Costa Rica - Crypto penetration

intro

Costa Rica, like Panama and Belize, is among the most popular countries in Latin America to open offshore companies. Operating in Costa Rica, these companies can also conduct transactions with cryptocurrencies in the de facto regime. However, crypto regulation has yet to be implemented in the country.

Security level

Сosta Rica has a very high danger security level according to our rating. It has 46.3 points (from 100) for safety level in Numbeo crime rating (1). Homicide level (2) is 11,4 per 100,000 inhabitants a year. Story of firearm-related death (3) 6.46 per 100,000 inhabitants a year.

Crypto Payments

According to Ticotimes (4), many escrow companies and banks in Costa Rica don’t recognize cryptocurrency income as legal and don't accept crypto deposits.

However, judging by scraps of information about business practices in this country, payment in cryptocurrencies is possible. Still, it needs to be fully regulated by law and is in a gray zone. Such transactions can be treated as barter payments.

Crypto Salaries

Currently, cryptocurrencies are not mentioned in Costa Rica's legislation. Based on Ticotimes (5), article 166 of the labor code allows the “use of commonly accepted assets” as a payment method. So, part of the salary can be paid in crypto.

Legal

Currently, Costa Rica lacks crypto regulation practices. However, the country will pass the crypto bill soon. The primary financial regulators in the country, which also can regulate crypto, are the General Directorate of Direct Taxation of Costa Rica (DGTD), Central Bank of Costa Rica (BCCR), and Central of Innovation Financiero (CONASSIF)(5¹).

Moreover, according to local media, Costa Rica is one of the Latin American jurisdictions to provide crypto business as a country with tax optimization practices. However, there needs to be more information about the market volume of crypto transactions in the country. For now, this business still stays unregulated and mostly untraceable.

Deputy Johana Obando, from the Liberal Party of Costa Rica, presented a bill to make Bitcoin a legal means of payment in the country in October 2022. Obando indicated that the circulation and exchange of crypto assets are permitted activities in the country. However, there needs to be a legal framework for their use and validation that we want to correct with this project.

You may check the full text of the law presented by Obando in Spanish here (6).

Here are some essential topics from future regulation based on local media DPLNEWS (7)

"In the project we propose the distinction between the use and transfer of crypto assets in a personal capacity and the development of these as an economic activity, as well as their respective tax treatment," Obando explained.

The financing of up to 50% of the effective expenses incurred by the General Superintendence of Financial Entities in the supervisory work.

First, in article 14 of the project, it is indicated: Crypto Asset Service Providers will pay an annual fee according to their size, structure, the number and amount of their transactions and number of employees, to contribute to:

1)The methodology for calculating the canon and its collection will be defined using regulations issued by CONASSIF.

2)According to the interview with the Central Bank president (8), the Central Bank of Costa Rica also has its regulation proposals.

“The Central Bank's approach is, therefore, one of vigilant tolerance: the existence and circulation of crypto assets is tolerated, and space is given to technological innovation to allow the emergence of the Fintech industry, while continuous monitoring is given to its evolution”, reports the article.

Taxation

In September 2023, Costa Rica's tax office renewed the crypto taxation framework. Based on

STEP, the Costa Rican tax authority, has issued a private letter ruling giving a general opinion on crypto-assets' taxation.

According to the tax authority, cryptocurrencies should be viewed as virtual or intangible assets, as they are not authorised as legal tender by the Central Bank of Costa Rica. They are, therefore, subject to taxes depending on the type of transaction performed. Virtual assets linked to business activity are subject to corporate income tax. Return on investment on personal virtual asset holdings is subject to the country’s tax on capital income and capital gains.

The ruling, MH-DGT-OF-0460-2023, comes in response to the General Directorate of Taxation’s request for further guidance on the tax treatment of cryptocurrencies and crypto-assets, although it is issued for informational purposes only.

In some cases, crypto sales will be tax-free. CGT: 15-30%, 30% tax rate applies for regular business activities. PIT - 25%. CIT - 30%.

Based on Remax overview (9) “capital gains on cryptocurrency investments are not taxable, but when crypto is used to conduct business in Costa Rica, the profits may be taxed.”

Tax name	Index
PIT tax Min	0
PIT tax Max	25
Corporate tax (CIT)	30
Min Individual CGT (for crypto)	0
Max Individual CGT (for crypto)	30
Wealth tax Min	0
Wealth tax Max	0