Payroll income tax 2026: practical impact on payroll and net salary

By means of Executive Decree No. 45333-H, which amends Articles 33 and 34 of the Income Tax Law, the income tax brackets on salaries and the tax credits for spouse and children have been updated, effective as of January 1, 2026.

Our Tax Department published the technical details of the new brackets and credits, as well as their legal basis. Additionally, in a previous communication we explained the increase in employee social security contributions (CCSS – IVM) that also applies as from January.

In this note, we would like to focus on an integrated payroll perspective: what do these changes mean when calculating payroll withholdings and employees’ net salaries?
 

1. Changes that affect net salary

As from January 2026, several legal adjustments come into effect:
  • Payroll income tax (Art. 33 of the Income Tax Law)
    • The monthly brackets are updated and the progressive tax rates (0%, 10%, 15%, 20% and 25%) are maintained.
    • The income thresholds at which each rate begins to apply are modified.
  • Tax credits (Art. 34 of the Income Tax Law)
    • The monthly amounts for spouse and for each dependent child entitled to the credit are adjusted.
  • Employee social security contributions (CCSS – IVM)
    • The total percentage contributed by the employee is slightly increased, as a result of the periodic adjustment to the Disability, Old-Age and Death (IVM) regime.
Taken together, these elements result in a variation in net salary, which will likely lead to questions from employees when they compare their January payslip against previous months.
 

2. Illustrative example from a payroll perspective

For explanatory purposes, let us consider the following reference profile:
  • Monthly gross salary: ₡1,500,000
  • Employee with a spouse and one child entitled to the tax credit
  • No additional deductions (voluntary plans, garnishments, etc.)
Under the 2025 vs. 2026 framework, the approximate result is:
  • With 2025 income tax brackets and social security contributions:
    • Net salary ≈ ₡1,279,070
  • With 2026 income tax brackets and adjusted social security contributions:
    • Net salary ≈ ₡1,276,000

In other words, solely as a result of the legal changes (income tax + CCSS), an employee with this profile could see a variation of approximately ₡3,070 less in their monthly net salary, even though their gross salary remains unchanged.

This type of analysis can be replicated for other income levels and different family configurations, and can be useful for companies to anticipate internal queries.
 

3. Implications for companies and HR/Finance areas

From a people management and compensation standpoint, we recommend:

  • Taking an integrated view of payroll: not analyzing only the income tax change or only the CCSS adjustment, but the combined effect on net salary.
  • Preparing internal communication: informing employees that any variation in net salary is due to general legal changes (Ministry of Finance and CCSS), and not to unilateral decisions by the company.
  • Supporting middle management: managers and team leaders are often the first point of contact for employee questions; it is important that they have clear and consistent messages.
At BDO, through our payroll administration services, we are incorporating these adjustments into our clients’ payroll systems, ensuring the correct application of the new income tax brackets and employee social security contributions.
 

Reference brackets

1. Payroll income tax (Article 33)

The new monthly brackets are as follows:
 

Monthly amount Tax rate
Monthly rent of up to ¢918,000 Exempt
On the excess of ¢918.000 and up to ¢1.347.000 10%
On the excess of ¢1.347.000 and up to ¢2.364.000 15%
On the excess of ¢2.364.000 and up to ¢4.727.000 20%
On the excess of ¢4.727.000 25%

 

2. Tax credits for employees (Article 34, items i and ii)
Category Monthly credit 2026
Per child ¢1.710
Per spouse ¢2.590
 

For more technical detail, you can refer to: