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Before purchasing a vacation rental in Costa Rica, it’s essential to understand the rules you’ll need to follow — namely, the taxes you’ll need to pay to the government.
Fortunately, paying taxes as a short-term rental owner in Costa Rica isn’t as complicated as it might seem. In this post, we’ll explain the nuances and detailed steps you’ll need to follow to pay taxes as a vacation rental owner in Costa Rica.
What Is the Difference Between IVA Tax and IVI Tax?
Costa Rica has two taxes that are taxed at the same rate (13%) — an IVA and IVI tax. Because the acronyms are so similar, many people confuse these two taxes, but as a vacation rental owner, it is vital to understand the difference.
Costa Rica introduced the Impuesto sobre el Valor Agregado (IVA tax) on July 1, 2019. This is a value-added tax for services. However, the Impuesto de Ventas Incluido (IVI tax) is an included sales tax already applied to goods and some services — including vacation rentals — before 2019.
So, as a vacation rental owner, you will still pay the existing IVI tax instead of the new IVA tax (both taxed at 13%). However, if you offer additional services to your renters, such as private chefs, in-house spa services, concierge services, or tours, these services will likely be subject to the new IVA tax.
How to Pay IVI & IVA Taxes as a Property Owner in Costa Rica
Collect IVI Taxes
Here’s the good news — as an owner, you are not responsible for paying the IVI tax. Your renters are!
However, if you are working with a third-party booking system, like Booking.com, Airbnb, or VRBO, or a property management company, you will need to ensure they charge the 13% IVI charge on every booking. Usually, your accountant or property management company will issue a factura electrónica (digital invoice) for each reservation that serves as a virtual tax record.
Declare IVI Taxes
Once you have collected the IVI and/or IVA taxes from your renters, you must pay these taxes to the Costa Rican government. This fiscal month runs from the first to the end of the month, and surcharges are due the following month, between the 1st and 15th.
So, for example, the taxes you collect from April 1st – April 30th, 2023, would be due between May 1st – May 15th, 2023. You must be registered as an IVI and/or IVA taxpayer (either as a company or individually), which is something your accountant or property management company can help with.
Once you are registered, declaring your IVI and/or IVA taxes is relatively straightforward. You will need to log into the virtual portal, where you will report your income and expenses from the previous month. The system will auto-calculate how much IVI and IVA tax is due — which, remember, is the 13% that should have been collected from your renters. You will owe nothing out of pocket.
Remember, always save a copy of these declarations for your records. If you don’t feel comfortable handling the process on your own, you can hire an accountant or rely on an expert property manager, like our team at Special Places of Costa Rica.
Pay the IVI Tax
After you declare your monthly income on the virtual portal, you can log into your business banking portal and navigate to the online bill pay section. Once you are here, choose Impuestos (Taxes), and select the options for Impuesto del Valor Agregado (IVA) or Impuesto de Ventas Incluido (IVI). The corresponding taxes you just declareed will appear here.
After you have paid, the process is finished until the following month. Even if you don’t have any rentals in a given month, you still must report $0 of income and expenses to prove you do not owe the IVI or IVA tax.
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Other Vacation Rental Taxes
In addition to the IVI and IVA tax, you will also owe a few other taxes on your property in Costa Rica. However, these taxes should be more familiar to you.
Costa Rica’s annual property taxes are assessed on a sliding scale, calculated at 0.25%. plus an additional 0% – 0.55% of your declared property value. The 0.25% tax rate applies to all homes. So, a home worth $150,000 will pay $375 of property taxes per year.
The additional 0% – 0.55% is applied to “luxury homes” and is the solidarity tax for social housing. You can learn more about property taxes and the amount of property taxes you will have to pay according to the value of your home on our taxes page.
Costa Rica’s income taxes are also determined on a sliding scale and are often more nuanced than property taxes. There are different scales for different types of income — for example, salaried employees are charged differently than independent freelancers.
If you are earning an income from your rental property in Costa Rica, you will need to pay income taxes. We recommend talking with a tax professional to minimize your tax obligations before operating your vacation rental. Our team at Special Places of Costa Rica would be happy to help you.
Allow Special Places of Costa Rica to Take Care of the Taxes for Your Vacation Rental
Keeping on top of taxes for your vacation rental can be a hassle. With monthly IVI and IVA taxes and annual income and property taxes, it can be challenging to keep track of when (and what!) you owe — especially with multiple properties!
Our team at Special Places of Costa Rica are experts in Costa Rica property management and all the taxes that come with it. We can help you stay on top of paying your short-term rental taxes so that you can focus your energy and attention on other things. Contact us today to learn more!