Despite the fact that Costa Rica does not maintain a fully dollarized economy, it is a country that allows the use of the dollar as commercial payment, however, this method of payment applies to employee wages. Is paying in foreign currency legal? Getting paid in dollars has long been a growing trend in Latin America, and a growing question is how it works with cryptocurrencies. Can paying salaries in cryptocurrency work? If you are thinking about registering a company in Costa Rica, this may interest you.
We spoke to Adriana Romero to find out more about this, what the benefits are and how it can work. Adriana Salazar Romero is a trilingual (Spanish, English and Italian) attorney and head of our Costa Rica legal department. In 2016, he graduated Summa Cum Laude with a degree in foreign affairs, and in 2022 he graduated with a second career Summa Cum Laude honors degree in law. Adriana previously worked at top Costa Rican law firms such as KPMG and ECIJA, as well as at the Ministry of Foreign Affairs, where she developed her international law skills. His practice includes legal advice in the areas of corporate law, contract law, labor law, negotiation processes, contract and international treaty drafting, and more.
Biz Latin Hub. Can companies in Costa Rica legally pay their employees in foreign currency or cryptocurrency?
As for foreign currency wages, it is stated in Article 163 of the Labor Code “The salary will be set freely, but it cannot be less than the minimum set.” Similarly, Article 165 states “The salary must be paid in legal currency when it is intended in AMD.” means that once fixed in a contract, it can be maintained in a currency agreed upon by the parties.
As for cryptocurrency, the use of this currency is allowed in Costa Rica. However, it is not legal, so employers cannot pay their employees in cryptocurrency.
BLH. Are there any specific regulations or laws that companies must comply with when paying salaries in foreign currency or cryptocurrency in Costa Rica?
Yes, in addition to the Costa Rican Labor Code, the Ministry of Labor and Social Security’s announcement DAJ-AE-022-10 of February 24, 2010 states the regulations for the payment of wages in foreign currency.
Article 48 of the Organic Law No. 7558 of the Central Bank defines the following:Deeds, contracts and obligations denominated in foreign currency shall be valid, effective and enforceable; but they may be paid at the debtor’s option in columns calculated according to the effective commercial value that was owed in foreign currency at the date of payment.’
There is still no cryptocurrency law on the matter. The use of cryptocurrencies is allowed in Costa Rica, investments in crypto assets will be protected by the principle of freedom (Articles 28, 45 and 46 of the Political Constitution), but they do not represent legal tender money.
At the moment, there is a legal file number 23,415, called the “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 their providers and promotes economic reactivation. the decentralization of the digital economy.
BLH. Are there tax implications for employers who pay wages in cryptocurrency or foreign currency?
Employers should take into account that the company’s labor and tax liabilities must be calculated in columns, so they must calculate the rate for each pay period, which can be a complex 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 against the payment of wages in foreign currency, any legal currency authorized by the Central Bank of Costa Rica will be accepted as wages if agreed between the parties.
BLH. How does a company ensure it complies with all relevant laws and regulations when paying wages in foreign currency or cryptocurrency?
To pay the salary in foreign currency, it should be taken into account that its value cannot be lower than the minimum salary in the colonies.
BLH. Are there advantages or disadvantages to paying salaries in cryptocurrency in Costa Rica?
Benefits of paying your employees in dollars or other currencies include:
- SavingsIf the company receives its income in dollars, it will save the exchange rate on the payment of wages in the local currency.
- It’s easyAll bank accounts in Costa Rica can also be opened in dollars.
- Attracting talentAs more and more companies offer this payment method, it is becoming a competitive option in the market.
However, companies should consider the following disadvantages:
- Higher cost in case of job completion cancellationSettlements and severance payments must be paid to the employee in the same currency in which their wages were paid.
- Complex calculationThe company’s labor and tax liabilities must be calculated in columns at the highest official rate for each pay period, showing deviations in monthly reports to the authorities.
- As payroll taxesBoth income and social security must be paid in the colonies, and exchange rates can occur when paying from dollars to the colonies or making currency changes, as commercial banks use their lower exchange rates.
- Review of employment contract in the case when the salary falls below the minimum due to the exchange rate;
BLH. Are there any additional procedures or documents required to pay employees in foreign currency or cryptocurrency?
There is no additional process of payment of salary in foreign currency. In the case of cryptocurrencies, we have to wait to see what the bill stipulates and its proper approval.
BLH. How does the company ensure that employees are aware and understand the terms and conditions of being paid in foreign currency or cryptocurrency?
It is important that the employment contract specifies the exact amount that will be paid in foreign currency, in part or in full, and whether the payment of the Christmas bonus or other bonuses or benefits will also be in foreign currency.
Biz Latin Hub can help you pay salaries in cryptocurrency
At Biz Latin Hub, we provide integrated market access and back office services throughout Latin America and the Caribbean, with offices in San Jose as well as over a dozen major cities in the region. We also have trusted partners in many other markets.
Our unrivaled reach means we are ideally placed to support market entries and cross-border operations in multiple jurisdictions.
As well as expertise in cryptocurrency payroll, our portfolio of services includes recruitment and PEO accounting and taxation, company formation, bank account opening and corporate legal services.
Contact us today to learn more about how we can help you find top talent or otherwise do business in Latin America and the Caribbean.
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