By the A.M. Costa Rica staff
There is no secret that some mid and-upper
range landlords are having a tough time
filling their apartments and condos.
The repeated complaint is that Costa Rica is
just attracting expats who only want to pay
under $400 for an apartment or house rental.
Also true is the growth of telecommuting. In
fact, the Costa Rican government is promoting
telecommuting for its employees to cut down on
traffic and increase employee morale.
However, the government has not promoted Costa
Rica as a telecommuting location for
Some landlords are doing that now, and several
travel and relocation agencies also have
promoted the concept to foreigners.
The big benefit is to duck the North American
or European winter and conduct business from a
Central Valley apartment or a central Pacific
And for U.S. citizens and green card holders,
there is an additional economic benefit
already well-known to some perpetual tourists
here. Uncle Sam exempts citizens and other
taxpayers on the first $101,000 of annual
foreign earned income. For many that income
tax break is enough to pay the rent and make a
couple of trips north a year.
The amount exempted keeps going up. And the
U.S. Internal Revenue Service says that
taxpayers can exclude or deduct certain
foreign housing amounts.
The U.S. Congress is being urged by expat
advocacy organizations to eliminate the
citizenship-based tax in favor of a
territorial one, like Canada has. But expats
have low priority with Washington politicians.
Consequently, the tax break is likely to
continue for years.
The U.S. rules, like everything else in
Washington, are complex, and professional help
is needed in most cases. For example, for some
reason the exemption does not cover pay
for services conducted in international
waters. The I.R.S. summary is HERE!
Those U.S. expats working here are a mixed
bunch. They include those at sportsbooks who
probably would not pay U.S. income tax anyway,
to writers, bookies, Web site designers sales
people and day traders.
Some come here with a clientele.
Costa Rica file photo
day at the office
Fortunately, the local Internet
infrastructure can handle most video
conferencing and telecommuting needs, although a
few day traders have been known to panic when
their Internet connection failed as they were
trying to buy or sell stock.
sometimes favor the setup because they can
outsource and avoid Social Security payments
and similar charges at home, and the person
doing the job is the same one who had just
been a stateside employee.
Of course, expats working here are subject to
Costa Rican taxes, but plenty evade this by
accepting payment in the United States. In
addition, the Costa Rican tax brackets are
generous. Expats who have corporations face a
stiffer local tax, but many simply do not
enroll with the Dirección General de
Tributación or even with the Caja
Costarricense de Seguro Social.
The situation might change in the next few
years as Costa Rica and the United States
exchange more and more tax information.
Theoretically, tax inspectors here could flag
U.S. taxpayers who claim an exemption or
credit and are living here. Still, the Costa
Rican tax bite is not as big as that in the
U.S., and the inspectors are not as competent
Tourists are not supposed to work here, but
that rule seldom is enforced. The
informal rule is that tourists can work here
until a Costa Rican complains that the
foreigner is taking his or her job.