This article provides a comprehensive overview of the sole proprietorship structure—known locally as “Persona Física con Actividad Lucrativa”—and outlines the main tax obligations, registration requirements, and fiscal conditions for individuals seeking to operate as sole proprietors in Costa Rica in 2025.
Availability of Sole Proprietorship Status in Costa Rica
Sole proprietorship status is fully available in Costa Rica under the designation “Persona Física con Actividad Lucrativa (Sole Proprietor)”. Both citizens and residents can operate under this framework, allowing individuals to invoice clients and manage business activity without incorporating a separate legal entity. This status is commonly used by freelancers, small business owners, and independent professionals across various sectors.
Main Features and Registration Requirements
- Name of Status: Persona Física con Actividad Lucrativa
- Who Can Register: Citizens and residents of Costa Rica
- Governing Authority: Dirección General de Tributación (the Costa Rican Tax Authority)
- Minimum Capital Requirement: None
- Common Use: Freelancers, consultants, independent professionals, and small businesses
- Registration: Directly with the Dirección General de Tributación
Taxation of Sole Proprietors in Costa Rica (2025)
Sole proprietors are subject to a progressive income tax system as well as value-added tax (VAT) and mandatory social security contributions. The table below summarizes the key tax rates and thresholds for 2025:
| Annual Income Bracket (CRC) | Approx. (USD) (Rate: CRC 525 = USD 1) |
Income Tax Rate (%) |
|---|---|---|
| Up to CRC 4,181,000 | $7,965 | 0% |
| CRC 4,181,001 – CRC 8,363,000 | $7,966 – $15,927 | 10% |
| CRC 8,363,001 – CRC 12,545,000 | $15,928 – $23,889 | 15% |
| CRC 12,545,001 – CRC 21,163,000 | $23,890 – $40,311 | 20% |
| Above CRC 21,163,000 | $40,312+ | 25% |
Conversion rate: CRC 525 = USD 1
Other Tax and Registration Requirements
- VAT (Impuesto al Valor Agregado): 13% applies if the activity is subject to VAT. Registration is required with the tax authority.
- Social Security (Caja Costarricense de Seguro Social – CCSS): Contributions are mandatory for all sole proprietors. These are required to maintain access to the national healthcare and pension systems.
Summary Table: Key Requirements for Sole Proprietors in Costa Rica
| Requirement | Description / Rate |
|---|---|
| Status Name | Persona Física con Actividad Lucrativa |
| Minimum Capital | None |
| Income Tax Rates (2025) | 0%-25% (see table above) |
| VAT | 13% (if applicable) |
| Social Security Contributions | Mandatory |
| Registration Authority | Dirección General de Tributación |
Compliance and Filing Considerations
When operating as a sole proprietor in Costa Rica, all tax filings, VAT reporting (where required), and social security contributions must be kept current. There is no separate business legal entity created, so the individual is fully liable for all business debts and obligations. Most registration and filing processes are handled directly through the relevant Costa Rican government agencies, either in person or online.
Pro Tips for Sole Proprietors in Costa Rica
- Register promptly with both the Dirección General de Tributación and the Caja Costarricense de Seguro Social to avoid potential administrative penalties or late fees.
- Maintain clear and timely financial records. This simplifies tax filings and supports compliance with income tax, VAT, and social security regulation.
- If turnover is low, confirm whether your business activity is exempt from mandatory VAT registration or if simplified tax regimes apply.
- As tax rates are progressive, consider annual revenue planning within the revenue bands to optimize your effective tax burden.
Useful Resources
Costa Rica Ministerio de Hacienda
Caja Costarricense de Seguro Social
For professionals and small business operators, Costa Rica’s sole proprietorship structure provides a straightforward approach for running an independent business with no minimum capital requirement. Keep in mind the progressive income tax brackets, the potential need to register for VAT, and the importance of social security compliance. These obligations shape the fiscal landscape you will navigate, so understanding these fundamentals is essential for sound business planning.