Property Taxes / Impuesto de Propiedad
One of the great benefits of owning property in Costa Rica is the low property taxes. Property taxes in Costa Rica are much lower than in the US and Canada. The fee is 0.25% of the assessed value of your home or property. If your home values at $100,000, your property tax would be $250 for the year. There is also a fee for garbage collection called Garabito the trash collection is roughly $10.50 per month and will be in the property tax statement. The taxes can be paid at the local municipality or via wire transfer and are due January 31st.
The value of your home is by either the amount registered at the National Registry (Registro) or the purchase price, whichever is higher. By law, it is the responsibility of the homeowner to have their property reassessed every five years. If the municipality appraises your home, it is more than likely it will be assessed at a higher value, so because of this, it is best you do so yourself.
Capital Gains Tax
A new tax law has gone into effect in Costa Rica regarding capital gains tax. As of July 1, 2019, there is a capital gains tax of 15%, which will be applied to real estate and investment income properties. There is a one-time exemption for property owners who were owners before the law going into effect. This does not mean you will not pay capital gains. It means you'll pay 2.25% on the difference between the sale and your purchase price. If you have more than one investment property, such as a commercial property, the second property would be subject to the 15% tax.
For property owners whose home is their full-time residence, you are always exempt from any property tax.
If you are a foreigner and do not live in Costa Rica, also referred to as a "domiciled person," which is a foreign person who spends more than 183 days in Costa Rica. If the foreigner leaves and enters the country sporadically, the Tax Office will need to confirm the status of the person to avoid any problems. The buyer, by law, has to hold back 2.5% of the purchase price of the property to ensure that any capital gains are paid. These taxes will be broken down in your Closing Statement, which is prepared by Escrow.
Value Added Tax (VAT)
Vacation rental properties are subject to a 13% value-added tax (VAT) as is added to all goods and services in Costa Rica. Most property managers will charge this to the renter and pay to the government on behalf of the renter
Under the Costa Rican tax system, residents and corporations are taxed only on income earned in Costa Rica. If you have a vacation rental property, then it would be necessary to file a tax return once a month and then again year-end. Deductions can be made for depreciation, travel expenses for 1% of the gross income declared insurance premiums, and any costs incurred. If you are self-employed, earning money in Costa Rica, you will need to file an income tax (impuesto de renta, although certain things are exempt from taxation, such as relocation costs.
Luxury Tax / Impuesto de Solidaridad
The Costa Rican government enacted this law to assist families in poverty with new homes. The Costa Rican Congress passed this tax in November 2008.
The Tax Office (Direction de Tributacion) developed the guidelines for the appraisal of buildings and land. The purpose of the Law is to tax “luxury homes” in Costa Rica so the Costa Rican government can provide homes to families in extreme poverty. The tax is based on calculating the construction values, as in the finishes, type of windows, type of flooring granite tops versus tile, and more as well as electrical and plumbing systems.
If the construction value of a home or condo is over 117 million colones or about approximately $245,000, then there is an additional .25% to .55% luxury tax. In our region, it is normally only the finest three bedrooms + residences that have an applicable luxury tax, and they are normally only subject to an additional .25%. Therefore, the total property taxes on such a luxury residence would be the normal .25% property tax + .25% luxury tax = .5%.