Consultation: MH-DGT-CONS-119-0010-2024, San José, January 19, 2024

II. Factual Background

The Costa Rican Chamber of Health (CCS), a non-profit organization, promotes medical tourism in Costa Rica. It works with foreign companies to attract international patients to the country.

II. Specific Queries

Are payments abroad subject to the tax on foreign remittances (IRE)?

If so, what is the tax rate?

III. Consultant’s Opinion

Regarding payments made abroad as a result of attracting potential patients, they are not subject to withholding tax, as these payments correspond to services provided by companies domiciled in the United States and subject to US laws.

The consultant argues that only income generated in Costa Rica is subject to income tax. Payments abroad for promotion are not subject to withholding tax.

IV. General Taxation Directorate’s Opinion

This General Taxation Directorate has indicated in several communications that what determines whether income is considered extraterritorial and not subject to IRE is that it arises from a service performed, complemented, and perfected outside Costa Rican territory, with effects or impacts maintained abroad. Otherwise, if the service is in any way completed, used, or has its effects in Costa Rica, it must be considered of Costa Rican source.

Payments abroad for promotion and marketing are subject to the tax on foreign remittances (IRE). According to the Income Tax Law, these payments are considered Costa Rican-source income and must be taxed. The applicable rate is 25%.

In summary, the CCS, by conducting its activities from Costa Rica and using foreign services with effects manifested in the country, is subject to IRE. This criterion is based on the information provided and may change if the situation differs in the future.