Monthly, the owners will be withholding, filing and paying the VAT (Value Added Tax), via form D-104 tax form, which is 13% of the rental income paid by the renter. Also monthly, the owners must file and pay income tax via form D-125 tax as outlined above. For example:
Renter pays $2,000 USD for rental, plus 13% VAT (Value Added Tax) = $260
Expenses allowed by law 15% of rental income = $300
Tax Base = $1,700
Income Tax to be paid = $255 ($1,700 x 15%)
There is one exception that will allow the tax payer to stay on the annual tax filing (form D-101). They must have an employee on the payroll that is duly registered in both CCSS 'Caja Costarricense de Seguro Social' (social security) and INS 'Instituto Nacional de Seguros' (Workers Compensation insurance). This can be evaluated in each case due to the labor liabilities.
It is worth mentioning as it relates to having legal employees:
Associated payroll taxes are around 28% of the gross salary
Workers Comp is, on average, 2% depending on the job description
The Christmas Bonus 'Aguinaldo' is mandator on an annual basis and is 1/12th of the total gross salary
2 weeks paid vacation is also mandatory
The list above are the very basics when it comes to payroll. To start the hiring process, a registration form including copies of the employee's ID, must be submitted within 8 days of hire to avoid fines and penalties before CCSS and INS.
It is highly advisable to have a written labor agreement that details the salary, hours, work description and all other relevant matters.
It is important to fully understand the tax and labor laws relating to renting property and hiring personnel for a rental property (such as a maid, housekeeper or maintenance person). For assistance, we are at your service at firstname.lastname@example.org