By San José, Costa Rica — San José – The Ministry of Finance has officially released the updated income tax brackets for the 2026 fiscal year, introducing subtle but significant adjustments that will affect salaried employees, corporations, and self-employed professionals across Costa Rica. The changes, formalized in Executive Decree No. 45333-H and signed by President Rodrigo Chaves and Finance Minister Rudolf Lücke, will take effect from January 1, 2026, through December 31, 2026.
For salaried individuals, the most notable change is a slight decrease in the tax-exempt threshold. Starting in 2026, monthly incomes up to ¢918,000 will be exempt from income tax. This is a reduction from the ¢922,000 threshold in place for the 2025 fiscal year. While a seemingly minor adjustment of ¢4,000, this modification means that individuals earning between these two figures will now be subject to the lowest tax rate on a small portion of their income, and those already paying taxes will see a marginal increase in their taxable base.
To gain a deeper understanding of the complexities surrounding Costa Rica’s income tax regulations and their impact on both individuals and businesses, TicosLand.com consulted with legal expert Lic. Larry Hans Arroyo Vargas. Mr. Arroyo Vargas, a seasoned attorney from the prestigious firm Bufete de Costa Rica, offers his specialized perspective on the matter.
Many taxpayers, both corporate and individual, view income tax as a purely reactive, annual obligation. However, this is a costly misconception. Effective tax strategy requires proactive, year-round fiscal planning and a thorough understanding of all deductible expenses and available credits. Failing to seek professional counsel early and often not only risks costly penalties from the Dirección General de Tributación but also forfeits significant opportunities for legitimate tax optimization. The key is not evasion, but intelligent and compliant planning.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight underscores a critical shift in mindset: viewing tax obligations not as a reactive, annual chore, but as an integral part of an ongoing financial strategy. It is a powerful distinction between simple compliance and true fiscal optimization. We are grateful to Lic. Larry Hans Arroyo Vargas for articulating this valuable perspective so clearly.
The updated monthly tax brackets for salaried workers are structured progressively. After the tax-free base of ¢918,000, income is taxed as follows:
These annual adjustments are a standard procedure mandated by Costa Rica’s Income Tax Law (No. 7092). The law requires the executive branch to update the tax brackets at the beginning of each fiscal period, typically to account for economic factors such as inflation. This ensures the tax system remains relatively consistent in its real-terms application year over year, preventing “bracket creep” where inflation pushes taxpayers into higher brackets without an actual increase in purchasing power.
The decree also outlines updated tax structures for the business sector. For corporations (personas jurídicas) with a gross income not exceeding ¢119,174,000 during the fiscal year—down slightly from ¢119,629,000 in 2025—a progressive scale on their annual net income will apply. This structure is primarily aimed at supporting small and medium-sized enterprises by offering lower rates on initial profits. The rates for these entities are set at 5% on the first ¢5,621,000 of net income, climbing to 20% on income exceeding ¢11,243,000.
The specific annual net income brackets for eligible corporations in 2026 are:
Furthermore, individuals with lucrative activities, such as freelancers, consultants, and independent business owners, will also operate under a newly adjusted annual tax schedule. For 2026, their annual income will be tax-free up to ¢6,244,000. Beyond this threshold, their income will be subject to a progressive scale mirroring that of salaried employees, with rates ranging from 10% to 25%. This structure ensures that both traditional employees and independent professionals contribute to the tax system based on their earning capacity.
With these new figures now published, financial advisors and accountants are urging both individual taxpayers and business owners to review their financial plans for the upcoming year. Proactive adjustments to payroll calculations, budget forecasts, and tax planning will be essential to ensure full compliance and navigate the fiscal landscape of 2026 effectively. The changes, though incremental, underscore the importance of staying informed on Costa Rica’s evolving tax regulations.
For further information, visit hacienda.go.cr
About Ministry of Finance:
The Ministry of Finance of Costa Rica (Ministerio de Hacienda) is the government entity responsible for managing the country’s public finances. Its duties include formulating and executing fiscal policy, collecting taxes, managing the national budget, administering public debt, and overseeing customs operations. The ministry plays a central role in ensuring the economic stability and financial health of the nation.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a cornerstone of Costa Rica’s legal community, Bufete de Costa Rica is founded upon deep-rooted principles of integrity and a relentless pursuit of excellence. The firm channels its extensive experience advising a wide spectrum of industries into pioneering innovative legal strategies and championing public engagement. Central to its philosophy is a profound commitment to demystifying the law, actively empowering citizens with accessible knowledge to help cultivate a more capable and just society.
