Costa Rica Digital Nomad Visa

Local tax regime and what it means for you

Costa Rica applies a territorial tax regime. Only income with a Costa Rican source is taxed locally; foreign-source income is outside the scope of standard Costa Rican income tax. The Digital Nomad Visa is explicitly marketed on this point: qualifying $3,000–$4,000/month must come from abroad, and that foreign-source remote work income is exempt from Costa Rican income tax while you hold this non-resident digital nomad status. Remote salary from a US or EU employer, contractor income paid into a foreign account, ETF dividends in a US brokerage, US rental income, and foreign pensions are not taxed in Costa Rica as long as they are not tied to Costa Rican activities.

Local-source income is different. If you start providing services to Costa Rican clients or take employment with a Costa Rican company, that income would be considered Costa Rican-sourced, and you would be in breach of your visa conditions and within the local tax net. The visa’s terms explicitly prohibit local work; the local income limit is 0% of total income.

Under territorial rules, capital gains on foreign investments — for example, selling index funds or ETFs in a US brokerage account — are treated as foreign-source and are therefore outside Costa Rica’s ordinary income tax scope for this category. By contrast, gains from disposing of Costa Rican real estate or local shares can be taxable. For a FIRE-style portfolio held entirely in foreign accounts, capital gains are effectively exempt locally.

Tax residency in Costa Rica is generally based on spending more than 183 days in-country in a tax year or having your center of vital interests there. However, the Digital Nomad Visa is framed as a non-resident “stay” (estancia) with a special tax exemption for foreign income, even if you spend 180+ days per year inside the country. The 180 days/year in the VISA FACTS are an immigration presence requirement, not a trigger for taxing your foreign earnings under this specific program.

Local filing requirements for digital nomads are minimal. The regime is designed so that qualifying foreign income is not subject to local income tax, so in practice many holders do not file an annual Costa Rican income tax return at all. There is no publicly specified separate tax-registration deadline tied to this visa type. If you later generate Costa Rican-sourced income or change to a resident category, you would then need to obtain a local taxpayer ID and file returns.

Costa Rica has no income tax treaty with the United States. That means there is no bilateral mechanism to eliminate double taxation via treaty rates or tie-breaker residency rules. Because Costa Rica does not tax your foreign-source income under this visa, the absence of a treaty mainly matters for US-side rules: you cannot rely on treaty provisions for reduced withholding on Costa Rican-source income, and there is no totalization agreement for Social Security.

For US Citizens and Green Card Holders

US persons on the Costa Rica Digital Nomad Visa still file US tax returns annually on worldwide income. The territorial nature of Costa Rican taxation means the main US tools are familiar, but their value shifts.

Foreign Earned Income Exclusion (FEIE, claimed on Form 2555) can shield up to $126,500 of earned income for 2024 (indexed in future years). Only earned income qualifies: remote W-2 salary, contractor payments, and self-employment income. FEIE does not cover ETF dividends, bond interest, capital gains, pension distributions, or Social Security. Because this visa encourages you to spend 180+ days/year in Costa Rica, most remote workers will qualify under the Physical Presence Test (330 full days abroad in any rolling 12-month period), especially if they avoid extended stays in the US. The Bona Fide Residence Test is harder to rely on here because the immigration status itself is non-resident and capped at 1–2 years.

Foreign Tax Credit (FTC, Form 1116) is less useful in this setup. Since Costa Rica does not tax your foreign-source remote income under the digital nomad regime, there is usually little or no Costa Rican income tax to credit against US tax. If all your income is foreign-source and taxed only by the US, the FEIE and, where relevant, the foreign housing exclusion/deduction are what reduce your US bill, not the FTC.

FBAR (FinCEN 114) and FATCA Form 8938 still matter. If you open a Costa Rican bank account or investment account and your aggregate foreign accounts exceed $10,000 at any point in the year, you must file an FBAR electronically with FinCEN. Form 8938 has higher thresholds (starting at $50,000 for single US residents, higher for those abroad) but often applies once a serious offshore cash buffer builds up. The visa does not require a local bank account, but many people open one; that alone can trigger FBAR even with modest balances.

In practice, a US person using this visa should coordinate two advisors: a US CPA who specializes in expat taxation and understands FEIE, Form 1116, FBAR, and FATCA reporting, and a Costa Rican tax advisor who can confirm when (if ever) local filing obligations arise if your situation changes. The $1,500–$3,000 you spend in year one on that combined advice is often recovered through optimized FEIE elections, correctly structured business entities, and avoiding non-willful penalties that start around $10,000 per missed FBAR.