5 oct 2026
Inactive vs. Active Corporation in Costa Rica: What Changes When Your Property Starts Generating Rental Income?
Many foreign property owners in Costa Rica hold real estate through a Costa Rican corporation. In some cases, that corporation was created simply to own the property and does not conduct any business.
For Costa Rican tax purposes, that type of company may be considered an inactive corporation.
But what happens when the owner decides to rent the property?
Whether the property becomes a long-term rental, vacation rental, or Airbnb, earning rental income can change the corporation’s tax and accounting obligations. Understanding that transition before the first rental income arrives can prevent unnecessary compliance problems later.
What Is an Inactive Corporation in Costa Rica?
An inactive corporation is not the same as a dissolved or nonexistent company.
A corporation can own assets—including Costa Rican real estate—while remaining inactive for tax purposes if it does not conduct an income-producing activity.
Inactive corporations still have compliance responsibilities. For example, they may have obligations related to the annual corporate tax and the reporting requirements applicable to inactive legal entities.
Historically, one important filing for these entities has been the D-195 Informative Declaration for Inactive Legal Entities, which reports summarized information about assets, liabilities, and the sources used to fund the corporation.
The important distinction is that owning property and earning income from that property are not the same thing.
What Changes When the Property Starts Producing Rental Income?
Once the corporation begins earning rental income, it is no longer simply holding an asset without producing income.
Its tax registration should reflect the activity being carried out, and the corporation may acquire new tax, invoicing, accounting, and filing obligations.
This is an important step to address when the rental activity begins—not months later when an annual tax return is being prepared.
Among the items that should be reviewed are:
The corporation's registration in Costa Rica's Registro Único Tributario (RUT)
The correct economic activity in TRIBU-CR
The applicable income-tax regime
VAT obligations
Electronic invoicing requirements
Bookkeeping and supporting documentation
Additional requirements for short-term tourist rentals
The exact obligations depend on how the property is rented and how the activity is structured.
What Happens to the D-195?
The D-195 is designed for inactive legal entities.
Costa Rica's Ministry of Finance has specifically addressed an example in which a corporation was inactive for part of a year and then registered an economic activity during that same year. In that example, because the corporation ended the period as an active entity with new tax obligations, Hacienda indicated that the D-195 did not correspond for that period.
This illustrates why the transition should be properly recorded in the tax registry.
Simply continuing to treat the corporation as inactive after rental operations have begun can create a mismatch between the corporation's actual activities and its tax registration.
How Is Rental Income Taxed?
Rental income in Costa Rica may fall under the rules for real-estate capital income (rentas de capital inmobiliario).
Under the standard capital-income regime, Costa Rica allows a statutory deduction equal to 15% of gross rental income without requiring proof of those expenses. The applicable tax rate is then 15% of the taxable amount after that deduction.
However, that is not necessarily the correct treatment in every case.
Rental income can fall under the profits regime in certain circumstances, and qualifying taxpayers may also have an option to move real-estate rental income into that regime. For example, specific rules apply where an employee registered with the Costa Rican Social Security Administration (CCSS) is used to generate the rental income.
This is one reason property owners should determine the appropriate tax treatment based on their actual situation rather than assuming that every rental property is taxed the same way.
Does VAT Apply to Rental Properties?
VAT also needs to be reviewed when a property begins generating rent.
The general Costa Rican VAT rate applicable to rental services is 13%.
There is an important exemption for properties rented exclusively as housing when the monthly rent does not exceed 1.5 times the applicable base salary. Using the 2026 base salary published by Hacienda, that threshold is ₡693,300 per month. When the qualifying residential rent exceeds the statutory threshold, the VAT treatment changes.
Short-term vacation rentals require separate consideration.
Properties offered as non-traditional tourist lodging—including qualifying homes, apartments and villas offered for short stays—are regulated under Costa Rica's non-traditional lodging framework. Providers are subject to registration requirements with the Costa Rican Tourism Institute (ICT), and applicable tax and electronic invoicing obligations also need to be addressed.
An Airbnb property therefore should not automatically be treated in the same manner as an ordinary long-term residential lease.
Bookkeeping Becomes Much More Important
Once rental operations begin, good bookkeeping becomes part of maintaining a clear tax position.
Property owners should keep organized records of items such as:
Rental income received
Bank deposits
Repairs and maintenance
Utilities
Property-management fees
Insurance
Professional fees
Furniture and equipment purchases
Taxes and other property-related costs
For short-term rentals, it is particularly important to reconcile the amount paid by the guest with platform fees, taxes, adjustments, and the amount eventually deposited into the owner's bank account.
These records help explain both the income reported and the financial activity taking place inside the corporation.
Plan the Change Before the First Rental
A common mistake is to think about tax registration only after rental income has already been received.
A better approach is to review the corporation before the property begins operating as a rental.
That gives the owner time to confirm the correct activity registration, determine the applicable tax regime, set up electronic invoicing when required, and establish a bookkeeping system from the first transaction.
For foreign owners in particular, this can be valuable because a corporation that once existed mainly to hold Costa Rican property can develop a significantly different compliance profile once that property becomes an income-producing asset.
If you are planning to begin renting a property held by a Costa Rican corporation, reviewing the accounting and tax implications before operations start can help ensure that the corporation's registration and records match what it is actually doing.
Disclaimer: This article provides general educational information and does not constitute individualized tax, accounting, or legal advice. Costa Rican tax treatment can vary depending on the property, rental arrangement, taxpayer, and business structure. Professional advice should be obtained for your particular circumstances.
