Although Costa Rica does not maintain a fully dollarized economy, it is a country that allows the use of the dollar as commercial payment, but does this method of payment apply to the salary of employees? Is payment in foreign currency legal? Getting paid in dollars in Latin America is a trend that has been growing for a long time, and a growing question that has been going around is how does it work with cryptocurrencies? Would paying salaries in cryptocurrency work? If you think about register a company in Costa Rica this may be of interest to you.
We spoke to Adriana Romero to find out more about this, what are the benefits and how it could work. Adriana Salazar Romero is a trilingual (Spanish, English and Italian) attorney and our Costa Rican Head of Legal. In 2016 she graduated with honors Summa Cum Laude from the field of foreign affairs and in 2022 she graduated from her second career with honors Summa Cum Laude in law. Adriana has previously worked at leading law firms in Costa Rica, such as KPMG and ECIJA, as well as at the Ministry of Foreign Affairs, where she developed her knowledge of international law. Her activities include, among other things, legal advice in company law, contract law, labor law, negotiation processes, drawing up contracts and international agreements.
Biz Latin Hub: Can companies in Costa Rica legally pay their employees in foreign currency or cryptocurrency?
Regarding wages in foreign currency, the Labor Code, article 163 mentions “The salary will be determined freely, but it must not be lower than that set as a minimum.” Article 165 also states “Wages must be paid in legal currency whenever stated in money.”, meaning that once established, it can be maintained in the currency agreed upon by the parties.
As for cryptocurrency, the use of this currency is allowed in Costa Rica. But it is not legal, therefore employers cannot pay their employees with cryptocurrency.
BLH: Are there any specific rules or laws that companies must follow when paying wages in foreign currency or cryptocurrency in Costa Rica?
Yes, in addition to the Costa Rican labor law, the statement DAJ-AE-022-10 of February 24, 2010 from the Ministry of Labor and Social Security mentions the rules for the payment of wages in foreign currency.
The Organic Law of the Central Bank, Number 7558, Article 48 states the following: “The foreign currency deeds, contracts and obligations will be valid, effective and enforceable; but they may be paid at the debtor's option, in colones calculated according to the actual commercial value which, on the day of payment, the foreign currency owed.”
When it comes to cryptocurrency, there are no laws on the matter yet. The use of cryptocurrencies is allowed in Costa Rica, the investment in crypto-assets would be protected by the principle of freedom (Articles 28, 45 and 46 of the Political Constitution), but they do not represent legal currency money.
At the moment, there is a legal file, number 23,415 called “Cryptoactive Market Law”, which seeks legality for the use and transfer of digital currencies in the country, promotes the national territory as an investment center for providers of these and promotes economic reactivation through the decentralization of the the digital economy.
BLH: Are there any tax implications for employers paying wages in cryptocurrency or foreign currency?
Employers must take into account that: the company's labor and tax obligations must be calculated in colons, therefore they must calculate the exchange rate for each payment period, which can be a complicated calculation at the end of each month.
BLH: Are there any restrictions on the types of foreign currency or cryptocurrency that can be used to pay wages in Costa Rica?
Since there are no legal prohibitions on the payment of wages in foreign currency, any legal currency approved by the Central Bank of Costa Rica will be allowed as wages if the parties agree.
BLH: How does the company ensure that it complies with all relevant laws and regulations when paying wages in foreign currency or cryptocurrency?
For payment of the salary in foreign currency, it must be taken into account that its value cannot be less than the minimum salary in colons.
BLH: Are there any advantages or disadvantages to paying wages in cryptocurrency in Costa Rica?
Among the advantages of paying your employees salary in dollars or another currency are:
- Savings: if the company receives its revenue in dollars, it would save the exchange rate on the salary payment in local currency.
- It's easy: in Costa Rica, all bank accounts can also be opened in dollars.
- Talent attraction: as more and more companies offer this payment method, it becomes a competitive option in the market.
However, companies must consider the following disadvantages:
- Higher cost when canceling work: settlements and layoffs must be paid to the employee in the same currency in which his salary was paid.
- Complicated calculation: the company's labor and tax obligations must be calculated in colons, according to the highest official rate for each payment period, showing the deviations in monthly reporting to the authorities.
- As payroll taxesboth income and social security, must be paid in colons an exchange rate may occur when paying or making currency exchanges from dollars to colons, as commercial banks use their lower exchange rate.
- Renegotiation of the employment contract in the event that the salary falls below the minimum level due to the exchange rate.
BLH: Are there any additional procedures or paperwork required to pay employees in foreign currency or cryptocurrency?
There is no additional process when paying salary in foreign currency. As for cryptocurrencies, we have to wait for what the bill decides and its approval.
BLH: How does the company ensure that employees are aware of and understand the terms and conditions of being paid in foreign currency or cryptocurrency?
It is important to have specified in the employment contract the exact amount to be paid in foreign currency, either in part or in full, and also to define whether the payment of the Christmas bonus or other bonuses or benefits is also to be made in foreign currency.
Biz Latin Hub can help you with payment of salaries in cryptocurrency
At Biz Latin Hub, we provide integrated market entry and back-office services throughout Latin America and the Caribbean, with offices in San José, as well as over a dozen other major cities in the region. We also have reliable partners in many other markets.
Our unparalleled reach means we are ideally suited to support multi-jurisdictional market entry and cross-border operations.
In addition to knowledge about the payment of salaries in cryptocurrency, our portfolio of services includes employment & PEO accounting & taxation, company formation, bank account opening and corporate legal services.
Contact Us today to find out more about how we can help you find top talent or otherwise do business in Latin America and the Caribbean.
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