Reforming the corporate tax system in Costa Rica

This chapter discusses the corporate income tax (CIT) in Costa Rica, focusing on CIT rates and the main CIT base provisions including tax depreciation allowances. Corporate effective tax rate (ETR) calculations show the combined impact of CIT provisions on the effective tax burden on investment in Costa Rica. The chapter discusses the debt-equity bias, the taxation of foreign-source passive income and the country's narrow tax treaty network. The chapter analyses whether the tax system creates a tax-induced incentive for foreign direct investment (FDI) in Costa Rica and analyses the impact on the ETRs of the CIT incentives for companies located in the Free Trade Zones (FTZ) the analysis distinguishes between parent companies which are tax resident in a country with a worldwide or a territorial tax system.