Which Lifestyle Would Cost Our Family Less - Oregon or Costa Rica? - Part 1: Taxes

Gringo expats decide to retire in Costa Rica for a wide variety of reasons. Topping many expats' lists of desirable advantages would be maintaining their living standard at a lower cost or enjoying a higher standard of living for the same cost. That goes for adventurous, frugal younger expats as well as older expats such as myself stretching their retirement dollars.

Costa Rica can certainly offer terrific savings, especially in the areas of health care and housing. Many other daily expenses, however - automobiles being the most egregious example - are higher than what most norteamericanos are accustomed to. Depending on your financial status, lifestyle choices, goals and ability to adjust, the comparative financial equations we all go through at some point before moving here will each have their highs and lows.

Taking Stock of Expat Living Expenses

One Constant Is That Things Change

As we approach a new phase in which our own income will shift to primarily U.S. Social Security, our calculations are changing. In fact, just in terms of cost of living, we find that it may actually be cheaper for us to reside in our previous home state of Oregon. I'm not going into all the gory details of that calculation, but this two-part article does hit the high points. Hopefully, it provides additional food for thought to those considering moving to Costa Rica

Eliminating the Worry of Shipping Your Car to Costa Rica

Are ready for an extended stay or retirement to the Land of Eternal Spring and have already decided you prefer to enjoy the freedom and convenience of driving your own vehicle while living in Costa Rica?

Buy a Car Inside Costa Rica or Bring Your Own?

Always check the tire quality!

We'll assume you already hashed out the pros and cons of vehicle ownership in Costa Rica. The next question is whether it’s wiser to buy a vehicle in-country or ship your current vehicle from North America. From my experience, if I had to do it over again, I’d bring in my own car without hesitation.

Why? Well, if you add up all the costs including shipping and import fees, you probably come out about even, but you’ll have one overriding advantage, which is complete confidence in your vehicle. That is something not available when purchasing a used car in Costa Rica.

One Big Reason Cars Are So Expensive in Costa Rica

It's a good news, bad news story in La Nación today regarding the import duties for new and used cars brought into Costa Rica. The site is in Spanish, but here's my rough translation of the most pertinent part of the story:

"According to the tariffs that have applied until now, new and second-hand cars of no older than three years faced a consumption tax of 30 % , cars four or five years old 40%, and more than six years old 53%.

In the next 10 working days, new and second-hand cars up to six years old will face a consumption tax of 30 % and will have an entire tax load of 53 % while cars seven years and older will see a tarriff of 48%."

The good news is that this is supposed to be a "tax cut" though it probably doesn't feel like such great news for most folks who initially pay the tax, and those who are paying it indirectly in higher car prices. 

Anyone know the make and model?

Questions? Well, I have a few that maybe expats here with more expertise in these matters can answer:

• Is the 53% "entire tax load" really on all cars up to six years old or just new ones?
• What's in that difference between the basic tariff and the full load (23%)? 13% of it must be sales tax, right?
• Is there a "full load" figure for the older cars paying the 48% base tariff?
• Where the heck does all this money go? Let me rephrase that: where is the money supposed to go? I'd wager it's not going into better roads.

Is It Really Worth the Trouble and Expense to Obtain Costa Rican Residency?

Knowing what I know now, having been through the residency process (as it was five years ago) and one renewal last year, I am not at all sure that I would do it again. Solely from an economic standpoint, I no longer think it's worth it for most people. Obtaining Costa Rican residency costs more in hard cash than in almost any other Latin American country.

It also does not come with many fringe benefits. For example, Panamá last year did an upgrade to their residency requirements that makes moving there very tempting form a financial viewpoint. You can get permanent (not temporary like in Costa Rica) the first time and with very little money in the bank. They also have huge discounts for retirees on just about everything. You bring in your household goods duty-free and the list goes on. You pay full freight in terms of duty and taxes when you move your stuff to Costa Rica. Sure, you'll get some big discounts at the  Costa Rica national parks and passing through Customs seems to be easier when you are a resident, but those advantages are very minor in the bigger picture.

Weighing Costs versus Legal Requirements

From a freedom of lifestyle perspective, residency might even be thought of as a detriment since once you are invested in it, you want to keep it going and thus, its presence may hinder you from trying another place. That is especially true during the first couple of years when you are still seeing if you can adjust. I will try to leave aside such subjective measures in the following calculations though. Which is why I also won't belabor all the physical and mental hassles of obtaining residency. Some people, crazy people, might actually enjoy those!

Bear with me as I walk through the calculations. Who knows, by the time I am through I may have even convinced myself that it is the right way to go. In all these calculations, I am figuring the costs for a couple who are applying for a Pensionado visa. The overall costs for rentista would be higher (see discussion of Caja below).

The Cost of Owning and Driving a Car in Costa Rica Can Be Daunting

We purchased our first car in Costa Rica, a 2006 Mitsubishi Montero Sport diesel 4x4, when we arrived to stay back in November, 2008. Those were the days when we were more flush with cash than we are now. It didn't seem a great luxury at the time even though the cost was nearly twice what you'd pay in the States, if you could find a diesel version there. That's basically the rule of thumb here for cars, new or used. Purchase prices are double that in the States. Here's a link as to the main reason why.

Oh, this can't be good!

That fact of life here is due to import duties, sales tax, and property transfer tax but also because the number of drivers in Costa Rica has been growing rapidly for years. Strong demand and weak supply play a big role in driving up asking prices.

If only the madness would stop there, it wouldn't be so bad.

Is Costa Rica The Happiest Place On Earth? Maybe Not for the Reasons You Think.

In a walk across the web, I stumbled over this article about how Costa Rica is again the Happiest Place On Earth, and my stubbed virtual toe is still smarting a little.

A lot(!) is written about how Costa Rica is an undiscovered paradise (mostly by the Tourism bureau and real estate agents methinks), and this Happiness Index thing keeps popping up every year. 

This particular article, however, seemed more over-the-top than most, so I couldn't resist dissecting it a bit - tongue-in-cheek - based on my own experience in "paradise." Yes, I've cherry-picked for brevity's sake, but 80% of the article is intact below. I'm going to use my own scoring, +1, -1 and 0 for neutral. Let's see what my "happiness index" comes up with.

Having just been voted the single-most happiest place to live on the planet, Costa Rica has grabbed the attention of many. But the question burning up the Internet is, "why is Costa Rica ranked the happiest place on Earth?"

...

First off, the country is ideally located in Central America between  Nicaragua to the north and Panama to the south.

I have no idea why that positioning would be considered an ideal location and the article doesn't say, either. I think a happier location would be between, say, France and Spain, or elsewhere on the Mediterranean. Will give this the benefit of the doubt, score 0.

Feeding the Birds, Shopping Lumber and Community Activities in Costa Rica

Group of five Cusingas feeding on oranges and bananas

In addition to ripe bananas, my wife has taken to putting out orange halves in the trees to attract the birds. We continue to observe new species from day to day. The “toucans” I previously identified are specifically Cusingas or Fiery-throated Aracaris.

The price of fuel rose this week, about 9%. Diesel’s at 609 Col. per liter today (roughly $4/gallon), with gasoline another 15 Colones higher. When oil prices rise, the price of fuel here rises immediately in response, but when oil drops fuel prices come down very slowly. 

Since this is an import-oriented country, the price of oil affects everything, not just your fill-up at the gas station. Anything imported is sky high, whereas the price of local goods sold by individuals benefit from a lack of import taxes, lower transport and labor costs. Items at the weekly farmer’s market are real bargains. Even the organically grown produce is relatively cheap. Last week, we bought a large head of lettuce, a big bunch of arugula, and a bunch of cilantro, all organic, for $1.20 total.

Butterfly on the window of our rental house

We visited one of the local wood mills/lumber yards with our neighbor Luis this week to check out the kinds of wood available and the prices. The only wood familiar to me were some pines. One was called Oregon Pine, but upon more questioning, it appeared doubtful it was actually from Oregon. 

The yard carries local and imported woods (mostly from South America) in all sizes, both rough lumber and finished goods. The names of the woods are enticing: Manglia, Nacareno, Malina, Cedro Dulce and so on.