Pillar Two and the GloBE rules: what they mean for Costa Rica
Who is in scope
The GloBE rules apply to multinational groups with consolidated revenue of at least €750 million in at least two of the four preceding years. Smaller groups and purely domestic companies are not affected. For groups in scope, the effective tax rate is calculated per jurisdiction. If it is below 15%, a top-up tax is due on the difference.
The building blocks
- Qualified Domestic Minimum Top-up Tax (QDMTT): the country where the low-taxed profit arises collects the top-up tax itself. It takes priority over the other rules.
- Income Inclusion Rule (IIR): if the source country does not collect, the country of the parent company does.
- Undertaxed Profits Rule (UTPR): a backstop that lets other countries where the group operates collect what remains.
- Subject to Tax Rule (STTR): a separate treaty rule that lets developing countries tax certain intra-group payments, such as interest and royalties, that are taxed below 9% in the receiving country.
Profits linked to real substance are partly carved out: a percentage of payroll costs and of tangible assets is excluded from the top-up calculation (the substance-based income exclusion).
Where things stand in 2026
The EU, the United Kingdom, Japan, South Korea, Canada, Australia and many other jurisdictions apply the rules. In January 2026 the Inclusive Framework agreed a "side-by-side" package. It includes:
- a side-by-side safe harbour that switches off the IIR and UTPR for groups headquartered in a qualifying country with its own minimum tax system. So far only the United States qualifies. A QDMTT still applies to these groups;
- a substance-based tax incentive safe harbour, under which certain incentives tied to real expenditure or production do not trigger top-up tax, within a cap linked to payroll or tangible assets;
- a permanent simplified effective tax rate safe harbour, which reduces the calculation burden.
What this means for Costa Rica
Costa Rica taxes companies on a territorial basis. The general corporate income tax rate is 30%; smaller companies pay progressive rates from 5% to 20%. Companies in the free trade zone regime (Ley 7210) can receive full or partial income tax exemptions for a set number of years, depending on their activity and location.
That is where the GloBE rules bite. A free-zone subsidiary of a large group may have an effective tax rate well below 15%. Without a Costa Rican QDMTT, the difference can be collected elsewhere: by the parent's country under the IIR, or by other countries under the UTPR. The incentive then shifts tax revenue abroad rather than benefiting the investor.
As of late 2025, Costa Rica had not announced legislation to implement the GloBE rules or a QDMTT, and we have not found a bill since. The government has said it wants to review the incentive system carefully so as not to lose ground in attracting foreign investment, and to rely more on non-tax strengths such as stability, legal certainty and a skilled workforce.
The side-by-side package changes the picture for many free-zone investors, a large share of whom have US parent companies. For those groups the IIR and UTPR are switched off, so foreign top-up tax on Costa Rican profits becomes less likely. A Costa Rican QDMTT, if adopted, would still apply to them.
What groups in scope can do now
- Calculate the GloBE effective tax rate for the Costa Rican entities, including the effect of free-zone exemptions.
- Check whether the substance-based income exclusion or the new incentive safe harbour reduces the exposure.
- Keep transfer pricing in order: the GloBE calculation starts from the profit each entity reports, so the arm's length allocation of profit (see CUP, cost plus and TNMM) directly drives any top-up tax.
- Follow Costa Rican legislative developments on a QDMTT.
Last checked: October 2026. Photo: Meagan Carsience on Unsplash