Justice progresses through judicial decisions. Judicial or administrative criteria that respond positively to evolving societal positions are the materialization of developments in the law.

Among the very large number of rulings that this law firm has produced in favor of taxpayers, a very recent one is contained in Official Letter MH-DGT-DNTI-DCN-CONS-0028-2026, dated April 13, 2026. It is a response to a query regarding whether an individual taxpayer subject to income tax on profits could deduct payments for medical expense insurance and life insurance.

The arguments presented in the query include the following:

Article 8 of the Income Tax Law does not contain a taxative list, but rather an illustrative list of deductible expenses, such that various useful, necessary, and relevant expenses for the generation of profit or benefit may be included. For the specific case, the expense is necessary for the generation of taxable income, useful, relevant, and not excessive.
The Second Chamber of the Supreme Court has issued jurisprudence regarding the deductibility, by an employer, of life insurance premiums and medical expenses for its employees, on the grounds that in the event of an accident or illness, one can assume “with greater economic relief” the expense that allows the worker’s reintegration into the company.
The Tax Administration itself has acknowledged the possibility that such types of expenses are deductible for an employer in official letters such as: MH-DGT-OF-119-0025-2023, MH-DGT-CONS-119-0055-2024, MH-DGT-CONS-119-0056-2024, and DGT-MH-119-0002-2025.
No less important is the possibility of the analogical application of a criterion in tax matters, without contravening Article 6 of the CNPT, because it does not involve the creation of taxes or exemptions, but rather the appropriateness of a deduction.

The response to the query, positive with respect to the petitioner’s arguments, confirms the possibility that expenses for medical insurance and life insurance policies may be deductible. The foregoing, albeit with the caveat, included in prior official letters, that “provided their connection with the generation of taxable income and compliance with the causation criteria established in the current regulations is demonstrated.”

The author of the query has explained in some forums how these requirements set forth by the Administration are not difficult to demonstrate in his specific case. He does, however, make a relevant distinction in the nature of one insurance type versus the other: in the case of medical expense insurance, the direct connection with the generation of taxable income is visible insofar as, as the Second Chamber held in the case of employees, the care of accidents and illnesses allows the rapid reintegration of the individual into productive activity; in the case of life insurance, the direct connection with the generation of taxable income appears more complex, but the doubt is dispelled by understanding, as the Judiciary has done, that social security in Costa Rica is fundamentally composed of a medical care element (SEM – Sickness and Maternity Insurance, work risks) and another fundamental component of disability, old age, and death (IVM). For this latter reason, the need for expenditure on life insurance is perfectly in accordance with the principles that guide Costa Rican social security, hence its relevance.

The precedent established by this official letter is highly relevant for various areas of productive life in the country. Prior official letters already shed light on the deductibility of these types of expenses for employers, and their non-consideration as salary for employees. Now, the screw is turned further, to consider them as possible deductible expenses for an individual under the profit tax regime. Could we contemplate its application for taxpayers subject to other regimes? The answer necessarily requires the analysis of the specific case. Allow us, at Faycatax, the tax department of Facio & Cañas, to analyze your case.

Dr. César A. Domínguez Crespo

Senior Associate