3 Residency Options—and Tax Advantages—in Costa Rica

I swung precariously about 100 feet above the forest floor. The motorized zip line chair I’d chosen for a canopy tour had run out of battery, and I was stuck. Cackling monkeys scrambling through the nearby treetops sounded as if they were laughing at me.

Eventually a young Tico (as Costa Ricans are known) motored over to me, attached a strap to my chair, and gently pulled me to safety. He could barely contain his amusement at the big gringo whose body weight had strained the motor beyond capacity. But he was friendly and kind.

Friendly locals and a gorgeous natural environment: that’s Costa Rica in a nutshell. I’ve visited several times for work. It’s one of the few countries where I’ve gone out of my way to bring my family back so I could show them the things I enjoyed.

In this case, it was the Pacific Coast town of Manuel Antonio, which hosts a world-famous national park combining dense jungle with some of the most beautiful tropical beaches I’ve ever seen. My young daughter and I hiked up a big vegetation-covered rock at the end of one beach. We met tree sloths, toucans, iguanas, water-walking basilisks… and many locals and foreigners enjoying a picnic lunch under the swaying palms.

Costa Rica is a unique place. I’ve always suspected it has something to do with 1948. The country suffered a brief civil war that year after a disputed election. The rebels kicked out the ruling elite, and much to the shock of everyone, chose to abolish the military altogether. Since then, Costa Rica has been the most stable and peaceful country in Central America. Money that in other countries is spent on guns and soldiers is used for security, education, and culture.

Seventy-five years of peace, stability, and democracy has engendered a relaxed lifestyle, symbolized by the national motto, “Pura Vida.” Literally translated as “pure life,” its cultural meaning is broader, something like Aloha in Hawaii. It’s all about simplicity, gratitude for life’s joys, and a positive outlook.

Pura Vida combined with a carefully protected natural environment of tropical beaches, jungle-clad volcanic mountains, and pristine lakes means Costa Rica is a popular destination for expats, especially from North America. There are as many as 70,000 Americans living in the country.

Another reason for Costa Rica’s attractiveness is the ease and simplicity of its residency offerings. There are three types of long-term temporary residency:

Pensionado: For retirees with a lifetime pension or retirement income of at least $1,000 per month. It includes the applicant, their spouse, and children under 25.

Rentista: For individuals with a stable income of at least $2,500 per month from passive sources like investments, guaranteed for at least two years. Alternatively, you can deposit $60,000 in a Costa Rican bank and replenish it every two years to extend the visa. It also covers a spouse and children under 25.

Inversionista: This option requires a minimum investment of $150,000 in real estate, shares, or projects of national interest. Investments can be combined to meet this threshold. For example, if you buy a home in the country for $150,000 or more, you get residency for as long as you continue to own it. It also covers a spouse and children under 25.

After three years of temporary residency, you can apply for permanent residency. After seven years living in the country, you can apply to become a Costa Rican citizen.

All of that would make Costa Rica attractive enough. But the cherry on top is the country’s territorial tax system. Income generated outside the country is not subject to tax at all. That makes it an ideal place for retirees and others on fixed incomes. There is a small mandatory contribution to the country’s “Caja” medical system, which you also gain access to. It’s a great deal, because Costa Rica’s healthcare system is highly regarded in Central America and internationally. It’s so good, in fact, that the country is a hot spot for medical tourism.

In my consultation service, Costa Rica is one of the top destinations people ask me about. Often, it’s a toss-up between that country and neighboring Panama. In my experience, people who want an urban lifestyle go for the latter, using Panama City as a base for forays into the countryside. On the other hand, people who prefer Costa Rica are looking for a laidback—almost stereotypical—Latin American/Caribbean lifestyle. (I tell people on the fence to consider Costa Rica, given that Panama City is only a day’s drive away on the Pan-American highway.)

So if Costa Rica sounds like a place you’d like to settle down, drop me a line, and I’ll help you get it done.