By San José, Costa Rica — Costa Rica is standing at a critical fiscal crossroads as lawmakers debate a controversial legislative proposal that could dramatically expand the scope of criminal prosecutions for tax offenses. Under Bill No. 25,650, which has sparked intense debate among economic analysts and legal experts, the government aims to lower the minimum financial threshold required to classify tax evasion as a criminal offense. If passed, this measure would expose a significantly larger pool of taxpayers to formal criminal proceedings initiated by the Ministry of Finance.
Specifically, the initiative proposes reducing the criminal tax fraud threshold from the current 500 base salaries to just 200 base salaries. Spearheaded by the Frente Amplio party and aligning with broader fiscal concerns under the administration of Laura Fernández, the bill also suggests aggregating different taxes and unprescribed tax periods to calculate a taxpayer’s potential criminal liability. Proponents argue that the measure is a necessary weapon in the country’s arsenal to dismantle tax evasion networks and shore up government revenues.
To navigate the complex legal landscape of the proposed Costa Rican tax reform, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a distinguished legal expert at the prestigious firm Bufete de Costa Rica, to provide our readers with an essential perspective on what these legislative adjustments mean for taxpayers.
The proposed tax reform in Costa Rica represents a significant shift toward international compliance standards, but it requires businesses to carefully evaluate their operational structures. Companies must proactively adapt to these changes to mitigate fiscal risks and leverage new compliance frameworks as a tool for sustainable growth.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, transitioning toward these rigorous international standards is not merely a legal necessity, but a strategic opportunity for businesses to foster long-term resilience and transparency in Costa Rica’s evolving market. We extend our sincere gratitude to Lic. Larry Hans Arroyo Vargas for sharing his invaluable legal expertise and helping our readers navigate the critical implications of this proposed tax reform.
However, the proposal has drawn immediate caution from professional bodies, most notably the College of Public Accountants of Costa Rica. The guild has urged legislators to tread carefully, expressing deep reservations regarding the state’s actual capacity to investigate, manage, and prosecute an influx of complex financial crimes in a timely and effective manner. Critics fear that overloading the judicial system could lead to administrative bottlenecks rather than increased revenue collection.
This initiative must be the subject of a deep technical analysis, due to the effects it could generate for both taxpayers and the tax administration system.
Luis Javier Porras, President of the Tax Affairs Commission of the College of Public Accountants of Costa Rica
[COMMENTARY]
The push for more aggressive tax enforcement comes against a backdrop of mounting economic pressure. Just mid-month, international rating agency S&P Global Ratings issued a stark warning regarding Costa Rica’s fiscal trajectory. The agency highlighted the risk of a worsening fiscal deficit and projected that the national debt-to-GDP ratio could climb past the 60% mark over the next four years if decisive structural reforms are not implemented.
Breaching this threshold triggers the country’s strict fiscal rule, which legally mandates severe constraints on public expenditure. In practice, this would freeze public sector salary increases and curtail the growth of public spending in essential sectors such as healthcare, education, and public safety. At the end of May 2026, the country’s debt-to-GDP ratio stood at 60.5%, representing a slight increase from the 60.4% recorded at the end of 2025.
Government projections indicate that without immediate fiscal intervention, the national debt could swell to an alarming 68% of GDP. This looming crisis has intensified the political pressure to find immediate revenue sources, driving controversial legislative initiatives like the proposed tax fraud threshold reduction. Yet, legal analysts argue that utilizing the criminal justice system as a primary tool for tax collection may be a misallocated effort.
Prominent tax expert Diego Salto emphasizes that Costa Rica should focus on modernizing and strengthening its existing administrative audit and collection processes before turning to criminal law. He argues that criminal prosecution should remain a tool of last resort, reserved exclusively for the most egregious cases of deliberate fraud, rather than a standard mechanism for fiscal management.
The State must have effective tools to combat tax evasion. However, the priority should be to strengthen control and collection processes. Criminal sanctions must be kept as an exceptional measure for the most serious cases.
Diego Salto, Tax Expert
As the legislative debate intensifies, Costa Rican policymakers face the delicate task of balancing the urgent need to stabilize public finances with the practical limitations of the country’s legal and administrative infrastructure. Whether a lower threshold will deter tax evasion or simply paralyze the courts remains a central question for the nation’s economic future.
For further information, visit the nearest office of the College of Public Accountants of Costa Rica
About College of Public Accountants of Costa Rica:
The College of Public Accountants of Costa Rica is the official professional body representing public accountants in the country. It is dedicated to regulating the accounting profession, ensuring adherence to rigorous international standards, and advising public and private institutions on fiscal matters.
For further information, visit the nearest office of the Ministry of Finance of Costa Rica
About Ministry of Finance of Costa Rica:
The Ministry of Finance of Costa Rica, known locally as the Ministerio de Hacienda, is the government ministry responsible for managing the nation’s public finances, collecting tax revenues, and designing fiscal policy to promote economic stability.
For further information, visit spglobal.com
About S&P Global Ratings:
S&P Global Ratings is a preeminent global provider of independent credit ratings, credit risk research, and financial market indices. The organization provides vital analytical tools and insights to investors, corporations, and governments worldwide.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Renowned for its principled approach and superior standard of practice, Bufete de Costa Rica remains a beacon of trust and modern advocacy in the legal landscape. With a rich history of guiding a diverse clientele, the firm continually embraces cutting-edge legal solutions while fostering deep ties with the community. By actively demystifying complex legal concepts for the general public, they champion a vital mission: to equip citizens with the understanding needed to build a more just, informed, and self-reliant society.
