Taxation of UK and US Pensions in Costa Rica: What to Know Before Retiring

Retiring in Costa Rica: A Growing Trend Among British and American Pensioners

Year-round sunshine, lush nature, a relaxed pace of life, and a welcoming community—more and more British and American retirees are choosing to retire in Costa Rica to enjoy a healthier, more peaceful phase of life.
One of the most frequent concerns, however, is the taxation of pensions abroad.
Do you still pay taxes on your UK or US pension if you move to Costa Rica?
The answer depends on several factors, especially your tax residency status and any international tax agreements between your country and Costa Rica.

How Taxation Works: Tax Residency and International Agreements

If you're a UK citizen retiring abroad, you may still be subject to UK income tax on your pension unless you qualify as a non-resident for tax purposes.
The UK has a double taxation agreement (DTA) with Costa Rica, which may help reduce or eliminate double taxation on the same income.
It's essential to check the specific provisions of the UK–Costa Rica DTA and consult HMRC or a tax advisor.

United States

If you are a US citizen or resident alien, you are required to report worldwide income to the IRS—including your pension—regardless of where you live.
However, Costa Rica only taxes income earned within its territory. This means your US pension will not be taxed by Costa Rica, but you still owe taxes in the US.

What This Means for Retirees

UK Pensioners in Costa Rica

Your UK pension income may still be taxed in the UK, unless you meet the conditions for non-residency and can apply relevant DTA benefits. You’ll need to inform HMRC about your change of residency and check whether you qualify for any tax relief.

US Pensioners in Costa Rica

Your US pension income will continue to be taxed by the IRS, but Costa Rica will not impose any local taxes on that income. Filing requirements such as the FBAR and FATCA still apply, and it's strongly recommended to work with a US tax professional familiar with expat taxation.

Taxation of UK and US Pensions in Costa Rica: What to Know Before Retiring

Why Costa Rica Is Still a Smart Choice

Even without tax exemptions, Costa Rica remains one of the most attractive countries to retire in. The cost of living is lower than in the UK or the US, especially in regions like Guanacaste, where Flor de Pacifico communities are located.

Basic living costs—such as rent, groceries, healthcare, and transportation—can be 30–40% lower than in Europe or North America.
The quality of life is enhanced by a tropical climate, abundant nature, and a community-oriented, peaceful lifestyle that promotes well-being and longevity.

The Pensionado Visa: Legal Residency for Retirees

Costa Rica offers a “Pensionado” visa, a legal residency permit for retirees.
To qualify, you must demonstrate a minimum monthly pension income of $1,000 USD.
This visa allows you to reside legally in Costa Rica and enroll in the public healthcare system (CCSS), while also enjoying discounts and legal benefits for retirees.

The taxation of pensions for UK and US citizens living in Costa Rica is primarily governed by the laws of their home countries.
Still, the economic, environmental, and lifestyle advantages make Costa Rica one of the best places to retire, even without specific tax incentives.

By planning ahead, understanding your tax obligations, and working with a qualified advisor, you can enjoy a serene and fulfilling retirement in Costa Rica.

Fill out the form on our website to receive a free retirement planning guide and speak with one of our English-speaking consultants who lives and works in Costa Rica.
We’ll help you explore housing opportunities, legal residency, and life in the Flor de Pacifico communities—all designed to make your retirement simple and sustainable.