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OECD Tax Policy Reviews: Costa Rica 2017

image of OECD Tax Policy Reviews: Costa Rica 2017

This report is part of a new series of publications entitled OECD Tax Policy Reviews. These country reviewsare intended to provide independent, comprehensive and comparative assessments of OECD member and non-member countries’ tax systems from a tax policy perspective as well as concrete recommendations for tax policy reform. By benchmarking countries’ tax systems and identifying tailored tax policy reform options, the ultimate objective of the reviews is to enhance the design of existing tax policies and to support the adoption and implementation of tax policy reforms.

This first edition provides a comprehensive tax policy assessment of Costa Rica’s current tax system as well as tax policy reform recommendations. The report is divided into five chapters, starting with a general chapter providing an overview of key macroeconomic and tax revenue trends (Chapter 1), followed by an assessment of the main types of taxes of the Costa Rican tax system, including corporate income taxes (Chapter 2), personal income taxes and social security contributions (Chapter 3), the general sales tax (Chapter 4) and environmentally-related taxes (Chapter 5)

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Reforming the corporate tax system in Costa Rica

This chapter discusses the corporate income tax (CIT) in Costa Rica, focusing on CIT rates and the main CIT base provisions including tax depreciation allowances. Corporate effective tax rate (ETR) calculations show the combined impact of CIT provisions on the effective tax burden on investment in Costa Rica. The chapter discusses the debt-equity bias, the taxation of foreign-source passive income and the country's narrow tax treaty network. The chapter analyses whether the tax system creates a tax-induced incentive for foreign direct investment (FDI) in Costa Rica and analyses the impact on the ETRs of the CIT incentives for companies located in the Free Trade Zones (FTZ); the analysis distinguishes between parent companies which are tax resident in a country with a worldwide or a territorial tax system.

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