According to recent interpretations by Costa Rican Authorities, renting your Beach or Vacation House in Costa Rica is subject to the Municipal Operation Permit. Currently, there is a stronger tendency for Municipalities in Costa Rica in pursuing this type of tax. The Operation Permit in Costa Rica is a license which involves paying a tax for engaging into commercial activities in Costa Rica, as per article 79 of the Commercial Code.

Notwithstanding if you are dealing with shorter or longer periods of time, more and more Municipalities are requiring owners to obtain the corresponding Municipal Operation Permit for renting their Houses or Apartments in Costa Rica; if such Permit is not obtained, owners are subject to the closing of the premises by the Municipality.

In addition to other permits that must in turn be obtained prior to the Municipal Operation Permit (mainly Zoning and Health Permit), Municipalities are also requesting for compliance with the access and measurements requirements established in Law 7600- Law for Equal Opportunities for Disabled Individuals – and its regulations. These regulations might present a problem considering that houses originally built for private use usually do not meet these specifications. New houses or buildings should take this into account, as it might eventually be a contingency if you would rent your house or building for vacation periods in the future.

In order to be able to obtain the Municipal Operation Permit, the property must also be up to date with the payment of land taxes in Costa Rica, which are collected also by the Municipality.

Furthermore, there is also an obligation to register before the Tax Authorities and file the corresponding returns for income tax. This is a separate obligation from obtaining and paying the operation tax to the local government. Municipal taxes and national taxes are different and independent from each other. Even if the taxpayer (house owner) is the same individual or legal entity, and the activity is the same (renting), Costa Rican authorities have determined that there is no double taxation since the taxable basis is different. Whereas the municipal tax (paid through the Municipal Permit) is normally paid based on the business’ gross income or a pre-established amount, income tax is calculated over the business’ net earnings. In addition, the municipal tax paid for the Operation Permit is considered as a deductible expenditure when calculating income tax. In any case, each Municipality has its own regulations, which should be reviewed when dealing with these topics, along with the specific operation, so a decision can be made.