You’ve probably heard that Canada is bucking the usual rich country trend and opening up the doors to a record number of immigrants. What is getting far less press attention, but is heard in plenty of private mumblings, is that a smaller but far richer transfer is taking place in the other direction: wealthy Canadians in Costa Rica and other countries that are benefitting from lower tax burdens and a more attractive real estate market.
Canadians have long been moving away to find sunnier weather, beaches, and better prices, but this latest exodus feels angrier and grounded in a desire to make a statement, not just to seek out fun and sun in the tropics. The latest batch of expats is talking more about fundamental and systemic problems in Canada, from a high tax rate that discourages success to a long run-up in housing prices that has left any new buyers on the sidelines looking in.
“I’m Canadian and my income is significant. So my marginal tax rate is 53.5%,” says Mark Meldrum, who has a finance PhD and advises wealthy clients. “I’m a minority shareholder in my own life in Canada because the government takes the majority of my income. If I spend anything after, it’s a 13% sales tax. If I try to spend anything on what they consider luxury items, it jumps to a 33% sales tax. So not only do they punish you when you make the money, they punish you when you spend the money.”
Depending on who is running the numbers, somewhere around 100,000 Canucks moved out the country in 2023, with Q3 hitting a level that hadn’t been breached since a blip in 2016 and before that, you’d have to go back to the 1960s according to BetterDwelling.com.
Mikkel Thorup pointed out in his Expat Money Show podcast that 2023 saw another worrying quirk in the data: a 64% increase in Canadians applying for E2 visas in the USA, nicknamed the entrepreneur visa. “I think for the first time in history, there are more Canadians leaving Canada and moving to the United States than there are Mexicans leaving their country and going for an entrepreneurship visa in the United States,” he says.
The Lure for Canadians in Costa Rica
More and more Canadians are going further than across one border and are aiming for a more drastic change in both lifestyle and finances. It’s already difficult for a cold country with a high cost of living to compete with the “pura vida” of Costa Rica, with its always warm ocean water and its slower pace of life. When you add on factors like crippling high taxes and a runaway cost of living to the mix, the decision to move goes from nice to no-brainer.
Our decision to move to Costa Rica was based on wanting to retire early, somewhere nice and warm, and live a healthier lifestyle with less stress,” say Jeremy and Cherie from Vancouver, BC. “We did not see early retirement as a possibility for us in Canada with the cost of living and increasing taxes.”
The signs are still under the surface more than in the media at this point, but like a trending meme or t-shirt slogan, you start seeing the stories around every bend when you go looking for them. Besides the hard numbers mentioned earlier, there are regular headlines about a housing market bubble that looks worse than the U.S. one in the ’00s and the fact that the ratio between salaries and home prices is at a lofty level never seen before. In that Better Dwelling site mentioned earlier, one headline sums it up well:
“Canada’s Real Estate Bubble Is Batsh!t Crazy Compared To Other G7s”
And it’s not just the G7 countries: nobody has seen such a rapid run-up in housing prices in the developed world. Head over to YouTube and you’ll find video titles like this one, which has gotten 443,000 views so far:
“Canada is Dying! 5 Reasons to Leave Before It’s Too Late”
For a country with a reputation for being polite and allergic to conflict, there are signs that those with the most to lose are getting fed up. They are moving to countries like Costa Rica to make sure they don’t give up all they’ve worked for over the years.
“Now the current regime wants to raise the top tax rate to 56%,” Mark says. They want to introduce a wealth tax, which means every year they want to come back and take another 2% of your income on top of that. Now it’s just punishing to be successful in Canada. In fact, there’s almost a hatred for it.”
So he started looking into territorial tax countries a few years ago, places where you only pay tax on what you earn in the country. He investigated Dubai before the Russian invasion led to an influx of Russians and China’s erosion of human rights in Hong Kong caused many to flee there for Dubai, both instances drying up the supply and increasing prices.
He also looked into Panama, but felt safer and more comfortable in Costa Rica, with less density in the capital and less traffic.
“Here, I’m in the mountain region outside of San Jose and it’s nice. There’s not much humidity. Yes, it rains, but in Canada it snows. I don’t have to shovel rain, so I chose Costa Rica because it had everything I needed. It had a territorial tax system but also great weather.”
What Your Investment Buys in Costa Rica
Mark bought a home that has all the amenities he wanted an a swimming pool, in a cooler mountain suburb outside of the capital. “I am on the side of the mountain. So I got a 180-degree view of all the mountains with wicked sunsets. To get this view I up north I’d have to go where mountains are in Canada, so Alberta or B.C. The property alone there would have been equivalent to the entire cost of this house.
In Canada, about 2/3 of the cost of any house is labor; down here it’s 10%. So your material costs 30% more maybe because of import taxes, but labor’s 10%. In Canada, if you build a $1,000,000 house, about $600K to $650K is just labor. Materials aren’t that expensive, it’s the labor cost and it’s the price of the land. Land is still inexpensive in Costa Rica. I think I have about 6 acres on the side of this mountain with a really nice view. ”
Because land prices are still reasonable, mountain or oceanfront living with a view in Costa Rica is not just reserved for the upper one percent. For what the cheapest building lot would cost on much of the coast of California, it’s possible to get a flashy condo in a high-end building that faces the water here or an expansive lot for building your dream house. A custom mansion with a buffer of land around it is still less than even the most basic home with a water view on Vancouver Island or in the Rocky Mountains.
Cherie and Jeremy also went for the mountain lifestyle, but are building a home that’s far nicer than they could have had back in Canada. “I would say we are much better off financially. There’s no way we would have ever been able to afford a nice home with a pool in our home country. We are building a main house and a guest house so our friends and family have somewhere to stay when they come visit.”
Cristina Jones from expat real estate agency WeRCR (We Are Costa Rica) has multiple luxury home listings on the Pacific Coast with prices that would look like cruel typos up north. Like lots on a hillside by the water in car-free Las Catalinas for less than $500K, new 3,000-square-foot luxury condos on the ocean for less than $2 million, or an 8,000-square-foot house with six bedrooms and a huge infinity pool for $2.75 million. As she pointed out in this article about investing in Costa Rica, the high rental yields, stable (but not crazy) appreciation, and reputation for a high quality of living make this country a safer bet than many others in Latin America.
Or for those who are not retired yet and need to stay connected, it’s easy to get into nature just outside of San Jose and get the benefits of the city without being hours away. “I needed access to infrastructure, which means multiple fiber optic connections for redundancy in case one goes down,” says Mark. “I have access to city infrastructure, but I’m far enough away that I’m not in the city.”
Others who just want to put their assets into play in a country where they won’t give up so much will have high rental return options in the beach areas, with Costa Rica’s two airports bringing down a steady stream of tourists with money to spend—many of them on their own scouting trip for a future move. They can stay up to 180 days now on a tourist visa thanks to recent changes and spend plenty of time checking out the best places to live in Costa Rica.
Pay High Taxes or Pay for a New House?
When I spoke to Mark about his multi-million-dollar home purchase in Costa Rica, he did seem to have a nagging feeling that he bought more than he needed in order to get the whole package of his big house with a view on a mountainside. “There was land in the package that’s not functional, basically a buffer to ensure that nobody builds beside me or in front of me in the future.”
He found it easy to justify, however, since the money he saved in taxes by moving south was so significant. “It’s a residual tax asset that I have. When I go to sell it, whatever I get for it is a residual tax asset because I would have had to part with that money if I stayed back in Canada. I would have lost that money anyway. So even if I only recover 80 cents of every dollar in the property, I’m still better off.
We are not accountants and any tax situation can get complicated in a hurry, so it’s best to consult with a professional for advice. For a deep look into the tax differences and options though, see this excellent rundown from The Nomad Capitalist: Lower Your Taxes by Moving to Costa Rica.
In the end, it shouldn’t just be about escaping a tax burden, but also enjoying life more where you land. That’s easy for Canadians in Costa Rica. “We love the scenery, the food, and the people,” say Jeremy and Cherie. “We love the laidback lifestyle, the wildlife, and how abundant the fresh tropical fruits are. Also, the mild political climate and access to good healthcare helped solidify our decision to make Costa Rica our home.”
