Costa Rica’s draft Bill No. 25,796 would replace the current group-specific rules with a residence-based framework for taxing foreign-source passive income, covering income earned by all tax residents and allowing credits for comparable foreign taxes paid.
Costa Rica published draft Bill No. 25.796 in the Official Gazette on 30 September 2026.
The bill was submitted to the Legislative Assembly on 22 September 2026 and proposes a significant structural reform to Costa Rica’s taxation of foreign-source passive income by shifting from a group-specific rule to a general rule based on fiscal residence.
The initiative modifies the taxation of foreign-source passive income by shifting the focus toward the resident taxpayer’s economic capacity rather than restricting the levy to multinational corporate entities. To prevent international double taxation, the new regulations allow residents to deduct similar taxes already paid abroad from their net taxable income.
Rationale and context
Bill No. 25,796 would eliminate existing tax asymmetries in the treatment of foreign-source passive income by removing requirements based on multinational group membership, entity qualification, and economic substance. Instead, taxation would be determined primarily by fiscal residence. The reform also aims to address tax erosion concerns arising from the removal of the economic linkage criterion.
Taxpayer scope and covered income
The proposed rules would apply to all Costa Rican tax residents, including individuals, companies, trusts, investment funds, and other entities. They would cover foreign-source passive income from rentals, interest, dividends, royalties, and capital gains on assets or rights located or used outside Costa Rica.
Royalties would expressly include payments for patents, trademarks, copyrights, formulas, and technology transfers, but exclude technical assistance. Covered capital income and gains would be subject to a 15% tax rate.
Double taxation mitigation & capital losses
The proposed rules would calculate taxable foreign passive income on a net basis, allowing foreign taxes paid or withheld to be deducted from gross income to reduce double taxation.
For business and CONASSIF-supervised financial entities, covered foreign passive income would be integrated into gross corporate income and taxed under the general corporate tax regime after the foreign tax deduction.
However, foreign capital losses could not be used to offset domestic tax liabilities.
Targeted scope vs. general territoriality
The proposal is not a shift to a general worldwide income tax system. Active business income remains subject to Costa Rica’s traditional territoriality principle.
Repeal of thematic bond tax credits
The bill repeals Article 15(d) of Law No. 7092 (introduced by Law No. 10.051), removing the corporate income tax credit previously granted to issuers of thematic (green/sustainable) public offer bonds to restore fiscal neutrality across security issuers.
As drafted, the legislation would enter into force upon approval and publication, with implementing regulations to be issued within six months.
