The Quick Guide To Costa Rican Property Tax Regulations
You can’t have it all. Well, theoretically you could – but you would still have to pay taxes on it. If you are a property owner in Costa Rica or thinking of becoming one, you should read this quick guide to Costa Rican property tax regulations.
Let me give you the good news first:
There are few places where the property tax is as low as in Costa Rica – we are talking ridiculously low.
And yet, as an owner you need to know exactly about Costa Rican property tax regulations and take care of your duties on time.
The government won’t remind you, and if you don’t comply, you’re going to end up paying fines or have collection procedures set up where they take your money anyway.
Don’t be fooled by the nice weather and friendly smiles. They will collect.
No ifs, ands, or buts about it.
So with that being said, let’s take a look at some of the most important stuff that you need to be aware of.
Every (Prospective) Property Owner In Costa Rica Should Know This
In Costa Rica, you might actually have to pay luxury task on your property.
Now, this tax applies to houses, condos, and apartments whose value of construction was beyond the exempted tax amount determined by the tax office, which just so happens to be $230,000.
In other words, if your property costs more than $230,000 then you’re getting taxed on it.
Amount Of Yearly Taxes Payable in Costa Rica
Now the amount of tax to be paid per year is not set in stone. Quite the contrary; there is a bit of wiggle room between 0.25 percent and 0.55 percent.
The percentage you’ll pay depends on your declared property value. In this case, you better hope your property isn’t worth much… don’t worry, I’m not having a sunstroke, I’m just kidding here.
So, non-exempt homeowners (aka people who have to pay the tax every year since their property is over $230,000) have to fill out a declaration form every three years called D-179.
I don’t know about you, but nothing gets my blood pumping like talking about taxes…NOT!
Well, I could actually enjoy this, if it was more of a “let me explain to you why YOU don’t have to pay taxes anymore”-type of conversation.
Still waiting on that one though. Oh well, let’s move on to the next point of the Costa Rican tax regulations: the lovely annual corporate tax!
Annual Corporate Taxes
From September 1, 2017 all corporations/incorporated entities have to register with the National Registry and pay an annual tax.
This is under tax law #9428: “tax over legal entities”.
So what does this mean?
If you have an inactive corporation, you have to pay a fixed rate fee of $120. If you have an active corporation, however, then your fee depends on income and can vary from $120 to $380.
This is of paramount importance because if you don’t pay your due taxes, then the National Registry won’t certify, register or issue any documents for your corporation. Actually, you won’t even be able to contract with the government or any public institution.
You’ll be like a dead fish just floating in the water, unable to do anything. Therefore, unless you are Aquaman and like floating in the sea, you need to get this done asap so that you can make some money on land.
Annual Property Taxes
You guessed it. It doesn’t stop with luxury and corporation taxes. Costa Rican property tax regulations obviously include an annual property tax. Otherwise, I could’ve watched a couple episodes of my favorite show instead of writing this, no?
However, as I have indicated in the first paragraph of this article in an attempt to make you like me, the actual property taxes in Costa Rica are super low.
Let me tell you how low. Your property tax is going to be 0.25% of the registered value of the property.
In other words, you’re going to pay 0.25% of the price you paid for the property or 0.25% of the value that’s assigned to it by the tax office.
Could be worse, couldn’t it?
I mean, I would trade the Costa Rican property tax regulations for the German ones in a minute!
Property owners also have to pay a garbage collection fee to the city, town or district where their property is located. A fancy word for these is “municipality”.
So how much is it and why doesn’t your wife pay you a fee, when you take the trash out, but you have to pay the state if they do the same?
Well, I cannot answer the latter question, as I’m generally afraid of wives and don’t want to get into trouble. In terms of the amount you will have to pay: read on!
Your garbage collection fee luckily is a fixed amount which you’ll pay at the same time as your property tax.
Unsurprisingly, Costa Rican property tax regulations assess the fee depending on the location of your property as well as if you use it for residential purposes or commercial.
Just a quick tip: There have been admitted errors in the administrative system where the municipality doesn’t always charge both the property tax and garbage collection fee amounts on the same statement. This can make it confusing.
To avoid any headaches just make sure you look over your statements, so everything seems kosher.
When To Pay Your Costa Rica Property Taxes
Also, you’ve got options. If you´re the type of person who likes to get things done ahead of time, then you can pay your property tax and garbage collection fee a year in advance. However, if you like a more step by step approach then you can pay your taxes and fees quarterly.
The end of the first quarter is March 31. Just be careful and mind your p’s and q’s otherwise you’ll get hit with interest charges if your payments are late.
Regulations: Costa Rica Property Taxes
Every 5 years you need to fill out a form and update the value of your property. If you don’t do this you’re going to get, wait for it, drumroll please…….fines! What a surprise!
Also, the city or district (municipality) will end up doing their own assessment of your property.
Recently the Costa Rican Congress and Constitutional Court approved the Law to Strengthen Public Finances. This law will be implemented once the regulations are ready within the following 6 months.
Changes to Costa Rican property tax regulations you can look forward to in the new law are:
- The fiscal year originally from October 1st to September 30th will now be from January 1st to December 31st.
- It establishes a Capital Gain Tax of 15%.
- It creates a Value Added Tax of 13% on most goods and services; 4% for airline tickets and private healthcare; 2% for materials, machinery, medical products; and last but certainly not least, 1% for food products of basic necessities.
If you are a shareholder of a property or corporation, the following will apply to you according to Costa Rican property tax regulations:
Starting on March 2019, corporations must disclose the names of all the shareholders to the Bank of Costa Rica. The due dates for this process are depending on the last digit of the Corporate ID according to the following schedule:
- March corporations ending in 0
- April corporations ending in 1
- May corporations ending in 2
- June corporations ending in 3
- July corporations ending in 4
- August corporations ending in 5
- September corporations ending in 6
- October corporations ending in 7
- November corporations ending in 8
- December corporations ending in 9.
Don’t Worry, Be Happy
In summary, as long as you take some time to find out about your personal duties in terms of Costa Rican property tax regulations and take care of them in time – you have nothing to worry about.
Taxes are low and the bureaucracy is within the scope of reason. You might have to fill out the forms and applications mentioned in this article but that’s part of the game.
If you are able to pay taxes upfront – even better – just get it done and wait for your tax returns.
Get it out of your way and enjoy the Pura Vida under the Costa Rican sun. Find topics of conversation that you will enjoy more than Costa Rican property tax regulations.
Whether you are looking to move to beautiful Costa Rica, or purchasing a vacation rental there, owning property is always a good investment. That is after good research on the respective object and market, of course. And where would be a better place to do that than Costa Rica, where people are happy, nature is fantastic and prices are low?
If you haven’t bought property in Costa Rica yet, you might want to check out this article as a first source of information.
If you own property already: get in touch with our property management services and find out how we can make life better for owners.