Property Tax: One of the great benefits of owning property in Costa Rica is due to low property taxes. Here we pay .25% of the registered value per year so on a property valued at $100,000 the annual taxes would be $250. Property taxes are payable quarterly, but you can pay until the end of the year in advance and there is a 5% discount if you do so. In most urban districts there is also normally a fee for garbage collection and maintenance services and in our county called Garabito the trash collection is roughly $10.50 per month and is included in the property tax statement. The taxes can be paid at the local municipality or via wire transfer.
Luxury Tax: If the construction value of a home or condo is over approximately $230,000 then there is an additional .25% to .55% luxury tax. In our region it is normally only the finest 3 bedroom + 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%.
Capital Gains: As of July 1, 2019, a capital gains tax is applicable. A primary residence is exempt from the capital gains tax, but investment properties will be subject to a 15% tax on gain in value from when purchased to when sold. Properties purchased prior to July 1, 2019 have the option of paying 2.25% of the sales price instead of 15% on the gain in value.
Tax for Non-Domiciled Sellers: This tax only applies if you own your property in your personal name with a foreign passport and is 2.5% of the sales price. If you own your property via a Costa Rican corporation or with a Costa Rican ID (cedula) then this tax does not apply. Furthermore, this tax does not apply if you occupy the property for 183 days or more per year. This tax is to ensure that a foreign seller will pay the capital gains tax so the 2.5% tax must be withheld in lieu of the capital gains tax in order for the property title to be transferred.
Hotel tax: Vacation rental properties are subject to a 13% value added tax 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 owner.
Income Tax: 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 year and taxes would be paid on the net income. Deductions can be made for depreciation, travel expenses for 1% of the gross income declared, insurance premiums and any costs that are incurred necessary to produce the income.
The tax year ends on September 30th and the annual tax has to be paid before Dec 15th. However, legislation was approved in 2019 that will change to a calendar based tax year that would run from January to December.
If you retire in Costa Rica, no matter where you come from, you probably pay taxes on your retirement income already. This exempts you from paying income tax in Costa Rica. Yes, retirees in Costa Rica do NOT pay any taxes on their foreign retirement income. You only pay income tax if you run a profitable business.