Quick answer: Costa Rica taxes on a territorial basis — your Indian salary, business profits, dividends and capital gains are generally outside its net. Costa Rica-source income (like rent from your villa) is taxed locally, capital gains on Costa Rican assets at 15%, and property carries a 0.25% annual tax plus a 1.5% transfer tax at purchase. Meanwhile, as long as you remain an Indian tax resident, India taxes your worldwide income — including that Costa Rican rent — and requires disclosure of the property in Schedule FA of your ITR every year. The planning happens on the Indian side.
Tax is where Costa Rica quietly outclasses many glamorous alternatives — and where careless Indian investors create entirely avoidable problems at home. Let's take both halves in turn: what Costa Rica asks of you, and what India still expects.
What does "territorial taxation" actually mean?
Costa Rica only taxes income generated within Costa Rica. Become a resident, spend the whole year in Atenas, and your Mumbai rental income, Indian mutual-fund gains, Gulf salary or US dividends are generally not Costa Rican taxable income at all. There is no wealth tax, and no inheritance tax between direct family members. For retirees and location-independent earners this is the headline feature of the whole programme: residency without importing your global income into a new tax net.
What will you actually pay in Costa Rica?
- At purchase: a 1.5% property transfer tax on the registered value, plus roughly 0.8–1.5% in notary fees and registration stamps.
- Every year: municipal property tax of 0.25% of registered value — on a $200,000 home, about $500 a year, a figure that makes Indian metro property-tax grievances feel quaint. High-value homes additionally attract the solidarity ("luxury home") tax on residences above a threshold recalculated annually.
- On rental income: Costa Rica-source income is taxed locally — progressive rates reaching about 25%, with a simplified regime for many landlords; your accountant will optimise between them.
- On sale: capital gains on Costa Rican assets are taxed at 15%.
- As a resident: Caja (public healthcare) contributions of roughly 9–10% of declared income — which buys real healthcare, not just a stamp.
What does India still tax while you remain resident there?
Everything. India taxes residents on worldwide income, so your Costa Rican rental income belongs in your Indian return, taxed at your slab. Since India and Costa Rica do not have a comprehensive double taxation avoidance agreement in force, relief for taxes paid in Costa Rica is typically claimed unilaterally under Section 91 of the Income-tax Act — real relief, but mechanical, so keep Costa Rican tax receipts meticulously. Confirm the current treaty position with your CA at filing time.
Two disclosure regimes deserve respect rather than fear:
- Schedule FA: every foreign asset — the villa, the Costa Rican bank account, shares in an S.R.L. — must be disclosed annually in your ITR, whether or not it produced income.
- The Black Money Act: non-disclosure of foreign assets carries penalties that dwarf any tax at stake. There is no legitimate planning reason to skip Schedule FA — ever.
When does the equation change?
The interesting inflection comes if you actually move. Spend enough time abroad and you may become non-resident for Indian tax purposes (the day-count tests in Section 6 — broadly under 182 days, with refinements for high earners and RNOR transition states). A non-resident is taxed in India only on Indian-source income; your Costa Rican rent then sits solely in Costa Rica's territorial system, and the combined burden can fall dramatically. Families planning a genuine relocation should model the sequence — which year to break residency, RNOR buffer years, when to realise gains — with a cross-border CA. Done well, it is one of the most tax-efficient retirements available anywhere.
What about TCS, GST on services, and other Indian friction?
The 20% TCS on LRS remittances above ₹10 lakh (covered in our money-transfer guide) is an advance, not a cost — adjust or reclaim it in your ITR. Fees paid to Indian intermediaries carry GST as usual. None of this changes the investment case; it changes the cash-flow calendar.
Frequently asked questions
Will Costa Rica tax my Indian retirement corpus or NRE deposits?
No — foreign-source income sits outside Costa Rica's territorial net. India's treatment continues per your residency status there.
Is there really no inheritance tax?
Costa Rica imposes no inheritance tax between direct family members, and India currently has no estate duty either. Succession planning is still worth doing — a Costa Rican will for the Costa Rican asset avoids probate friction across jurisdictions.
If I sell the villa after getting permanent residency, what do I owe?
Costa Rica: 15% on the gain. India: if you are still Indian-resident, the gain enters your Indian return with Section 91 relief for the Costa Rican tax; if you are properly non-resident by then, India's claim generally falls away.
Does holding the property in a company change the taxes?
It changes which taxes and adds compliance in both countries. For a family home tied to residency, personal ownership is usually simpler and cheaper; run the comparison with your CA before structuring.
Want a tax model for your specific mix of Indian income and Costa Rican plans? Contact our team and we will connect you with cross-border advisors who do this weekly.
This article is general information, not tax advice. Rates, thresholds and treaty positions change; verify with your chartered accountant and a Costa Rican tax advisor before acting.