The "gig economy" has transformed labor markets globally. Technological advances, remote work, and digital platforms have driven this model, characterized by temporary, freelance, or contract-based jobs instead of traditional full-time employment. Millions of people in the United States, the European Union, and Latin America actively participate as app drivers, freelance designers, service consultants, or developers. This global trend promotes labor flexibility but also poses the challenge of adapting legal and tax frameworks to promote formalization and protect these emerging workers.

In Costa Rica, the gig economy has encouraged many professionals to become self-employed. Freelancers, content creators, consultants, and service providers on digital platforms have a unique opportunity: to turn their activity into a formal Small and Medium-sized Enterprise (SME) and access significant tax benefits.

What does the law say in Costa Rica?

The reform to Article 15 of the Income Tax Law, through Law No. 10392, establishes a progressive scale of reduced rates for micro and small businesses properly registered with the Ministry of Economy, Industry, and Commerce (MEIC).

New micro and small businesses can access the following benefits on their profits:

• 0% tax during the first three years of business activity.
• 25% tax during the fourth and fifth years.
• 50% tax during the sixth year.

From the seventh year onward, these businesses will be taxed according to the general progressive scale, which varies between 5% and 20% depending on the amount of net income.

How does this law benefit those working in the gig economy?

Many independent workers operate informally or as individuals with business activity. This prevents them from fulfilling their tax obligations and taking advantage of incentives for formal Small and Medium-sized Enterprises. By establishing themselves as a business and meeting MEIC requirements, they can significantly reduce their tax burden during the first six years, thus facilitating formalization and business growth.

How to take advantage of these benefits in Costa Rica?

1. Formalize as a legal entity (S.A. or SRL).
2. Register with the MEIC as a micro or small business.
3. Keep organized accounting and file tax returns correctly.
4. Comply with formal obligations before the Tax Administration, CCSS, and other entities such as the municipality.

Turning a startup into a formal Small and Medium-sized Enterprise not only allows for tax reduction but also opens up new opportunities for financing, public contracting, and strategic partnerships.

At Dentons, we help you structure your business and access the available tax benefits. We are your trusted partner.

Contact us today and take the next step towards growth and formalization.