Property Taxes In Costa Rica: A Comprehensive Guide

Taxes on real estate are typically handled by the city or county government nearest the property in question. It is crucial for a Costa Rican property owner to be familiar with the relevant tax rules and regulations. It used to be the “wild, wild west,” with people deliberately understating the value of their land to the government in order to pay less in taxes. The government has started taking a harder stance against this sort of thing in recent years. Still, compared to many other nations, property taxes in Costa Rica are relatively low.

This manual will explain how to pay your Costa Rican property taxes, what forms those taxes can take, and whether or not you qualify for any exemptions or reductions.

Types Of Property Taxes In Costa Rica

There are two central property taxes in Costa Rica: the Property Tax (Impuesto Sobre la Renta) and the Property Transfer Tax (Impuesto de transferencia de Bienes Raíces).

Property Tax

The Property Tax is an annual tax based on the property’s value. The tax rate ranges from 0.25% to 1.25%, depending on the property’s value. The value of the property is determined by the Costa Rican Tax Authority (Dirección General de Tributación). 

“Luxury” Home Tax

The municipality where the property is situated is also responsible for collecting luxury taxes. The luxury home tax levies any residences where the construction is valued at ₡138,000,000 colones or approximately $220,000 USD. You may pay this every three months (quarterly) or in advance for 1-2 years. 

Property Transfer Tax

The Property Transfer Tax is a one-time tax paid when a property title is transferred from one owner to another. The tax rate is 3% of the property’s value, as determined by the Costa Rican Tax Authority.

How to Pay Property Taxes In Costa Rica

Property taxes in Costa Rica can be paid at any of the Costa Rican Tax Authority offices. Most municipal governments will require property taxes to be paid every three months (quarterly) and allow you to pay for the entire year. Most towns will provide a discount if you pay for the whole year in advance. Certain towns may not accept credit cards, while others have an online payment system. Given that this varies, it is advantageous to learn about potential future, less complicated online payments made using a BCR account.

Potential Exemptions And Deductions

There are certain exemptions and deductions available for property taxes in Costa Rica. For example, properties used for agricultural or forestry purposes may be eligible for a reduction in the Property Tax rate. Property used for social or affordable housing may also be eligible for tax exemptions or deductions.

It is important to note that the process and requirements for exemptions and deductions may vary depending on the specific tax and the property in question. It is recommended that property owners consult with a tax professional or the Costa Rican Tax Authority for more information on potential exemptions and deductions.

Property Bought Through Corporations Tax

Each January, corporations must pay their yearly taxes. The administrative charge for the Ministerio de Hacienda (the tax authorities) is about ₡80,000 colones or about $126.90 USD.

If you do not pay your corporate taxes, you face the danger of having your business dissolved, which might delay selling your property. We advise constantly keeping up with your taxes because fixing this could cost thousands of US legal expenses.

The shareholder’s Declaration or RTBF yearly declaration’s goal is to update corporations’ information about their current shareholders and beneficial owners. Every year, the deadline is April 30.

The assets, liabilities, and equity of inactive corporations that don’t engage in commercial activity or company must be disclosed in Costa Rica. It takes a public accountant to complete this procedure. You can file this duty through your Costa Rican attorney, which applies to all corporations in the country. The yearly filing deadline for this declaration is March 15.

How Property Taxes Are Evaluated

Every five years, the property owner must submit a “Property Declaration Form” (Declaración de Bienes Inmuebles) to the municipality where the property is situated. Although the owner fills out the form indicating the value, the municipal government reviews it to ensure the disclosed values are within bounds. Many have a database of property values, and they anticipate you to set values in your declaration that go inside their valuation guidelines. If it believes that the value stated in a file is lower than the values established in its valuation manuals, it may audit the filing. This declaration applies to all properties last declared in 2017 or before, even those that have never made a valuation declaration previously, and is due on November 30, 2022. Some jurisdictions have started enforcing penalties for failure to file, such as a fine that might be the same as the new appraisal’s value and the amount of property taxes you previously paid. You can file anytime between September 1, 2022, and November 30, 2022.

What Happens To The Property Taxes?

From our understanding, the breakdown of the property taxes landowners pay to their local government is as follows: 1% of the cost of assessment training for local municipal governments is covered by the National Revenue Department; 3% goes to the National Property Registry; the Board of Education receives 10% of the money from each regional Canton; tax collection-related administrative expenses are allocated 10% of the budget; the remaining 76% is given directly to regional municipal authorities.

Conclusion

As a property owner in Costa Rica, it is essential to understand the various types of property taxes that apply to your property, the process for paying these taxes, and any potential exemptions or deductions. By staying informed and working with a tax professional, property owners can ensure that they comply with the tax laws and regulations in Costa Rica.

-Written by Glenn Tellier (Founder of Grupo Gap)

+506 8500-2085
info@gap.cr

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