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I'm a UK citizen who works as a self-employed (sole trader) Software Developer remotely for a variety of UK/US clients.

I'm interested in moving to Costa Rica soon, which has a territorial tax system. If I simply lived and worked in Costa Rica on the rentista temporary visa on route to permanent residency after 3 years, then I'm fairly sure this actively earned income would class as income earned in Costa Rica and I'd owe tax to Costa Rica.

I would no longer be eligible to pay tax to the UK (as long as I didn't visit for more than 16 days and some other things).

It's not clear to me if I could even register as self-employed in Costa Rica and file taxes to pay that money if I was on a temporary visa, first of all.

My question is could I set up an offshore company, let's say in Bulgaria or Estonia, and then charge my clients to this and pay some low tax rate, whilst paying myself dividends to Costa Rica, which would be classed as foreign income (and tax-exempt) or is this foolish thinking?

What other structure could I use if not this one?

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  • If you're going to dabble, just be aware that "offshore companies!" are rarely as easy as ads make it look. Apart from anything else, you'll be surprised at the fees and costs every year, the banking difficulties, and more.
    – Fattie
    Oct 20 '20 at 11:21
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or is this foolish thinking?

This really depends on what you DO. If you provide virtual services - i.e. programming, trading, anything where you do not move physical goods to and from your location - then it all starts with "how the heck is CR even going to find out". And I am not joking. If you shelter behind a company and keep your paperwork straight - it is not like you have offices with Employees in Costa Rica.

For the real details: do not ask here, You will not get an answer that is worth anything - particularly defending in court. Contact a CR tax advisor specialized in this and get a QUALIFIED answer. One you can at least pull out in paper if things end up wrong and say "I asked a professional and this is what he told me, so I worked in good faith". I had a situation like this years ago in Poland and the result of that was that while I had to pay (higher) taxes going back some years, there was no interest rate added and no penalty because I could prove good faith.

You do NOT ask unknown people on the internet for this. THe answer yo uget may be off and "I asked on the internet" is NOT good faith.

That being said, I would definitely use an offshore company - not sure I would trust CR to behave nicely over some years.

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  • Yeah I provide software development/IT consulting to US/UK startups totally online. I would like what I'm doing to be legit though so I don't get a nasty surprise in a few years rather than just "I hope they don't notice, some guy on SE said so". I will eventually hire a paid tax lawyer, but initial consults with them over email suggested CR doesn't care about work being done remotely like this on their soil as long as the clients are foriegn (again take with a grain of salt)
    – fpghost
    Oct 21 '20 at 15:45
  • I do need to explain my situation to my home country government however (the UK). I am not a tax resident there, but if I am living in CR and not filing returns there either it all feels a little grey and amiguous. Also I'd need my clients to either pay me to a UK bank account (possibly one more tie for the UK to want taxes - although bank account isn't sufficient tie according to the SRT) or I'd need to get paid to a CR bank account (in which case CR definitely knows about my activity)
    – fpghost
    Oct 21 '20 at 15:50

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