What are Closing Costs?
Closing costs are fees paid at the closing of a real estate transaction. This point intime called the closing is when the title to the property is conveyed to the buyer. Closing costs are incurred by the buyer. When you get a mortgage, you will need to pay closing costs, which are fees – charged by lenders and third parties related to the purchase of the home. In addition to owing the lender the down payment on the home and the principal and interest related to the mortgage, you will also owe the lender and third parties closing costs, which you usually pay at the time that you close on your mortgage. Most of the time, it is the home buyer who pays the closing costs, rather than the seller, though on some loans such as VA loans, the seller pays a portion of these costs.
How Much Are the Closing Costs?
Typically, closing costs normally run approximately 4-5% of the purchase price, which includes a transfer land tax, legal fees, and miscellaneous fees. For the purpose of lowering the property transfer land tax, it is common practice to lower the gross amount paid by declaring a much lower sum than the actual sale price. The transfer and land taxes are assessed based on the declared value, while legal fees are charged based on SALES PRICE of the property. Be aware that acting in this manner could cause problems in the future. As always, it is recommended that you consult a lawyer about closing costs.
When selling your property, there is no captail gains tax that has to be paid. Property tax is ¼ of 1% or 0.25% of the value of your property.
There are a variety of stamps required to transfer a property in Costa Rica. They are– the Legal Bar Association Stamp (Timbre del Colegio de Abogados), the Municipal Stamp (Timbre Municipal), the Fiscal Stamp (Especie Fiscal), the National Archives Stamp (Timbe del Archivo Nacional) and the Agriculture Stamp (Timbre Agrario). Your lawyer will take care of these stamps, which equate to roughly .05% of the sale price.
Legal fees, also known as notary fees here in Costa Rica, are calculated at 1.5% of the sale price. This is what is paid to the lawyer/notary for setting up the Sales and Purchase Agreement, as well as, researching and filing all of the necessary documents in the sale. These standard legal fees do not include any additional legal work (e.g., a new corporations, establishing an easement, etc.).
Transfer tax is 1.5% of the sale price.
The 13% Sales Tax
According to Camara Costaricense de Bienes Raices (CCBR), the agency that oversees real estate brokers in Costa Rica, “The real estate broker is responsible for collecting the sales tax by law and must charge the owner /seller 13% on the commission for the sale of the property.” This tax is in observance of Ley General del Impuesto Sobre las Ventas (Sales Tax Law), Article 1, subparagraph ‘n’.