Costa Rica is a rugged country in Central America containing rainforests and beaches on the Caribbean Sea and Pacific Ocean. Expanding to this beautiful country is an exciting decision for your company, but there are necessary factors to consider for your new location to be successful. You must assess your Costa Rica payroll options, set up your payroll, and ensure complete compliance.
G-P can help with our Costa Rica payroll outsourcing services. We use our Employer of Record solution to run your payroll, ensuring you stay compliant so you can focus on growing your business.
Taxation Rules in Costa Rica
Costa Rica has a social security system called the Caja, which gives employees free healthcare, sick leave, disability pensions, and retirement benefits. As an employer, you are required to register all employees with the Caja and contribute about 26.5% of their salary. Employees must contribute 10.5%.
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 you earn in a year, you could owe up to 30%.
Costa Rica Payroll Options for Companies
You have four main Costa Rica payroll options:
- Internal: Operating an internal payroll can help larger companies demonstrate their commitment to Costa Rica. However, you will need a bigger budget to hire a full HR team.
- Remote: If you’d rather have one payroll for all your employees in Costa Rica and the parent company, you can use remote payroll run out of your parent company. The different sets of employees will have separate employment laws to follow.
- Costa Rica payroll processing company: A processing company is a solution to outsourcing your payroll, but you will still have to handle compliance.
- G-P: Choosing G-P will help you outsource your payroll and take the burden of compliance off your shoulders.
How to Set Up a Payroll in Costa Rica
Before you set up your Costa Rica payroll, you have to establish a subsidiary in the country. The process to set up a subsidiary can take weeks or months depending on where you incorporate and what type of entity you choose. However, it’s a necessary step before you can hire employees, run payroll, and start operating in Costa Rica.
G-P lets you skip this step. We use our existing subsidiary in Costa Rica to hire employees on your behalf, set up your Costa Rica payroll, and help you stay compliant.
We recommend outlining certain entitlement and termination terms in an employment contract before setting up your Costa Rica payroll. Termination can be difficult in Costa Rica, and you need to terminate employees based on a cause included in Article 81 of the Labor Code. As the employer, you carry the burden of proof that you terminated an employee for cause.
Payroll Processing Company in Costa Rica
G-P is the Costa Rica payroll outsourcing solution you need to succeed in your expansion. Contact us today to learn more.