With its favorable business environment, stable political climate, and strong economic growth, outsourcing and IT staff augmentation in Costa Rica offer numerous benefits. The country offers excellent nearshore alignment, a compelling combination of shared time zones with North America, strong English skills, cultural compatibility, and skilled tech talent. While being a relatively small country of 5.1M people, Costa Rica is a popular destination for outsourcing to Latin America. Let’s look at the benefits and conditions for nearshore outsourcing to Costa Rica.

Benefits of outsourcing to Costa Rica

Costa Rica is a thriving country in Central America that is known for its business-friendly environment. With a stable political climate and strong economic growth, nearshore outsourcing to Costa Rica is rapidly becoming one of the top choices for companies looking to expand their operations and optimize costs. The government is actively working to attract technological partners and promote cooperation. Today, this country is no longer catching up with other players in the market but actively participating in technology trends and adopting innovation. In 2023, it became the first country in Latin America to have an AI development policy.

Here are the main reasons to choose Costa Rica as a nearshore outsourcing destination:

1. Highly skilled talent

The country is home to over 45K tech specialists, concentrated primarily in major IT hubs such as San Jose, Heredia, Alajuela, and Cartago. San Jose, in particular, ranks among the top three cities in Latin America for talent availability and skill level. Costa Rican engineers specialize in various programming languages, including JavaScript, Java, C#, Python, .NET, and C++.

Number of developers in Costa Rica by specialization

2. Technological initiatives

The Costa Rican government plays an active role in facilitating the growth of technological industries in the country, with a particular focus on Information and ICT. This commitment is evident through various policies, incentives, and infrastructure development aimed at attracting both domestic and foreign tech companies. 

Read more: Software development outsourcing to Costa Rica

3. Thriving tech hubs

Costa Rica has several thriving tech hubs that attract top talent and foster innovation. The capital city, San Jose, hosts numerous tech enterprises and R&D centers of industry giants like Microsoft, IBM, and Intel. Heredia, known for its high-tech industries, accommodates diverse technology companies, including Amazon, Cisco, and Procter & Gamble. The presence of established tech hubs like San Jose and Heredia makes nearshore software development outsourcing in Costa Rica highly attractive by ensuring access to a skilled, innovation-driven talent pool. 

Key services of Costa Rican IT vendors

4. Time zone convenience

Costa Rica's central time zone seamlessly synchronizes with the majority of US regions. With the entire country situated in the UTC-6 time zone, Costa Rica maintains a mere 2-hour time difference with New York City and just a 1-hour difference with Los Angeles. This eliminates the need for late-night or early-morning meetings, ensuring smooth communication between teams.

5. Cultural similarities

While Spanish is the official language, English proficiency is widespread, particularly among the country's ICT specialists. Costa Rica ranks 38th in the EF Global English Proficiency Index, just one point below Spain. Costa Rica has embraced North American business practices and fosters a culture of innovation and agile software development.

Read more: Software development in Costa Rica: Market overview

Holidays

Costa Rica is a predominantly Catholic country with a rich history of struggle for freedom. It observes eight official holidays that commemorate important Christian days and significant achievements in the country. Additionally, four more holidays are granted based on religious observance. 

Outsourcing to Costa Rica holidays calendar 2025

Further, employees are entitled to 14 days off for every 50 working days. The first three days of sick leave have to be compensated with a minimum of 50% of the daily salary; from day four, the government fully takes on this responsibility.

Costa Rican tax system for outsourcing

The government has made significant, successful investments in the country's education and various programs aimed at boosting innovation and technological advancements. However, these progressive initiatives also require financing.

The biggest disadvantage of Costa Rica is its complex taxation system. The taxes that apply depend on the form of the contract. However, the tax regime in the country affects the cost of outsourcing, regardless of which party is responsible for filing.

When purchasing software development services from a Costa Rican legal entity, the company is only accountable to the tax regulations of its country of residence. For example, the US does not recognize tax returns on offshore outsourcing deals. So, some companies may hire developers in Costa Rica directly to address intellectual property concerns and achieve long-term collaboration goals. If the outsourcing agreement includes direct employment of local workers in the destination country, the hiring company will need to comply with the labor laws of that country. Here is a general overview of taxation rates in Costa Rica:

  • Workers’ compensation insurance 1.5-4%. In some cases, the employer will also be obligated to contribute to the worker’s health insurance. The labor code distinguishes occupations by skill and health risk. Software developers are low-risk, highly-skilled workers and thus receive less insurance compensation than other categories. 
  • 26.33% social insurance tax on employers and 10.84% on employees. It is not uncommon for Costa Rican developers to avoid paying this tax. North American companies should be prepared to present a clear policy on this practice to avoid involvement in questionable schemes.
  • Employers withhold and file up to 15% income tax on behalf of the employees. With an average yearly income of a developer around $30,000, most developers fall into the highest tax bracket of 20-25%. 

When evaluating Costa Rica for IT nearshoring, keep in mind that its complex tax system can add some costs and administrative effort. However, the country’s skilled talent pool and tech-friendly environment often make it a worthwhile trade-off compared to other outsourcing locations.

Costa Rica in comparison to other LatAm countries

To evaluate Costa Rica as a nearshore outsourcing destination, it’s helpful to compare average hourly rates and ease of doing business scores across Latin America. A higher ease of doing business score suggests fewer administrative hurdles, which can reduce both risk and overhead. Meanwhile, a lower hourly rate helps maximize cost efficiency.

Costa Rica ranks as the second most favorable outsourcing location in the region, balancing cost and business climate. Its average hourly rate is $44, paired with a strong ease of doing business score of 69.2, well above South America's average of 59.1, though below the US score of 84. While Costa Rica’s legal system can be complex, its competitive labor costs and overall stability make up for it. Peru and Bolivia show a similar pattern. In contrast, Colombia offers a smoother regulatory environment but at a higher labor cost.

Of course, cost isn’t everything. Success in nearshoring also depends on factors like technical expertise, English proficiency, cultural alignment, and time zone compatibility. Costa Rica stands out in all these areas, making it a top-tier choice for IT outsourcing in Latin America.

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Conclusion

In conclusion, nearshore outsourcing to Costa Rica offers numerous advantages, making it an attractive option for businesses seeking cost-effective and high-quality software development and IT services. With its skilled workforce, cultural alignment with North America, and favorable time zone, Costa Rica provides a competitive edge in the outsourcing landscape. 

Discuss your nearshoring project to Costa Rica with N-iX expert

Why choose N-iX as your nearshore outsourcing partner

  • N-iX has over 22 years of experience in nearshore outsourcing and over 2,400 professionals on board and even more in the talent pool.
  • N-iX has established development centres in 25 countries, including Colombia, Poland, Romania, and India. 
  • N-iX is an official partner of technology leaders, including Google Cloud Partner, Microsoft Gold Certified Partner, AWS Advanced Consulting Partner, SAP partner, and more.
  • We have a wide expertise profile, cooperating with leaders from healthcare, finance, manufacturing, telecom, retail, and other industries.
  • N-iX ensures the highest levels of data protection by complying with established data protection standards, such as GDPR, and ISO 9001:201

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N-iX Staff
Erika Gutierrez Cardenas
Location delivery director at N-iX Colombia

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