Expanding to Costa Rica is an exciting strategic move for businesses, but there are necessary factors to consider that are key to success. One such factor is how to set up Costa Rica payroll in compliance with local laws.
Taxation rules in Costa Rica
Costa Rica’s Social Security System is called the Caja and provides employees with healthcare, sick leave, disability pensions, and retirement benefits. The employer is required to register all employees and contribute 26.67% of their salary. Employees must contribute 10.67%.
Employers also need to make sure employees are registered to pay personal income tax. Costa Rica uses a progressive income tax scale that goes up to 25%. Companies also use a progressive scale for corporate income tax that fluctuates based on profits. Depending on what the company earns in a year, they could owe up to 30%.
Costa Rica payroll options for companies
There are 3 main payroll options in Costa Rica:
- Internal: Operating an internal payroll can help larger companies demonstrate their commitment to Costa Rica. However, companies will need a bigger budget to hire a full HR team.
- Costa Rica payroll processing company: A processing company is a solution to outsourcing payroll, but you will still be responsible for compliance.
- G-P: By partnering with and Employer of Record like G-P, companies can expand their global footprint without the hassle of entity setup and management. With G-P, all employees will be paid punctually and compliantly so employers can focus on other key aspects of their business.
How to set up payroll in Costa Rica
Before setting up payroll in Costa Rica, companies must establish a subsidiary in the country. The process to set up a subsidiary can take weeks or months, depending on where the company is incorporated and the type of entity chosen. However, it’s a necessary step before hiring employees, running payroll, and starting operations in Costa Rica.
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