Costa Rica is widely regarded as one of the most stable nations in Central America, with a democratically elected legislature and a judicial system that is generally perceived as impartial. With its increasing focus on exporting technologically manufactured products, the CR is called the “Silicon Valley of Latin America”. The move diversifies businesses away from traditional export crops. Costa Rica is an excellent place for businesses to expand internationally.
The Economy
Costa Rica is incredibly popular with foreign investors due to the stable political environment. The country has garnered some of the highest levels of investment per capita in Latin America and is one of the most prosperous markets in Central America. The gross domestic product (GDP) of this country, per capita, is ranked 33rd in the world. Ranking above Peru, Brazil, or Mexico. This country is also an incredible investment destination—in fact, its foreign direct investment (FDI) is the best performing in the world relative to its size.
The Importance of Small and Medium-Sized Companies
Like many countries around the world Costa Rica’s economy relies on small and medium enterprises (SMEs). Of all the businesses in the country, more than 93% are SMEs, with about two-thirds of those qualifying as micro-businesses which is one that employs fewer than ten people.
Population Characteristics
With approximately 5.1 million people, Costa Rica is the sixth-most populous nation in Central America. Costa Ricans are highly literate with a literacy rate of more than 97%. While the nation’s official language is Spanish, a significant number of people in Costa Rica speak English
fluently, especially in tourist destination areas. This makes conducting international business there fairly easy.Economic Opportunities
Costa Rica was once known primarily for agricultural products like bananas, coffee, plantains, and pineapples. The nation has made a concerted effort to diversify its economy to better fit into the 21st century. This successful attempt means that, while Costa Rica still produces many export crops, they represent a much smaller portion of the economy. Beyond agriculture and manufacturing, the service economy has risen to prominence contributing more than
three-fifths of the nation’s gross national product (GNP). Tourism makes up a large share of that contribution, but other services, including commerce, finance, and
construction, are not far behind.Key Sectors of the National Economy
Human Talent
Costa Rica is well-known across Latin America for its technical innovations. Its workers are exceptionally skilled at coding and programming. There are several government programs aimed at attracting women into the STEM fields of science, technology, engineering, and mathematics which creates more workplace diversity. Workers in Costa Rica have a strong technical knowledge base, and with more than 250 multinational corporations currently doing business there, the country is well-positioned to continue providing technical services for countries across the globe.
Liberia City
Liberia is the biggest city in Costa Rica by land size and a popular tourist destination. With an international airport, pristine beaches, five-star resorts, colonial-style architecture, and the bluest river in the world according to locals, its growth is expected to expand in 2022-2023 to 4.9 percent; which will be driven by its mining sector and outside demand.
San José
San Jose is the capital of Costa Rica and the largest city by population, with more than 342,000 people. It is the center for political and economic activity, making it the perfect destination for investment. San Jose boasts several free trade zones (FTZ) which allow exporting companies to bring goods to the country without paying nationalization taxes. Government administration boosts the city’s economy combined with a competitive business climate and many innovations—especially within the IT sector.
Technological Ecosystem
Another major part of the Costa Rican economy is tech exports. While the country first focused on producing computer technology like microprocessors, it shifted to developing and manufacturing a wide range of medical and pharmaceutical products to be shipped worldwide. Costa Rica is home to 16 of the best 100 IT companies in the world. One of which is Intel, which was wildly successful in expanding the business into this region. Microsoft also recently jumped on the opportunities here, especially because of the talented workforce.
Facilities for Foreign Investment
Costa Rica is one of the few nations in the world where there are virtually no restrictions on owning a business—
not even residency. You can start a business in Costa Rica while visiting on a normal tourist visa. The one major restriction to be aware of is that while anyone can own a business, you can’t work for the company unless you are a resident of Costa Rica. This rule was enacted to ensure that citizens aren’t shut out of the workplace, but it restricts what role you can play in day-to-day business.
Business Culture in Costa Rica
Unlike major world economic players including the U.S. where business culture is fast and fierce Costa Rican culture has a relaxed quality. Workers in Costa Rica value modesty and friendliness, and businesses place a high value on developing strong relationships before making important agreements. That’s not to say that Costa Ricans don’t work hard. Quite the opposite — Costa Rican workers are diligent and dedicated. The difference is that there is much more focus on life outside of work, which means employers from different cultures need to be patient and plan for longer time frames for projects.
Costa Rica Gastronomy: Regional and Traditional Cuisines
Rice is an important food staple in Costa Rica. Arroz con pollo is a popular rice dish featuring chicken. Lunch is the largest meal of the day, and restaurants typically serve this from 11 am to 3 pm. It’s not uncommon for people to go home for lunch, even children from school; family is very important in this culture.
General Highlights
| Year | 2022 |
| Country | Costa Rica |
| Capital | San José |
| Num. States / Province | 7 provinces |
| Principal Cities | San José, Alajuela, Cartago, Heredia |
| Language | Spanish |
| Local Currency | Costa Rican Colón (CRC) |
| Major Religion | Catholic |
| Date Format | DD/MM/YY |
| Thousands Separator Format | 135.250.000 |
| Country Dial Code | +506 |
| Time Zone | Central Standard Time CST (GMT-6) |
| Population | 5.1 million |
| Border Countries | Nicaragua to the north and Panama to the southeast |
| Continental surface | 51,100 km² |
| Fiscal Year | 1st October – 30th September |
| VAT % | 13% |
| Minimum Wage | Costa Rica’s minimum is 317.915.58 CRC monthly. |
| Taxpayer Identification Number Name in the country | “Cedula Persona Fisica” which translates “physical identification number” |
| Current President | Carlos Andrés Alvarado Quesada |
What you need to know about employing personal in Colombia
Public Holidays
The Labor Code provides for public holidays that are observed in Dominican Republic:
| Date | Holiday Name |
| January 1st | New Year’s Day |
| January 6th | Three King’s Day |
| January 21st | Day of the Virgin of Altagracia |
| January 26th | Birthdate of Juan Pablo Duarte |
| February 27th | Independence Day |
| Variable in March or April | Good Friday |
| Variable in May or June | Corpus Christi |
| May 1st | Labor Day |
| August 16th | Restoration Day |
| September 24th | Day of the Virgin of Mercedes |
| November 6th | Constitution Day |
| December 25th | Christmas |
Laws that Regulate Labor Relationships
| Laws | Brief Description |
| Constitution of Costa Rica | The constitution of Costa Rica was signed in 1948 and is the supreme law. One unusual fact about this constitution is that the military was abolished, making it the second country to do so. Also, the citizens have the right to live in a healthy, natural environment |
| Labor Code | Workers can work no more than 6 hours at night or 8 hours during the day. A six-day workweek is allowed capping hours at 36 hours on a night shift or 48 hours daytime hours, on average |
| Tax Code | Costa Rica corporate tax rates are progressive and run between 10% – 30% |
| Social Security | These are from: Ministry of Labor and Social Security (MTSS) Ministry of Finance (MH) Occupational Health Council (CSO) Costa Rican Social Security Fund (CCSS) It includes family and child benefits, maternity benefits, unemployment, work accidents, and occupational diseases, as well as old age, disability, and survivors’ pensions, and health protection; addressing all these branches through a combination of contributory schemes (social security) and non-contributory benefits financed with taxes, particularly social stimuli such as those granted with resources from the Family Allowance Fund. Actions to guarantee Social Security form a substantive part of all the work of the Ministry of Labor and Social Security and institutions such as IMAS, the CCSS, PANI, INAMU and the Ministry of Health, among others. |
Key Tax and Labor Authorities
| The Ministry of Finance | This is the main authority on tax matters and is divided into two sections: General Customs Administration and General Tax Administrations |
| Social Security Law (CCSS) (Costa Rican Social Security Fund) | The CCSS is the social security law that gives rights to employees for medical assistance, pensions, etc. The CCSS also runs most of the hospitals and healthcare in the country, making it among the best health care in Latin America |
Labor Contracts
| Executive decree (No. 42522-MTSS) | It is a procedure for employers to request the temporary suspension of labor agreements with their employees. This became effective in 2020 as a response to Covid-19 |
| Contracts (Section 18 LC ) | There is an assumption of a contract between employer and employee, written or verbal. The current working conditions trump the written or verbal agreement. |
| The International Labor Organization | Costa Rica is a part of the United Nations labor organization, and therefore follows laws and rulings of this organization. |
| Work Hours (Section 136 LC) | Day shift cannot be more than eight hours. The night shift cannot be more than six hours. And the mixed shift cannot be more than 7 hours, according to Section 136 LC. |
Basic Requirements
Labor Code dictates contracts must contain:
- Name
- Scope
- Clear description of your employees’ responsabilities
- Remuneration Terms
- Addition Benefits
Payroll
Payroll taxes cannot exceed the amount set by law or they are subject to income tax rates ranging from 0% to 25%. Knowing what these maximums and minimums are is important to operate within regulations and avoid legal trouble. Manual workers must be paid every 15 days, domestic and intellectual service workers can be paid monthly. It is also mandatory to pay an annual bonus called the 13-month salary payment which means a bonus
equivalent to one month’s salary. Employers must make this payment by the 20th of December. Legal Benefits in Costa Rica- You must create a contract for your employees that states the salary and compensation amount in colón rather than the currency of the location of yourself.
- Employees in this country require a month of wages for their Christmas bonus, which must be paid between the 1st and 20th of December.
- Your employees must receive full paid sick leave for the first three days of their illness. Employers pay 50% of this, and social security covers the other half.
- Employees are allowed 14 vacation days a year.
- Costa Rica is a part of the World Trade Organization (WTO).
- There is privacy and anonymity for your shareholders, who do not need to be named.
- There are many free trade agreements between countries such as: Mexico, Chile and Canada.
| Minimum Wage (National Council on Wages) | • 317.915,58 CRC (monthly). As Costa Rica does not have a minimum wage, there is no mandatory minimum pay rate for employees. |
| Vacations | • The minimum wage is revised every 6 months and can be found in the magazine “La Gaceta” • It is dependent upon the skill of the employee • Those with a degree earn at least 682,607 colónes a month, around $1,058 a month |
| Overtime | • If an employee works more than 48 hours a week, it is considered overtime • Overtime is considered an exception and should be asked for only in circumstances where it is absolutely necessary • All payments must be supplemented with an extra 50% of the employees’ hourly wage • You cannot require more than 4 hours or a total of 12 hours per day |
| Christmas Salary (Aguinaldo) | • Every employee is entitled to a Christmas bonus • The Christmas bonus is the employee’s average monthly wage over the previous year. From December 1st to November 30th. |
| Occupational risk insurance (National Insurance Institute)(article 195, 218) | • This protects the worker against risks in the workplace. They can have medical, surgical, hospital care, pharmaceutical, and rehabilitation assistance as well as cash benefits if an accident happens in the workplace |
| Vacations or PTO | Salary employees must be paid on: • August 2 (Virgin of Los Angeles Day) • October 12 (Cultural Day) regardless of whether they work The rest of the country’s 11 public holidays: • January 1 (New Year’s Day)August 15 (Mother’s Day) • April 11 (Juan Santamaria Day) • Holy Thursday and Friday (Easter Week) • May 1 (Labor Day) • July 25 (Annexation of Guanacaste Day) • September 15 (Independence Day) • December 25 (Christmas) • Employees receive one day of vacation for every month they work and two full weeks of vacation after 50 weeks of work • Employees are not entitled to accumulate or carryover any leave unless it is agreed upon by the employer and the employee in a written agreement |
| Leaves of Absence Employees have the right to paid absences for the following things: | • Employees are entitled to three days of pay for sick leave • Paternity Leave • Maternity Leave covers one month before birth and three months after • Parental leave • Bereavement leave; if someone passes, the employee is entitled to three days of pay |
Employers Contribution or Labor Cost
Employers are subject to taxes and other costs for having employees. Employers cannot recover these costs. Costa Rica Income Tax for Lucrative (Profit Generating) Activities
| Over this amount | Not over this amount | Tax % on Excess |
| 0 | 2.747.000 CRC (4292.46 USD) | 0% |
| 2.747.000 CRC (4292.46 USD) | 4.102.000 CRC (6409.78 USD) | 10% |
| 4.102.000 CRC (6409.78 USD) | 6.843.000 CRC (10130.32 USD) | 15% |
| 6.843.000 CRC (10130.32 USD) | 13.713.000 CRC (29289.56 USD) | 20% |
| 13.713.000 CRC (29289.56 USD) | | 25% |
Corporate Tax Rates
| Taxable Gross Income | Tax % on Excess |
| CRC 0-41,112,000 (64451.76$) | 10% |
| CRC 41,11,000(64451.76$) – 82,698,000(129646.62$) | 20% |
| Above CRC 82,698,000(129646.62$) | 30% |
Types of Disabilities
Disability rates in Costa Rica are 10.5% of the country, and they have been part of the UN’s Convention on the rights of persons with disabilities since 2008.
Maternity Leave
Once an employee is pregnant, they can take leave a month before their baby is due plus three months of maternity leave after the baby arrives. The maternity payment responsibility falls on both the employer and CCSS for the entirety of four months.
Termination
The Labor Code outlines rules for termination of an employment contract:
| Type of Termination | Brief Description |
| No cause | • Employees fired without cause are entitled to severance pay. This is known locally as Prestaciones Laborales. • The employer must give a 30 days’ notice. Regular pay continues for these 30 days, but the employee still has the right to one paid day per week to look for another job. • If no notice is given, 30 days of pay is due. |
| Example: For Cause Articles 81 | • The employer holds the burden of proof, so the cause must be well substantiated • When terminating an employee, employers must personally deliver to the employee a dismissal letter which clearly outlines the facts behind the dismissal • Employment disputes can now be litigated orally, in two hearings, rather than in written form as was previously required |
Other forms of compensation upon termination include all unused vacation days, and the pro-rated Christmas bonus. Severance pay grades are based on the following table:
| Length of Employment | Holiday Name |
| 3-6 months | 7 days pay |
| 6-12 months | 14 days of pay |
| 1 year | 19.50 days |
| 2 years | 20 days |
| 3 years | 20 days |
| 4 years | 21 days |
| 5 years | 21.24 days |
| 6 years | 21.50 days |
| 7 years | 22 days |
