Our guide to Payroll in Costa Rica

Doing Business in Costa Rica

Costa Rica is one of the most attractive investment destinations in Central America, renowned for its political stability, peaceful governance, and well-educated workforce. The government encourages foreign direct investment through tax incentives, modern infrastructure, and a streamlined business registration process. English is widely spoken due to the influence of international business and tourism.

Basic Facts about Costa Rica

Common Phrases
Hello: Hola
Good Morning: Buenos días
Good Evening: Buenas noches
Do you speak English?: ¿Habla inglés? (polite) / ¿Hablás inglés? (informal, local use)
Goodbye: Adiós
Thank you: Gracias
See you later: Nos vemos (more common locally than "Hasta luego") 

Registrations and Establishing an Entity

Foreign investors may register a Corporation (Sociedad Anónima) or a Limited Liability Company (Sociedad de Responsabilidad Limitada). Each requires a minimum of one director and two shareholders, with a registered office in Costa Rica. Entities must register with the Public Registry and maintain legal books for shareholder meetings and board minutes.

Banking

An in-country bank account is required for payroll and tax purposes. Banks are generally open Monday to Friday, 09:00 to 15:00. Some mall branches open on Saturday mornings.

Working Week

The standard working week is up to 48 hours, typically Monday to Friday. In sectors like retail, the day may extend to nine hours as long as it does not impair health.

Employment Law

Holiday Accrual
Employees are entitled to 2 weeks of paid vacation for every 50 weeks of continuous service. On termination before 50 weeks, compensation is calculated as 1 day of pay for every month worked. There are eight paid and two unpaid national holidays.

Maternity Leave
Maternity leave lasts 4 months—1 month before and 3 months after childbirth. Half is paid by the employer and half by social security.

Paternity Leave
Public sector fathers receive 8 days of paid paternity leave following the birth of a child.

Sick Leave
Employers pay 50% of wages for the first 3 days. From day 4 onward, the social security system pays 60% for up to 52 weeks. Additional compensation depends on employment length.

National Service
There is no compulsory national service in Costa Rica. The military was abolished in 1948.

Tax & Social Security

The tax year runs from 1 January to 31 December.

Income Tax
Individuals pay tax on a progressive monthly scale:

• Up to CRC 922,000: 0%
  
  
• CRC 922,001 to 1,352,000: 10%
  
  
• CRC 1,352,001 to 2,373,000: 15%
  
  
• CRC 2,373,001 to 4,745,000: 20%
  
  
• Above CRC 4,745,000: 25%
  
  

Employers must withhold and submit taxes monthly.

Social Security
Employees contribute 10.67%, and employers contribute 26.5% of the salary. Contributions are remitted monthly to the Social Security Fund and other relevant agencies.

Payroll

Online payslips are allowed but employees must confirm receipt by email. Payroll records must be retained for five years.

Payslip Example

Reports

Tax filings are due by the 15th of each month. Social security payments are due between the 26th and the 6th of the following month.

Reporting

Monthly tax and social security filings must include employee-level data and payment confirmation. Annual declarations are also required.

New Employees

New hires must be registered with the Social Security Office within 8 days. Employment contracts must be signed and submitted within 15 days and include terms such as salary, working hours, address, and contract duration.

Leavers

Dismissals require cause or else severance must be paid based on tenure. The Social Security Office and pension operator must be notified. Severance ranges from 7 days to 22 days’ salary depending on years of service.

Employee Benefits

Employers may offer allowances for transportation, education, and vehicles. All such benefits must be declared in monthly social security reports.

Expenses

Business expenses are reimbursed with receipts and often fall outside payroll but are subject to review if reported in payroll filings.

Foreign nationals must apply for a work permit, which can take 3–8 months. Required documents include an application form, birth certificate, criminal background check, and employment offer. Visas are valid for 12 months, and workers must enter the country within 60 days of approval. Changing employers requires reapplication. Dependents may be included with supporting documents.

All legal records must be maintained in Spanish and stored at the company’s registered office. Corporate benefits and severance obligations are tightly regulated. Payroll providers and legal representatives must be licensed to file returns on behalf of employers.

Further Information

For more information, or assistance with Costa Rica Tax inquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.