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August 26, 2020

Luxury Taxes in Costa Rica

Costa Rica has made many recent changes in its complicated tax laws. One of these is a luxury tax on high-value homes, established in 2009 and officially known as the Solidarity Tax for the Strengthening of Housing Programs.

The stated purpose of luxury taxes in Costa Rica is to build homes for people living in poverty and to reduce the number of crudely built shanties throughout the country.

Whether you must pay this tax depends on the value of your constructed home, along with other improvements such as ranchos, swimming pools, walls, internal streets, sports fields, etc. The threshold at which the tax kicks in applies only to these types of construction and improvements, not to the land itself.

However, if you meet the threshold, you must then add the value of the land to the value of the construction and pay the tax based on the entire amount.

Thresholds for luxury taxes in Costa Rica

The threshold at which the tax kicks in rises every year. For 2020, that threshold is 133,148,400 colones (about $233,900). So if your constructed home (not the land underneath it) is worth less than this, you don’t have to pay the tax. But if the home is worth more than this, you have to add the value of the land to the value of the home and other improvements, and then pay the tax based on the total value of the property.

The tax ranges between 0.25% and 0.55%, again depending on the value of the home. Payment must be made by Jan. 15 each year, or penalties will be imposed. The Costa Rican government expects homeowners to have their homes assessed, determine the amount of tax due and pay it on their own, although it may check to verify that the correct amount has been paid.

Every three years, those affected must fill out a form called “Formulario Único de Inscripción, Declaración y Pago Impuesto Solidario para el Fortalecimiento de Programas de Vivienda, Ley 8683.” But the tax must be paid annually.

The good news is, Special Places of Costa Rica takes care of all these complicated tax issues on your behalf. We are committed to providing full-service property management for all our owners, and we offer this update for informational purposes. If you have any questions, feel free to contact us at specialplaces@crvr.net, although depending on your situation you may wish to consult a real estate attorney.

 

 

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