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HMRC internal manual

Double Taxation Relief Manual

Costa Rica: Admissible taxes and unilateral relief

Admissible in principle for unilateral relief

Income tax (impuesto sobre la renta).

Note: Costa Rica’s income tax law imposes a withholding tax on various types of income paid to non-residents at rates specified in Costa Rican Income Tax Law Article 59. A total or partial exemption from liability can be granted for withholding taxes on profits, dividends, social participation, interest, commissions, financial expenses, patents, royalties, reinsurance, consolidation and insurance premiums of all types referred to in Article 59. The exemption can be given if it can be shown that the recipient of such income is not granted in the country in which it operates or resides any credit against its tax liability for the withholding tax that was paid in Costa Rica.

In order to claim the exemption (under Article 61), the Costa Rican Tax Administration requires the foreign recipient or its withholding agent to provide certification from the tax authorities of the country in which the recipient operates or resides verifying that the tax is not creditable in that country.

Unilateral relief is not available in the UK for these “soak up” taxes, as they do not represent the “minimum tax payable”, as required by section 795A ICTA 1988.

A resident certificate to that effect can be supplied by the UK resident’s tax office.