Costa Rica Vs Panama: Which Is Better For Expats?

Costa Rica and Panama are two of the most sought-after destinations in Latin America. Their tropical climates, welcoming locals, and pristine beaches attract all types of expats, from digital nomads to retirees and real estate investors.

These countries are neighbours and share the same official language but differ in many ways. When looking at moving to any country, multiple factors, such as the cost of living, taxes, infrastructure, and other important lifestyle aspects, like healthcare and safety, must be considered. In this article, we’ll compare these countries to help you make an informed decision.

TAXES

One of the main pillars of any offshore Plan-B is tax mitigation. Many of my clients, tired of paying astronomical tax rates back home, have already moved to countries like Panama and Costa Rica. These two nations offer interesting tax systems to help expats minimize their tax bills. 

Both countries offer attractive territorial tax systems for expats, which make foreign-sourced income tax-free. This makes them popular choices for digital nomads and retirees aiming to minimize their tax burden. Locally sourced income is taxed progressively in both countries, with rates ranging from 0% to 25%, while capital gains and property taxes are generally lower in Panama. Neither country imposes wealth taxes, but Costa Rica has a gift tax. Costa Rica applies a 13% VAT, compared to Panama’s 7%. 

Panama is safe for expats, with low crime rates in areas like Panama City and Coronado. Outside the hurricane belt, it also faces fewer natural disasters than Costa Rica

SAFETY

Taxes are important when considering moving to a new country, but they’re just one piece of the puzzle. Safety is another significant aspect. Are Costa Rica and Panama safe? And is one safer than the other? Let’s compare them:

SAFETY IN COSTA RICA

Costa Rica is known for its welcoming locals and political stability, which provide a solid foundation for safety. Crime is generally opportunistic, with petty theft being the most common issue, particularly in areas like San José and coastal towns. While violent crime rates are lower than in other Central American countries such as Guatemala and Honduras, they are higher than in Belize. To give some context, Costa Rica saw a nearly 38% increase in homicides in 2023, reaching a rate of 17 per 100,000 inhabitants. In the first half of 2024 alone, over 400 homicides were reported. That said, expat-friendly areas like Atenas and Tamarindo are notably safer. Depending on the region, natural hazards like earthquakes and hurricanes can pose additional risks. 

SAFETY IN PANAMA 

On the other hand, Panama benefits from substantial government investment in security, particularly in Panama City and key tourist areas. Just like in Costa Rica, petty theft is the most common crime. Statistics show that Panama’s homicide rate was lower in 2023, at 11.5 per 100,000 inhabitants. Popular expat destinations like Panama City and Coronado are known for their safety, and expats in these areas generally feel safe. Moreover, Panama is outside the hurricane belt and experiences fewer severe natural disasters than Costa Rica. 

San José offers an affordable cost of living compared to North America, with rents from $600 to $1,000+ USD. Local produce is cheap, but imported items can be pricier

COST OF LIVING IN THE CAPITALS

When considering moving to another country,  one of the most important factors is the cost of living. Even though both countries offer significant tax benefits which allow for more disposable income, you still have to account for everyday expenses like food, transportation, and housing. Let’s take a look at the general cost of living in the capitals of both countries:

COST OF LIVING IN SAN JOSÉ, COSTA RICA

San José has a relatively affordable cost of living compared to major North American cities, but rent can get a bit pricey. Depending on factors like location, size, and amenities, rent ranges from $600 USD to well over $1,000 USD. As always, do your due diligence to find the best deal possible. Grocery stores offer a mix of local and imported products, with the former being generally cheaper. Locally sourced products like vegetables and fruit are affordable, while imported sauces and cheese are more costly. 

COST OF LIVING IN PANAMA CITY, PANAMÁ

Panama City also has a relatively low cost of living. Rent prices, for instance, can range from $700 USD to well over $1,000 USD. If you want to live in Panama City long-term, do your research to find accommodation that suits your needs. Groceries can be inexpensive, especially for locally sourced products like fruits and vegetables. Poultry and meat are also affordable, while imported goods are more expensive. 

Pacifica Salud, affiliated with Johns Hopkins, offers exceptional healthcare in modern facilities, providing high-quality, affordable services for expats

HEALTHCARE

Another major factor to take into consideration is healthcare. As a permanent resident of either of these countries, you have immediate access to government-run health services. However, choosing private hospitals and carrying private medical insurance is better to enjoy the highest quality of medical care possible. Let’s see what the best hospitals are in each country:

HEALTHCARE IN COSTA RICA

Private hospitals offer advanced services and personalized care, attracting locals and expats. Hospital Clínica Bíblica is one of the most prominent, renowned for its cutting-edge technology and highly trained staff. Other popular private hospitals include Hospital CIMA and Hospital La Católica, which offer various medical specialties and diagnostic services. These medical centres are known for their prompt attention and international standards, making them a preferred choice for those seeking private healthcare.

HEALTHCARE IN PANAMA 

Panama offers high-quality, affordable healthcare, making it an ideal choice for expats. Renowned hospitals like Pacifica Salud, affiliated with Johns Hopkins, and San Fernando, accredited by Joint Commission International, provide exceptional care. Services range from routine check-ups to complex surgeries, often at a fraction of the cost in the U.S. Facilities are modern, and private rooms with premium amenities ensure comfort. 

EASE OF DOING BUSINESS

Last but not least, if you want to start a business in a new country, factors such as law enforcement and obtaining electricity are essential. These elements can significantly impact whether your entrepreneurial endeavours are met with support and opportunity or hindered by unexpected challenges like burdensome regulations. Let’s check the ease of doing business in Costa Rica and Panama:

EASE OF DOING BUSINESS IN COSTA RICA

Overall, Costa Rica offers a stable and welcoming environment for doing business due to its political stability, relatively high education levels, and openness to foreign direct investment. The country provides streamlined processes for setting up corporations, access to free trade zones, and opportunities in sectors like tourism. However, some challenges persist. For instance, Costa Rica grapples with bureaucratic delays, such as licensing and infrastructure issues and high energy costs. Despite some hurdles, Costa Rica is still an attractive destination for businesses seeking stability and growth in Latin America. 

EASE OF DOING BUSINESS IN PANAMA

Panama is one of the most vibrant business hubs in Latin America and the world. Its strategic location, dollarized economy, and robust logistics infrastructure, such as the Panama Canal, are solid incentives to trade in Panama. Free trade zones like Colón also add to the country’s appeal. Opening a business in Panama is relatively simple and cost-effective, particularly for activities without complex regulatory requirements. The primary requirement is obtaining an "Aviso de Operación," which costs $15 USD for individuals and $55 USD for corporations. 

I chose Panama for its location, excellent infrastructure, affordable living, and tax-friendly system. Unlike Costa Rica, it offers streamlined residency and fewer natural disaster risks

WHY DID I CHOOSE TO LIVE IN PANAMA?

Before leaving the UAE, I considered​​ the best options available to me, and yes, one of them was Costa Rica. After all, it offers territorial taxation and is in a U.S. time zone, making it a good base of operations. Other countries I considered moving to were Hong Kong, Thailand, and Portugal. I chose Panama, finally, because it ticked all of my boxes: great location, excellent infrastructure, affordable living costs, and a tax-friendly system.

Costa Rica fell short of my criteria, especially considering its infrastructure and immigration policies. Panama offers excellent infrastructure and streamlined residency programs that can eventually lead to a second passport. Costa Rica’s risk of natural disasters, such as flooding and earthquakes, further convinced me that Panama was the right option. 

Costa Rica offers natural beauty and "pura vida," while Panama stands out for its economic benefits, ease of doing business, and stability. Both are great expat hubs—your choice depends on your priorities

CONCLUSION

Costa Rica and Panama are both exceptional expat hubs offering unique benefits. Whether you prioritize lifestyle, safety, or financial advantages, your choice is deeply personal. However, let’s quickly recap the pros and cons of each country.

Costa Rica’s natural beauty and political stability make it a top choice for those seeking a peaceful lifestyle. Its attractive tax system, especially territorial taxation, draws in digital nomads and retirees alike. However, bureaucratic hurdles, high energy costs, and limited infrastructure may discourage individuals who want a seamless transition or robust business opportunities. 

On the other hand, Panama is an expat-friendly country offering many strategic benefits, such as an excellent location, a dollarized economy, and top-notch infrastructure. The country also provides territorial taxation and great ease of doing business. Moreover, Panama’s commitment to safety, modern healthcare facilities, and natural disaster resilience further solidify its position as a practical and attractive option.

While Costa Rica is a paradise in which to enjoy nature and the “pura vida” lifestyle, Panama offers a better choice due to its economic benefits, ease of doing business, and long-term stability. Ultimately, choosing a country is a deeply personal decision, but I hope this article has helped you to better compare these two countries. To get you started on your expat journey, subscribe to our newsletter and get our free special report, ‘Plan-B Residencies and Instant Citizenships.’