Those low property taxes and a lack of capital gains tax in Costa Rica makes real estate investment a viable opportunity for foreign investors. What if a house is sold at a loss from the cost to build or buy it? We weren’t planning on covering these because they are so new that it’s premature to measure the impact on our real estate. Your email address will not be published. Costa Rica Offers Tax Advantages . First, the rate is 0.25%. On a side note, one interesting piece of information that you might consider when contemplating buying real estate in Costa Rica is the Zona Marítimo Terrestre. Property taxes are levied on the cadastral value of the property as assessed by the tax authorities. Second, the tax is levied based on the property’s cadastral value, as assessed by the tax authorities. Many refer to it as the IVA (impuesto de valor agregado) for its initials in Spanish. I never spam and will never pass on your email to any other party. However, a relatively newer tax has hit the real estate market that you should keep in mind should you consider purchasing property in Costa Rica. Hi Russ, Find overseas properties to buy in Costa Rica with the UK's largest data-driven property portal. On 20 December 2019, Costa Rica’s tax authorities published, in the Official Gazette, Resolution No. Now that the capital gains tax is in effect, the strategy changes. The tax laws in Costa Rica are changing and it is important to know and understand the new obligations so your business remains compliant when operating in the country. The goal of the tax reform law is to change the sales tax into a Value Added Tax (VAT) that will be broader in scope by covering products and services. Property taxes are payable quarterly, but you can pay until the end of the year in advance and there is a 5% discount if you do so. Property taxes are levied by the municipalities at the flat rate of 0.25%. Some time later, after the new law has taken effect, you sell it for $250,000. Many, especially realtors, are aghast at the nerve of the Costa Rican government for doing such a thing. A. Your email address will not be published. Americans are increasingly choosing to relocate to destinations like Costa Rica. A 15% tax on the capital gains is now imposed when a property is sold. Similarly to the United States, local governments are tasked with performing routine appraisals of the real estate property located in their jurisdiction. In Guanacaste, house prices fell by 2.8% y-o-y to an average of US$1,158 per sq. The new tariff is part of the broader “Law to Strengthen Public Finances” that was passed the previous December. Updated COVID Requirements Costa Rica October 23. It’s called the Impuesto Solidario para el Fortalecimiento de Programas de Vivienda (roughly translated as the Solidarity Tax for the Strengthening of Housing Programs) The Costa Rican tax system is based on the principle of territoriality, according to which any business activity in Costa Rica is subject to income taxation on local income in the same way as a registered business, irrespective of the place of incorporation. Costa Rica News – The General Directorate of Taxation is now offering online services through the ATV portal. Theoretically, yes. ), tax in Costa Rica wasn’t something most travelers needed to concern themselves with. If you want to keep up with what is happening in Costa Rica sign up for my monthly email. INCOME TAX. Local governments can waive this ban, but if you are looking to purchase beachfront property in the country, you should know that governments are prohibited from issuing waivers for foreigners that have not lived in Costa Rica for at least five years. The lowest tax bracket is 10% and the highest is 30%. Property buyers should ensure that their “escritura” (deed) reflects the true purchase price. Only revenue earned by an individual within Costa Rica is subject to an assessment by the tax authorities. Costa Rica: Personal Taxation Property Tax. What is it, and how does it affect you? Costa Rica property taxes are extremely low—just 0.25% of the declared value—so municipalities have had little funding to use for improvements. The Costa Rican level of property taxation (currently 0.25 percent) is quite a savings from most North American countries, the United States included. Meléndez & Bonilla has lawyers that specialize in these types of cases and would love to help you set up your dream home or dream investment property in Costa Rica. Residents of Costa Rica who sell their primary residence are exempt. The law requires that the buyer set aside 2.5% of the purchase price. Costa Rica: Summary of tax reform changes, new VAT system Costa Rica: Summary of tax reform changes New law in Costa Rica provides a comprehensive reform of the tax system. In the past, official property values were kept as low as possible, sometimes artificially, in order to minimize property taxes. Personal income tax rates Self-employed individuals. Living in Costa Rica might have important income tax consequences for you if you’re a taxpayer in the United States. The luxury home tax applies to anyone with homes valued at more than $218,000 at the current exchange rate. If your primary residence is outside of Costa Rica, and you sell a vacation home in Costa Rica, you will have to pay the tax. New Costa Rica tax laws went into effect on July 1, 2019. What if you sell a property that is subject to capital gains tax but you owned it before the new law went into effect? Low property taxes and a lack of capital gains taxes have inspired other investors and retirees to do just that. 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