Costa Rica | Costa Rica removed from EU’s ‘blacklist’ of non-cooperative jurisdictions for tax purposes

·       Costa Rica was delisted from Annex I (commonly referred to as the “blacklist”), following the approved reforms to the country’s Income Tax Law that amended aspects of the foreign-source income exemption regime.

·       However, Costa Rica was included in Annex II, pending the implementation of the Global Forum recommendations regarding the automatic exchange of information in due time.

·       Taxpayers, particularly financial entities, should monitor upcoming reforms that may be approved in this area.

On 17 October 2023, the Council of the European Union (EU) adopted the conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes and decided to delist Costa Rica from European Union’s (EU’s) Annex I (commonly known as the "blacklist") following the reforms incorporated in the Income Tax Law through the approval of Law No. 10.381, to amend aspects of Costa Rica’s foreign-source income exemption regime.

These reforms include a clarification to the scope of the territoriality principle and introduction of a new taxation regime for foreign-source passive income. (For additional information, see EY Global Tax Alert, Costa Rican Congress approves bill to achieve exclusion from the European Union's list of non-cooperative jurisdictions in tax matters, dated 12 September 2023.)

After removing Costa Rica from Annex I, the EU decided to place the country in Annex II, pending the country’s implementation of the Global Forum recommendations regarding automatic exchange of information. The goal is for Costa Rica to achieve determinations in Fall 2024 of, at least, “In place, but needs improvement” on Core Requirements 1 and 2 in the Global Forum peer review report.

For additional information please contact:

Ernst & Young, Costa Rica

Rafael Sayagués – rafael.sayagues@cr.ey.com

Randall Oquendo – randall.oquendo@cr.ey.com

Daniel Quesada – daniel.quesada@cr.ey.com