

15.00%

20.00%

25.00%

Business Regulation in Costa Rica

Starting to do business in another country can be difficult, but some countries make it easier than others. Costa Rica is very open to foreign firms and knowing about the regulations there can be useful for making your business decisions.

Registration and Compliance

To start doing business in Costa Rica, you’ll need to choose a business structure like a corporation (Sociedad Anónima), a limited liability company (Sociedad de Responsabilidad Limitada), or a branch of a foreign company.

You’ll need to choose a name, prepare the necessary documents, and register with the National Registry. You may also need to obtain permits for compliance with health, safety, and environmental regulations. You’ll also need to register your business with the Costa Rican Tax Authority (Dirección General de Tributación).

Taxes and Investments

Costa Rica levies personal income tax at a progressive rate between 10% and 25%, depending on income. Withholding taxes are levied at 15% on interest, dividends, and director’s fees, 10% on salaries to non-residents, and 25% on professional fees. 

The corporate income tax (CIT) rate is between 5% and 30%, depending on annual net income. Companies with a net income of more than 122,145,000 CRC (about 234,035 USD) pay 30% CIT. There are no provincial income taxes, but municipal taxes are usually levied on net income. 

VAT is 13% on most goods and services, and a selective consumption tax on non-essential goods can reach 100%. 

However, there is a Free Zone Regime (FZR) in place for international companies. They receive exemptions on VAT, income tax, and remittances abroad that can amount to 43% savings. However, they must follow strict guidelines and controls set up by the Costa Rican government.

Employment Laws

Employees in Costa Rica work eight hours a day and up to 48 hours per week. They should receive at least one 24-hour period of rest per week and an annual paid leave of 10 working days. After five years, they get 15 days and 20 days of leave after 10 years of service.

Costa Ricans get 12 paid public holidays per year. Mothers are granted four months of fully paid maternity leave. There is no mandated paternity leave.

Employees are allowed to take sick leave if necessary. Employers and social security each pay 50% of the worker’s full pay for three days, and social security pays 60% after that with no employer obligation.

Intellectual Property

Costa Rica takes a very serious stance on intellectual property rights and these rights are enshrined in the country’s constitution. Non-disclosure agreements are enforced and disclosing confidential information can be a criminal offence. Trademarks can be registered for ten years and then renewed. Copyrights last for the author’s life plus 70 years and patents last for 10 years from filing.

Benefits of Doing Business in Costa Rica

Setting up a business in Costa Rica can produce some clear advantages for foreign companies and investors. These include:

  • Free trade agreements and trading links with the US
  • Political and economic stability
  • Skilled and educated workers
  • Government support and initiatives for foreign investment, including an attractive free zone regime

Downsides of Doing Business in Costa Rica

There are also challenges to doing business in Costa Rica, including:

  • Language barrier
  • Difficulty enforcing contracts due to slow courts
  • Complex and slow bureaucracy
  • Difficult to obtain credit

Exploring Business Opportunities in Costa Rica

There are multiple ways to start doing business in the Costa Rican market, including:

Costa Rica Employer of Record (EOR)

The Costa Rica EOR becomes the official legal employer of your Costa Rica team. This method is fast and efficient, making it perfect for companies that need to quickly deploy staff on the ground. 

An EOR handles payroll, benefits, taxes, and compliance with local labor laws, allowing businesses to focus on their core activities. They may also provide additional services, such as Costa Rica talent acquisition and visa support. 

LEARN MORE

Recruitment Agencies

Recruitment agencies in Costa Rica help businesses expand by connecting them with skilled local talent across various industries.

Remote People provides recruitment solutions that simplify hiring and ensure compliance with Costa Rican labor laws.

For businesses looking to grow in Costa Rica, Remote People offers the expertise and resources needed to build a local workforce quickly and effectively, making it a practical solution for market expansion.

LEARN MORE

Costa Rica Professional Employer Organization (PEO)

If you don’t yet want to set up a business in Costa Rica but simply want to hire local workers to work for you remotely or to start testing the waters, you can hire them without owning an entity.

When you work with a professional employment organization (PEO) or employer of record (EOR), these service providers can hire employees on your behalf. They legally employ your workers and manage their related needs over the long term, allowing you to focus on how their work will create value for your enterprise.

Partnering with a professional employer organization (PEO) allows companies to employ local staff in Costa Rica without the need to establish a legal entity. This approach is quicker and less expensive, making it ideal for businesses testing the Costa Rica market or those with limited operations. PEOs handle administrative tasks and ensure that companies comply with Costa Rican regulations, reducing the complexity and risk associated with hiring local employees. 

LEARN MORE

Subsidiary Incorporation

If you want to set up a new entity in Costa Rica, most companies choose to structure themselves as corporations or limited liability companies. Once registered in the country, these entities become independent and can take on their own debts and assets and do business on their own. They’re still owned by their parent company wholly or in part.

Branch Registration

It’s also possible to simply open a branch of your company in Costa Rica to represent your company registered elsewhere. In this case, the branch is not a separate entity and the parent company has full liability for the branch’s debts and liabilities.

Business Opportunities in Costa Rica

Costa Rica offers one of the most stable economies and skilled workforces in Latin America. Importantly, it also offers a Free Zone Regime to international companies. Combined with the low cost of labor, this can make Costa Rica a very attractive place to do business.

Business Opportunity Reason
Ecotourism and Sustainable Hospitality Costa Rica’s rich biodiversity, stunning natural landscapes, and global reputation for ecotourism create opportunities for investments in eco-lodges, adventure tourism, and sustainable hospitality projects.
Advanced Manufacturing Costa Rica’s skilled workforce, strategic location, and attractive free trade zone incentives make it an ideal hub for high-tech manufacturing, particularly in the areas of medical devices, electronics, and precision components.
Services and Business Process Outsourcing (BPO) With its highly educated, bilingual population and competitive labor costs, Costa Rica presents opportunities for investments in services such as software development, customer support, and back-office operations.
Agribusiness and Food Processing Costa Rica’s fertile land, favorable climate, and strong export potential offer opportunities for investments in organic farming, value-added food processing, and niche agricultural products like coffee, cocoa, and exotic fruits.
Renewable Energy and Cleantech As Costa Rica aims to become carbon-neutral, there are growing opportunities for investments in renewable energy projects, energy efficiency solutions, and clean technologies, supported by government incentives and a strong commitment to sustainability.

These opportunities are in line with Costa Rica’s economic development strategy, which aims to attract foreign investment, drive innovation, and support sustainable growth. The government provides various incentives for businesses, including tax exemptions, simplified bureaucratic procedures, and dedicated assistance through the Costa Rican Investment Promotion Agency (CINDE).

Moreover, Costa Rica’s political stability, high quality of life, and commitment to education and healthcare create a strong foundation for businesses seeking to establish a presence in the region.