Costa Rica: Bill proposing to change taxation of foreign-source passive income submitted to Parliament
Bill would expand scope of taxation of foreign-source passive income to all Costa Rican residents.
September 30, 2026
The Executive Branch on September 22, 2026, submitted a bill (Legislative File No. 25.796) to Parliament (the Legislative Assembly) that would change the taxation of foreign-source passive income as follows:
- Expanded scope: Taxation of foreign-source passive income would be extended to Costa Rican residents in general (both individuals and legal entities), rather than being limited to non-qualified entities belonging to multinational groups.
- Definition of foreign-source passive income: Foreign-source passive income would be defined as income from real estate capital, movable capital income, and capital gains generated by assets, capital, or rights located or used outside Costa Rica.
- Treatment of capital losses: Capital losses originating from assets, capital, or rights located or used outside Costa Rica would not be recognized for tax purposes in Costa Rica.
- Determination of taxable income: A specific rule for calculating taxable income derived from foreign-source passive income would allow for the deduction of a similar tax effectively paid or withheld abroad.
- Mechanism to avoid double taxation: A deduction of similar taxes paid in other jurisdictions would mitigate double taxation, rather than a tax credit mechanism.
- Applicability of income tax on profits: Foreign-source passive income would be subject to the income tax on profits under the circumstances regulated in Article 1-bis of the Income Tax Law (LISR).
- Restriction on voluntary inclusion: Foreign-source passive income would not be allowed to be voluntarily included within the scope of the income tax on profits.
Read a September 2026 report (Spanish) prepared by the KPMG member firm in Costa Rica