Costa Rica Income & US Tax – IRS Real Estate, Assets & Accounts
We represent many clients each year with on matters involving the IRS and Costa Rican income, assets, accounts and investments.
Whether our client is an expat residing full-time in Costa Rica, or a global investor who resides in the United States, or other 3rd party country — there is a commonality of not being aware of U.S. tax rules, and reporting requirements.
Here are some common examples (and misconceptions):
I Already Pay Tax in Costa Rica
Just because a person pays tax in Costa Rica does not mean they are exempt from paying tax in the U.S. In other words, U.S. Persons (not just citizens) are subject to U.S. Tax on their worldwide income.
If a person already paid tax in Costa Rica on income, they may be eligible for a Foreign Tax Credit on their U.S Tax Returns.
I have my Real Estate in a Sociedad Anonima
A Sociedad Anonima is a common Business and Estate Planning tool used in many countries. While many foreign entities can be “disregarded,” from a U.S. tax perspective — the Sociedad Anomina is a “per se” corporation.
This means that the Sociedad Anonima cannot be disregarded – which also means it may result in (list is not exhaustive):
- 2017 Transition Tax
- 2018 (going forward) GILIT
- Subpart F Income
- 5471 Reporting
- 8865 Reporting
Foreign Real Estate Does Not Generate Income
If a U.S. person has a foreign corporation that contains foreign real estate, and the real estate is not used to generate income — that is not the end of the analysis.
Unless the foreign corporation can either be disregarded, or meet all the elements of being “dormant “(cap on the value of the property) — the corporation must still be reported.
I have Not Repatriated Any of the Money
Just because the money has never been “repatriated” is not conclusive of tax or reporting. In accordance with the TCJA, there is a one-time repatriation/transition tax on previously unreported income (Earnings and Profit). In addition, there may be GILTI, Subpart F — along with other reporting and income tax requirements.
Golding & Golding, A PLC
We have successfully represented clients in more than 1,000 streamlined and voluntary disclosure submissions nationwide and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
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Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.