Law of Remote Worker Attraction and Tax Implications

July 27, 2021

On July 24, 2021, LaRepú web site commented on the non-payment of income tax promoted by the Law of Attraction, according to the following:

1. Approval of the Law to Attract Remote Workers and Providers.

The Law to Attract Remote Workers and Service Providers of International Nature was approved as a proposal for economic reactivation in Costa Rica, having people the privilege of working from different locations to their permanent place of residence.

2. Special Migratory Status

With this Law, a special migratory condition is created for the subject, or family nucleus, who being a foreigner can validate a monthly amount received equal to or greater than $3,000-$4000 US dollars during a temporary period of 12 months with the possibility of extending up to 24 months, and all under a special visa called Remote Worker or Service Provider.

3. Income Tax Exemption

In addition, as part of the benefits granted to the person who qualifies to obtain such condition, is the exemption from any type of income tax payment, specifically from the tax on profits. In the same way, these persons will be exempt from the payment of import duties on goods necessary to generate income directly related to their professional work.

4. Digital nomads and tax exemptions

This attraction is important to prevent the so-called digital nomads from being trapped in a bureaucratic hard process, although it seems to confuse an exemption with a non-subjection.

Commentator Daniel Pelacano points out that “the regulation refers to a tax exemption, referring that the Tax Administration could also request on these subjects a formal control spectrum, through the filing of tax returns and documentation to validate not only the exemption in the payment of profit tax but also the processing of exemptions on import tariffs”.

5. Better Proposal

The idea would be that people who have the special migratory status contained in the recently approved law will not be considered as tax residents. In this way, digital nomads will be considered as people non-subject to Income Tax.

6. Target

The legislation target is to promote long stay tourism among foreigners visiting the country, taking advantage of their high consumption capacity, also achieving the income of fresh foreign currency to the national economy. For such purpose the competent authorities are urged to review the scope of the tax benefits granted in the legislation, where the income tax could be unpaid, having to be more specific that those who choose and obtain the migratory status, should not have to evade any type of administrative tax obstacle during their stay in Costa Rican lands.

Source: La República 07/26/21