A simplified guide to understanding the Salary Tax & CCSS Deductions in Costa Rica.
Navigating the tax system can be daunting, but having a clear understanding of how taxes are calculated is essential. In this simplified guide, we will delve into the tax deductions for employees in Costa Rica, We'll explore the tax brackets, and deductions, and provide an example to help you grasp the intricacies of the Costa Rican tax system. By the end of this article, you'll know how to calculate your Net Salary after taxes & deductions. [1*]
Update for 2024
Understanding Tax Brackets in Costa Rica:
Costa Rica employs a progressive tax system, where tax rates increase with higher income. Tax brackets have changed for 2024, we will play slightly more tax compared to the previous year 2023 and the tax brackets are as follows
1. 0%: Income up to ₡929,000.
2. 10%: Income between ₡929,001 and ₡1,363,000.
3. 15%: Income between ₡1,363,001 and ₡2,392,000.
4. 20%: Income between ₡2,392,000 and ₡4,783,000.
5. 25%: Income exceeding ₡4,783,000.
For reference, these were the tax brackets for 2023.
1. 0%: Income up to ₡941,000.
2. 10%: Income between ₡941,001 and ₡1,381,000.
3. 15%: Income between ₡1,381,001 and ₡2,423,000.
4. 20%: Income between ₡2,423,001 and ₡4,845,000.
5. 25%: Income exceeding ₡4,845,000.
I’ve updated the example below as well to reflect the new tax brackets.
CCSS Deductions:
CCSS deductions, also known as Caja Costarricense de Seguro Social deductions, are mandatory contributions to healthcare, pensions, and other social security benefits. The CCSS deductions for the current year are as follows:
- 4.17% deduction: A percentage of your monthly salary for disability, old age, and death, is contributed to each worker’s pension plan.
- 5.5% deduction: A percentage of your monthly salary for sickness and maternity insurance, only includes access to health services offered by the Costa Rican Social Security Fund
- 1% deduction: A percentage of your monthly salary for Worker protection law.
More details about CCSS deductions can be found at https://www.ccss.sa.cr/calculadora
With that said, let’s look at an example.
Example Scenario:
Let's consider an individual with a monthly salary of ₡1,000,000 (approximately $1,667, conversion rate of ₡600 = $1) to illustrate the tax calculations.
1. Calculate the CCSS Deductions:
- 4.17% deduction: ₡1,000,000 x 4.17% = ₡41,700 (approximately $69.50)
- 5.5% deduction: ₡1,000,000 x 5.5% = ₡55,000 (approximately $91.67)
- 1% deduction: ₡1,000,000 x 1% = ₡10,000 (approximately $16.67)
2. Calculate the Tax Liability:
- Calculate the tax within each bracket:
- 0% tax on the first ₡929,000 = ₡0
- 10% tax on the income between ₡929,001 and ₡1,363,000:
Taxable income in this bracket = ₡1,000,000 - ₡929,000 = ₡71000 (10% tax in this bracket) means 10% of ₡71000 = ₡7100 (approximately $9.83) - Effective Monthly Salary shall be ₡1,000,000 — ₡106,700-₡7100 = ₡886,200
- Since the salary does not fall into other tax slabs, there won’t be tax calculations needed in other slabs.
Let’s calculate the yearly salary with Aguinaldo (13th Salary, mandatory bonus paid by law, in Costa Rica)
3. Summary:
- Yearly Gross Salary: ₡12,000,000 [₡1,000,000 * 12 ] + ₡1,000,000 (This is calculated on a pro-rata basis, in this case, the assumption is you have joined in January, employed till December, no other Bonuses included in the calculation) = ₡13,000,000 (approximately $21,666)
- Yearly Net Salary: ₡10,634,400 (Net monthly Salary * 12)+ ₡1,000,000 (pro-rated bonus which is calculated as Sum of Gross Salaries/12) = ₡11,634,400 (approximately $19,414.66)
[1*] Disclaimer: This article provides a simplified explanation of the tax system in Costa Rica and should not be considered professional tax advice. The tax laws and rates are subject to change, and it is recommended to consult with a qualified tax professional or refer to official government resources for accurate and up-to-date information. The conversion rate used in this article is 600 CRC = 1 USD, but it is advisable to check for the most current exchange rates for precise conversions.
Remember, these calculations are for illustrative purposes only, and individual circumstances may vary.
