If you're a foreign resident in Costa Rica leveraging the booming tourism market by renting out your property on platforms like Airbnb, the time for full tax compliance is now. Hacienda, Costa Rica's tax authority, is intensifying efforts to ensure digital rental income is fully declared. Understanding and meeting these obligations is no longer optional; it's essential for the continued legality, success, and protection of your short-term rental business.
Let's delve into what you need to know, drawing on the latest insights and expert advice, to ensure your Costa Rica short-term rental business operates squarely within the bounds of the law.
Step One: Mandatory Registration of Your Costa Rica Rental Property!
This is the absolute cornerstone of Costa Rica tax compliance. According to tax expert Heidi, an experienced accountant and "super host" in the short-term rental space, the first, and most critical step is to officially register your rental activity with Hacienda. Failing to do so carries a substantial fine of ₡1.3 million colones (approximately $2,500 USD).
The law specifically classifies your rental activity as "Alquileres" (rentals), which has significant implications for how you are taxed. The good news is that the registration process itself is straightforward, primarily requiring basic information about you and your property. Do not delay this – it is the foundational requirement for operating any rental-related business activity in Costa Rica.
Step Two: ICT Registration – Another Mandatory Requirement!
Beyond Hacienda, the Costa Rican Institute of Tourism (ICT) mandates registration for all tourism-related businesses, including short-term rentals. This is not just a formality; it's a key part of your legal compliance in Costa Rica. Registering with the ICT offers several benefits, including official authorization to operate, access to tourism promotion initiatives, and the potential to obtain a Certificate for Sustainable Tourism (CST). Often, this registration is also a prerequisite for obtaining municipal operating permits. Ensure you complete the electronic registration form available on the ICT’s official website.
Step Three: Worker Risk Insurance (INS Póliza de Riesgos del Trabajador) – A Crucial Safety Net
Even if you don't directly employ staff, all businesses, including vacation rentals, are typically required to secure worker risk insurance through the National Insurance Institute (INS). This policy covers workplace injuries and is regularly a prerequisite for obtaining municipal operating permits. Don't overlook this vital layer of protection and compliance.
Step Four: Third-Party Liability Insurance – Protecting Against the Unexpected
While not always explicitly mandated by law for all short-term rentals, obtaining third-party liability insurance is a critical step for comprehensive protection. This type of insurance protects you, the property owner, from financial losses in case a guest or a third party (e.g., a visitor, a maintenance worker) is injured on your property or their belongings are damaged due to your negligence. Accidents can happen, and a robust liability policy can cover legal fees, medical expenses, and potential settlements, preventing a single incident from jeopardizing your entire rental business. It's a wise investment in peace of mind and long-term financial security. Consult local insurance providers to understand the scope of coverage available and recommended limits for rental properties in Costa Rica.
Step Five: Hacienda Knows: Digital Platforms Are Sharing Your Data!
This represents a monumental shift for Costa Rica property owners. Both Booking.com (which initiated this in February 2025) and Airbnb (more recently) have been urging hosts to update their tax information. This isn't mere administrative paperwork – these platforms are now directly sharing detailed income data with Hacienda, making Costa Rica tax enforcement considerably more robust.
"The tax ministry receives income data quarterly, and will be able to see what individuals earned," warns Heidi. This means they will soon possess a clear and comprehensive picture of your rental income. The consequences of non-compliance in Costa Rica are severe: expect retrospective audits and potential back taxes for up to ten years. While Hacienda might initially focus on data from 2023-2025, they reserve the right to investigate records from as far back as 2022. It is unequivocally better to achieve compliance now than to face unpleasant surprises later, especially for those who have made significant real estate investments in Costa Rica.
Step Six: Municipal Operating Permits (Patentes Municipales)
Some municipalities are increasingly requiring local operating permits for short-term rentals. Regulations vary significantly across the country, so it is essential to check directly with your local municipality for specific requirements in your area. Non-compliance can result in fines or operational restrictions.
Step Seven: IVA Explained – Your Value Added Tax (VAT) Duties for Costa Rica Rentals
There's good news for long-term rentals: if you rent your property for one month or more, the income derived from that specific booking is generally exempt from IVA (Value Added Tax).
However, for short-term rentals in Costa Rica (stays less than 30 days), you are typically subject to the Value Added Tax (IVA) at a rate of 13%.
Here's how it generally works:
You are required to collect IVA from your guests.
You can credit any IVA you paid on related business expenses (such as cleaning supplies, property maintenance, utilities, and property management fees).
The difference between the IVA collected, and the IVA paid on expenses is your "Fiscal Debt," which you must remit to Hacienda monthly by the 15th of the following month.
Crucial tip for your listings: If you do not explicitly separate the IVA from the base price on platforms like Airbnb, the entire listed price will be assumed to INCLUDE the IVA. This also means the platform will calculate their commission on that IVA-inclusive total, effectively taxing you on the tax. Configure your listing settings carefully to ensure proper Costa Rica tax calculation and transparency for your guests.
Step Eight: Income Tax – "Renta de Capital" for Rental Income
Income generated from short-term rentals in Costa Rica typically falls under 'Renta de Capital' (Capital Income). This necessitates filing a specific monthly declaration using Form D-125. The tax rate for Renta de Capital is a flat 15%. However, the law allows for an automatic deduction of 15% for expenses, without requiring receipts. This means the 15% tax is applied to 85% of your gross rental income. Effectively, this results in a 12.75% tax on your total gross rental income ().
Could you be taxed differently? If you have employees properly registered with the Costa Rican Social Security System (CCSS/Caja), you might be able to opt for "Renta de Utilidades" (Profits Tax), which has a different tax structure allowing for more extensive expense deductions. Additionally, newly established small and medium enterprises (Pymes) can sometimes access tax discounts. It is highly advisable to consult a Costa Rica tax professional about these options to determine the most advantageous structure for your specific situation.
For expats in Costa Rica: If your home country taxes worldwide income, you must consult your tax advisor there to understand potential double taxation implications and any applicable tax treaties that might offer relief.
Step Nine: Electronic Invoices – Your Digital Receipts for Rentals
Every rental income received requires an electronic invoice (factura electrónica). Ideally, these invoices should include the guest's full name, passport number, and country of origin. What if you don't have all the guest information readily available through the booking platform? Issuing a general electronic ticket (tiquete electrónico) or including the reservation number is a less-than-ideal but compliant alternative. The key is to issue a valid electronic document for every transaction.
Heidi's Tip: If your listed price includes IVA, simply divide that total by 1.13 to determine your base price, then calculate 13% of that base price for the IVA portion. Also, remember that cleaning fees are considered an integral part of the overall lodging service – do not invoice them separately under a different activity code! This is crucial for accurate Costa Rica accounting.
The Airbnb Payout Challenge (Especially for Property Managers)
A key concern for Costa Rican property managers is that Airbnb's system doesn't easily split income or issue invoices for multiple owners when a single account receives all payments. Heidi highlighted this as a major worry for many. While a similar functionality exists on Airbnb in other countries (like the US), it is notably absent in Costa Rica.
As of the recent meeting with Airbnb on June 11th, 2025, the issue of splitting income and invoicing for multiple owners remains a key challenge. Hosts should continue to monitor updates from host associations (like ASOHOST) and tax professionals for evolving solutions and guidance on this complex issue.
Who Pays What? Ownership & Management Structures
The tax obligations ultimately fall on whoever is registered with Hacienda as the recipient of the income.
If you own and list your property directly: You are directly responsible for all tax compliance.
If a property manager in Costa Rica lists your property and receives payments on your behalf: They are generally responsible for collecting and remitting the taxes.
It is absolutely crucial to formalize these relationships with clear legal contracts, such as a lease agreement (arriendo) or a comprehensive property management agreement. These documents clarify responsibilities, including who is accountable for the Costa Rica tax paperwork.
Using a Corporation (Sociedad): If your property is held by a Costa Rican corporation (Sociedad Anónima or Sociedad de Responsabilidad Limitada), the corporation needs its own tax registration (NITE) and must file its own tax declarations. Any money paid out from the corporation to you (e.g., as a dividend) will be subject to a 15% dividend tax. Legal contracts like "comodato" (loan for use) or "usufructo" (usufruct agreement) can also define who is operating the Costa Rica rental business and thus who bears the tax responsibility.
Beyond Taxes: Additional Key Considerations for Costa Rica Property Owners
Beyond the core tax obligations, several other legal and operational aspects are crucial for compliant and successful short-term rental operations in Costa Rica:
"Hotel" Terminology: Unless your property genuinely meets the specific criteria to be classified as a hotel (e.g., 10+ rooms, specific services), avoid using terms like "hotel" in your advertising and listings. This can lead to different regulatory and tax obligations.
Income Origin: Regardless of whether you receive payments in foreign currency or even cryptocurrency, if the rental property is located in Costa Rica, the income generated is considered Costa Rican-source income and is fully taxable here. This is a crucial point for understanding your Costa Rica tax residency obligations.
Join the Community: Consider joining ASOHOS (the Association of Short-Term Rental Hosts). They offer invaluable support, advocacy, and up-to-date information for Costa Rica expats and hosts navigating the evolving regulatory landscape.
Your Action Plan: Don't Delay on Costa Rica Tax Compliance!
The message is undeniably clear: proactive compliance is paramount for successfully operating a Costa Rica business in the short-term rental market.
Register NOW: If you haven't already, get registered with Hacienda. This is your immediate and most critical step toward Costa Rica tax compliance.
Determine Your Tax Regime: Consult a tax professional to understand whether 'Renta de Capital' or 'Renta de Utilidades' (or other categories like Pyme) is the most appropriate tax regime for your specific rental activity.
Update Listings: Configure your Airbnb/Booking.com listings to clearly separate the base price and IVA, or adjust your pricing to account for IVA if it's inclusive.
Maintain Detailed Records: Keep meticulous records of all income and expenses, not just electronic invoices, to support declarations and prepare for potential audits.
Issue Electronic Invoices: Implement an electronic invoicing system and diligently issue invoices for all rental income, ensuring they meet Hacienda's requirements.
Formalize Agreements: If you are using a property manager in Costa Rica or operating through a corporate structure, ensure your contracts are clear, legally sound, and define tax responsibilities.
Seek Professional Advice: Tax laws are complex and constantly evolving. Seriously, consult a qualified Costa Rican accountant or tax professional. They can provide personalized guidance for your specific situation, helping you optimize your tax strategy and avoid costly penalties. This is an essential component of sound Costa Rica business consulting.
By taking these proactive and diligent steps, you can continue to enjoy the benefits of your rental property in Costa Rica while ensuring you are fully compliant with local laws and avoiding unnecessary financial risks.
¡Pura Vida and Happy Hosting!
The information provided is for informational purposes and does not constitute legal or financial advice. Consult a qualified Costa Rican professional for your specific situation. ©2004-2025 Costa Rica Expertise. Free use permitted with attribution (CC BY 4.0). 1250706 ZZ!
