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i did these figures
$100 @ C500 = C50,000
C50,000 x 4% = C2000
simmple, except now you want to exchange that C52,000 back into dollars at C512 — $104 is now only $101.562 and if the rate changes to C517 to buy $, you now only have $100.58.
[quote=”maravilla”]i did these figures
$100 @ C500 = C50,000
C50,000 x 4% = C2000
simmple, except now [b]you want to exchange that C52,000 back into dollars[/b][[i]emphasis added[/i]] at C512 — $104 is now only $101.562 and if the rate changes to C517 to buy $, you now only have $100.58.[/quote]
Well, maravilla, I’m with you right up to the point of “. . . [I] want to exchange that c52,000 back into dollars . . “.
But I don’t!
I want to spend those 52,000 colones in the local economy to buy goods and services that I need or want, so the exchange rate a year from now is immaterial. Once my money’s in colones, it’s in colones that it’ll stay.
Our U.S.-source income is all in U.S. dollars, but we never spend dollars here in Costa Rica; we only spend colones. So once we’ve made the conversion of our dollars to colones, we’ll never convert those colones back to dollars. And so earning Banco HSBC’s 4.5% or 7% in a CD nets us that many more colones to spend in the Costa Rican economy.
If I invest in a one-year HSBC CD at 7%, and if the internal inflation rate is less than 7%, I’ve made a little money, right? I’ve increased my buying power a little. And if the inflation rate is greater than 7%, I’ve at least offset in in part with my 7% interest earnings, haven’t I?
it will all depend on inflation and the cost of goods. in the end you will most likely — and i could be wrong — make only a tiny bit more than you would have if you’d invested in dollars. did you see this article?
Well, if the government officials quoted were right back in February (and when are they not?), Costa Rica’s 4-6% projected inflation rate for 2011 makes HSBC’s 7% CD rate look all right.
Sure, it ain’t much, but it is something which is more than the nothing one would gain in a demand account or a mattress pocket.
In answer to your original question David, about taxation of interest earned on Costa Rica bank CD’s, the answer is yes, you would be liable to pay income tax on the interest earned to the Costa Rica Tax Department.
[quote=”DavidCMurray”]Thank you very, very much! I was afraid that would be the answer.[/quote]
I believe that income generated in Costa Rica is only taxable if it exceeds a certain amount… Last I heard, that was ¢215,000/month.David
whatever you do do NOT place any substantial monies here in a costa rican bank
ask scott since he has alot of experience in this area
The problem is two fold:
1. The most serious problem for my dear friends from the U.S., is that contrary to the BS that some ‘international living’ type newsletters like to promote, is that NONE of the reputable offshore banks and offshore financial services firms I have access to will do business with U.S. citizens.
NOT ONE OF THEM!
2. For my non-U.S. clients, the minimum account that would be considered by my associates in Zurich would be US$250K.
I may have joked about this ‘somewhere’ here but I think it’s hilarious that my banker in Zurich (in Switzerland ferChrissake whhich is 7 hours ahead) replies to my emails and returns my telephone calls MUCH faster than my private banker in San Jose who is less than 2 miles away…
Scott
PS. I keep six months cash living expenses here.
[quote=”Scott”]NONE of the reputable offshore banks and offshore financial services firms I have access to will do business with U.S. citizens..[/quote]
why is that? US laws on banking? US becoming to financially unreliable? Banks just plain sick of US?
It is because of FACTA, which is part of the Patriot Act. Financial institutions must report on US bank account holders or 30% of any payments from a US institution will be withheld. Many banks have just chosen not to accept any US accounts rather than be subjected to the reporting requirements of the IRS. This is all done under the false mask of anti-terrorism and drug money laundering, but it is really an assault on our freedoms, an attack on purported “tax havens” and total hypocrisy on the part of the US government who promote foreign investment, but at the same time is handcuffing US citizens.
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