The recent approval of Law 23.578, which will come into effect on January 1, 2026, brings a significant change to the tax regime for self-employed workers in Costa Rica. Below is a breakdown of the most critical aspects.
Increase in the income tax exemption threshold
The reform increases the income tax exemption threshold for self-employed individuals whose annual income is less than ₡6,244,000. It means that up to that amount, they will not be subject to income tax. Above that threshold, progressive tax rates apply:
| Annual Income Range (₡) | Applicable Rate |
| ₡6.244.001 – ₡8.329.000 | 10 % |
| ₡8.329.001 – ₡10.414.000 | 15 % |
| ₡10.414.001 – ₡20.872.000 | 20 % |
| Over ₡20.872.000 | 25 % |
These thresholds will increase annually in line with the cost of living index, ensuring that benefits are adjusted nominally without the need for new legislation each year.
Tax reduction for middle and low incomes
The reform focuses tax relief on self-employed workers with lower incomes. The elimination of the tax on the first ₡6.24 million (approximately USD12,358 annually) represents a direct benefit. All self-employed workers earning below that level will be exempt starting in 2026.
It not only improves the liquidity of those who provide professional services or work on a fee basis, but also has a direct effect on their cash flow and financial planning.
Practical consequences
Lower immediate tax burden: by excluding the first ₡6.24 million from the tax base, the amount on which the tax is applied is reduced, which can translate into tax savings of more than ₡624,000 (10%) if it had been paid from the lowest bracket.
Simplified accounting: the reduction in brackets and a higher exemption threshold make it easier to file tax returns, simplifying accounting processes and reducing tax uncertainty.
The importance of annual planning: thanks to the cost-of-living adjustment from the second year of validity, professionals will need to reassess their income level and tax implications each year. Accounting advisors can optimize the income structure (e.g., deferring invoices, investing in deductible VAT, or other deductible expenses).
What should you do as a self-employed worker?
- Review your current income level: make sure you are aware of whether your annual income will be below or close to the new thresholds.
- Plan your invoicing: if you are in the middle bracket, thinking about how to distribute your income can help you reduce your tax base.
- Take advantage of cost-of-living adjustments: these limits will rise each year, which means that this tax benefit will become progressively broader.
- Seek accounting advice: professional support is key to identifying which expenses are deductible and how to achieve an optimal tax structure.