Global minimum tax and its considerations for Costa Rica

Felipe Guevara

Felipe Guevara

The global minimum tax arises from the OECD initiative known as “Pillar 2”, whose purpose is to establish a minimum global taxation level of 15% for large multinationals in all countries where they are present, as well as from the Multilateral Convention (MLC) signed between 140 member and non-member countries of this organization, intending to collect between 4% and 8% of worldwide income, by way of income tax. The global minimum tax came into force on January 1, 2024, in 36 jurisdictions that had already approved internal regulations for this purpose.

The entry into force of this regulation brings with it a series of vicissitudes and challenges, particularly for countries with emerging economies, as is the case of Costa Rica, given that it will affect companies that are part of multinational or exclusively domestic groups with annual revenues equal to or greater than €750 million in at least two of the four preceding fiscal years and, specifically, companies that are:

    1. Ultimate parents.
    2. Intermediate parent companies.
    3. Subsidiaries of groups exceeding the minimum level of income.

In this regard, according to the OECD itself, in an update of the estimated economic impact of the tax, it is likely that the place where multinationals invest abroad will depend more and more on aspects such as labor and infrastructure training, and not so much on the location that may reduce their total tax bill, given precisely that the global minimum tax will apply even if a tax benefit is obtained in a subsidiary located in another jurisdiction, as would be the case in Costa Rica.

This poses great challenges not only from the perspectives (labor and infrastructure), but also at the level of social charges, given that Costa Rica is the highest in the OECD, which implies a disincentive to formality, and now even more so, for foreign direct investment.

On the other hand, it invites the possibility that the Costa Rican treasury rethinks some tax advantages granted to its investors, since not doing so could imply ceding taxation in favor of those jurisdictions where companies must consolidate and end up paying the global minimum tax for the portion not paid in Costa Rica. However, neither can it neglect an investment attraction model that has proven to be successful and generates well-paid employment.

Therefore, although it is still early to know the effects and the way to go, it is not too late to start the discussion on the necessary reforms to introduce the Costa Rican regulatory framework, especially at the level of social charges.  If you need more tax advice on this subject, please do not hesitate to contact us at: