Buying property in Costa Rica can be an enticing experience for foreign investors, not only because of the beautiful scenery and tropical environment, but also because of the profitable returns. However, investing in the Costa Rican market involves more than finding the perfect property. Knowledge of the property Tax in Costa Rica is also necessary.
Property taxes in the country are lower compared to other nations, and the regulations are not very complex; however, they may vary according to the type and use of the property. Be it the villa on the coast, the condo in the city, or the home in the mountains, understanding the taxes that come with it means owning the property without a hitch.
In this ultimate resource, we will walk you step by step through what you need to know about real estate taxes in Costa Rica, from typical municipal fees to luxury property taxes, corporation taxes, lease fees, and more, so you can wisely invest in Costa Rica without costly surprises.
Are there property taxes in Costa Rica?
Yes, all property owners in Costa Rica are legally required to pay property taxes, officially known as impuesto sobre bienes inmuebles. These are determined based on the value of the property, including land and any improvements on the land, in most instances.
Even though property taxes in Costa Rica are considered low when compared to other nations, it is essential to be in compliance in order to avoid having to pay fines or face a lawsuit if payments are not made on time. Familiarizing oneself with how property payments are calculated, by whom, and when they are due is essential for all foreigners who acquire property in Costa Rica.
In the next few sections, we will discuss Property Taxes in Costa Rica further and explain standard rates, payment methods, and other factors that will help you handle everything with confidence when you buy a property in Costa Rica.
Property Taxes in Costa Rica
Property taxes in Costa Rica are an integral part of Costa Rican property ownership that is charged on most properties, irrespective of their location and value. While the charges for these taxes in Costa Rica are relatively low, it is necessary for property investors in the country or those considering purchasing property for the first time to understand the payment process involved.
In the sections below, we will highlight the essential information regarding standard property taxes and payment mechanisms to help you avoid issues and remain tax compliant.
Standard Property Tax Rate: How It’s Calculated
Costa Rica levies a 0.25% annual municipal property tax on the declared value of the property. This means for a $300,000 home, the tax would be around $750 per year. The municipal government determines your property’s taxable value, which must be declared and updated regularly.
Determining Property Value
Costa Rica levies a 0.25% annual municipal property tax on the declared value of the property. This means for a $300,000 home, the tax would be around $750 per year. Your local government sets what is considered your taxable value for your property, and it is supposed to be reported and updated regularly.
Payment Deadlines & Where to Pay
Property value is based on your declaration to the municipality, considering land, construction, age, and other features. When purchasing a new property, the declared value usually corresponds to the purchase price. Properties are reassessed every five years to reflect market changes.
Penalties for Late or Incorrect Property Tax Payments
Property taxes are typically paid annually at your local municipal office. Payment is usually done online or physically. Each year, a statement is issued by the municipality showing the amount to be paid.
There are late fees, as well as interest, up to a possible 50% penalty, if the assessed taxes are not accurate. Not reporting accurate assessments of property can lead to investigations or lawsuits.
Luxury Home (Solidarity) Property Tax
In addition to standard property taxes, Costa Rica imposes a Luxury Home (Solidarity) Property Tax on high-value properties. This tax has been introduced to ensure that individuals owning high-priced homes make equal contributions to developments and social services in their communities.
Knowing how your property qualifies, how the tax is assessed, and how the declaration is made is very important.
Qualifying Property Thresholds
Properties costing more than about $250,000 (¢148,000,000) are liable to the luxury home solidarity tax. This tax is only charged on the construction value and not the raw land, ranging between 0.25% – 0.55% according to the total value of the property.
Declaration & Renewal Process
Owners must declare properties meeting the threshold annually. These municipalities issue forms for reporting the value of constructions and lands to calculate the tax liability for the year.
What Happens if Luxury Tax Isn’t Paid
Failure to pay will incur fees, fines, and accrual of interest. In severe cases, there can even be liens or legal actions on properties.
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Property Transfer & Title Registration Taxes
Sometimes, when foreigners purchase or sell a property in Costa Rica, they may not understand all the taxes and fees charged for transferring ownership and registering a property. Fees for transferring a property include fees charged for transfer, notary fees, and registration fees.
Understanding your respective obligations will make the transaction smooth and prevent any unexpected costs when buying and selling your property.
Transfer Tax at Purchase
There is also a charge of 1.5% of the property value, which is paid while the title is being transferred.
Stamps & Legal Registration Fees
Legal registration of property requires stamp duties and notary fees. These costs vary but typically add 0.5–1% of the property value.
Buyer vs Seller Responsibilities
- Buyer: Usually pays the transfer tax, notary fees, and registration costs.
- Seller: Responsible for any capital gains tax if applicable.
Corporate Ownership Property Tax
Whether it’s an active business or an inactive business, it’s important to be aware of this information regarding obligations in order to ensure that everything runs smoothly with property management.
Whether your company is active or inactive, understanding these obligations, including annual declarations and potential penalties, is essential to ensure compliance and maintain smooth property management.
Active vs Inactive Company Obligations
Properties held by corporations may face annual corporate property taxes. Both active and inactive companies are required to file declarations, though rates may differ depending on business activity.
Annual Corporate Declaration for Property Owners
Shareholding companies have to make annual returns of all the properties they own and their value to the concerned corporate authorities.
Penalties for Non-Compliance
Non-compliance may result in penalties, interest, and even possible litigation, such as limitations of the business operations of the corporation.
Rental Property Tax
If you are going to rent your property in Costa Rica, whether it is going to be a long-term rental or a short-term rental property, it is important that you are able to comprehend and understand the tax laws concerning rental property in Costa Rica.
Below, we will discuss in more detail the main points to take into account for both short and long leases, from your VAT/IVA obligations to digital billing, and how to manage your rented property with confidence.
Long-Term vs Short-Term Rental Taxation
In fact, long lets are liable for income tax in accordance with standard treatment, whereas short lets (as with Airbnb) are liable for VAT/IVA at 13% on rental revenue.
Required VAT/IVA on Short-Term Rentals
By default, short Rental Properties owners will have to pay 13% of the IVA, complying with Costa Rican legislation.
Digital Invoicing (Mandatory for Rental Owners)
Digital invoicing is required for rental property owners, allowing the government to track income and tax compliance automatically.
Other Taxes to Know When Living or Investing in Costa Rica
Apart from property and rent taxes, there are other taxes and fees, a person or an expat residing within or investing within Costa Rica must know about. These include income taxes, Value-Added Taxes (IVA), Import Duties, Vehicle Taxes, and municipal fees.
Familiarity with such taxes is necessary for quality financial planning and full compliance with the taxation system in Costa Rica. We have attempted to elaborate on the above-mentioned taxa in detail so that readers are aware of what to expect.
Income Tax (Residents vs Non-Residents)
- Residents: Taxed on income sourced within Costa Rica only.
- NonResidents: Typically not liable for local taxation on foreign-sourced income.
VAT / IVA (13% Standard Rate)
The VAT is charged on all the services and goods, including the short-term rental service of immovable properties, professional services, among others.
Import Taxes
Costa Rica imposes import duties ranging from 1% to over 49%, depending on the type of goods brought into the country.
Annual Vehicle Tax (Marchamo)
All vehicle owners must pay the annual Marchamo, which covers road permits and mandatory insurance.
Education & Culture Stamp
The Marchamo, an annual tax that all car owners pay, also includes road fees and insurance.
Municipal Garbage & Service Fee
The trash and service fees levied by the municipalities depend on the size and location of the property.
Conclusion:
Navigating Property Taxes for a Smooth Investment in Costa RicaReal estate ownership in Costa Rica can prove to be a great investment; however, property taxes in Costa Rica can help you have a smooth experience as a foreign buyer. By complying with all that is required, you can live comfortably in your investment property. If you are interested in purchasing a property within Costa Rica or are searching for a house for sale within Samara, Costa Rica, Tendance Immo Latina is there every step of the way. They take care of everything that is involved when purchasing a property, including everything that is legal and related to taxes and real estate.
