As of May 15th, 2019, the “Agreement between the United Mexican States and the Republic of Costa Rica to avoid double taxation and prevent tax evasion in income taxes matters” is in force.
The agreement applies to Costa Rican Income Tax and Federal Income Tax in Mexico. It clearly defines the term resident (Article 4), configuration of a permanent establishment (Article 5), which is considered an associated company (Article 9), among others.
The Treaty assigns the respective rights of encumbrance over:
1- Income from immovable property (Article 6).
2- Corporate profits (article 7).
3- Benefits from sea and air navigation (article 8).
4- Dividends (article 10).
5- Interest (Article 11).
6- Royalties (article 12).
7- Capital Gains (article 13).
8- Independent personal services (article 14).
9- Income from dependent personal work (article 15).
10- Remuneration in the capacity of adviser (article 16), income of artists and sportsmen and sportswomen (article 17).
11- Pensions (article 18), official services (article 19), students (article 20).
The convention follows the ordinary imputation system as a method of avoiding double taxation, whereby the State of residence will allow the taxable person to deduct the tax paid in the country of origin, but will be limited by the rate of taxation of the State of residence on income acquired in the country of origin.
Finally, the agreement contains a clause for the exchange of tax information between both countries.
Partner
García & Bodán
Costa Rica