Costa Rica Now Gives Tax Deductions to Companies that Hire People Over 45
At the end of 2021, Costa Rica had more than 80.000 people aged 45 or older that were unemployed. Unemployment has been one of the biggest issues the country has faced both before and during the Covid-19 pandemic. Because of that, the Legislative Assembly has discussed several bills to booster several job indicators, one of them being the opportunities for people who lost their position and are over 45 years old.
Congress passed a bill on this matter in October 2021, and President Carlos Alvarado signed the law in December. This past January, the official gazette posted the contents of the law, which means it should be implemented now. The law gives tax benefits to companies that prove that at least 10% of their personnel is aged 45 or over, and the amount of said deductions depends on how many employees of this age group they have.
Income tax deductions
The law says that the State Tax Administration will apply a 5% deduction in the income tax returns of companies that prove that 10% of their employees are over 45 years old. If more than 20% of a company’s personnel is over that age, the deductible goes up to 7%. Employers must have this employees registered in the Caja Costarricense del Seguro Social (CCSS, Costa Rica’s social security system).
Social development tax deductions
In Costa Rica, with limited exceptions, patrons must pay a 5% tax on all the salaries of their employees to the Social Development Fund and Family Allowances (Fodesaf, its acronym in Spanish). However, with these new law employers who demonstrate that 10% of their personnel is over 45 years old will only have to pay 4% to Fodesaf, and those who have more than 20% of employees of this age group will only have to pay 3%.
Benefits apply only in case of new hires
If you have a company in Costa Rica and think that you can apply for these tax deductions, keep in mind that the law makes it clear that the benefits will only apply for new hires that happen after its publication. It also says that income tax deductions for this matter will be applied after the amount to pay for this tax is determined and with the condition that these new hires are for at least a full year of continued labor.
Because of this new law, it won’t be considered a discriminatory practice if employers prefer to hire people over the age of 45 rather than other applicants.
Four-year trial
Since this law has the objective of reducing unemployment in people aged 45 or more, and overall to create more job opportunities for those who have been getting left behind in the last years, it will be reviewed in four years to see if those goals were met. The law says that it has a validity of four years since its publication, meaning it should be reviewed in January 2026.
If the law continues in force , the Ministry of Labor will have to present a report to the Legislative Assembly about its impact in terms of job creation and maintenance. Congress will then define if it extends its validity period for another four years. As for now, Eduardo Cruickshank, leader of National Restoration (the party that proposed the bill), has celebrated that this law will open new job opportunities for all men and women over 45 years old.
