Overview of Taxes in Costa Rica: What You Need to Know
Like many countries, Costa Rica has its own set of annual taxes. However, not all taxes apply to every property owner. Here are the key taxes you should be aware of when owning property in Costa Rica:
Capital Gains Tax
Due: At Closing of the Property Sale
As of July 1, 2019, Costa Rica introduced a 15% capital gains tax on the profit made from the sale of real estate. However, if the property was purchased before this date, the seller has the option to pay a one-time tax of 2.25% based on the sales price, rather than the full capital gains tax.
- Exemptions: Properties that served as the owner’s primary residence or were used for business purposes are exempt from the capital gains tax.
- Buyer’s Responsibility: The buyer is required to withhold 2.5% of the sales price at the time of purchase to ensure the capital gains tax is paid. This is to prevent foreign property owners from selling without settling their tax obligations.
Luxury Tax
Due: January 15th of Each Year
The Luxury Tax (also known as the Solidarity Tax for Housing Programs) applies to residential properties such as houses, condos, and apartments that exceed a certain value threshold. For 2024, the threshold was 145,000,000 colones (approximately US$279,000), and this amount is adjusted annually.
Annual Corporation Tax
Due: January 31st of Each Year
Corporations, subsidiaries, and limited liability companies (LLCs) registered with the National Registry must pay an annual corporate tax under Law #9428 (“Tax on Legal Entities”). This tax is in addition to any VAT or Income Tax the corporation may be subject to if it is active and registered as a taxpayer.
Property Tax & Garbage Collection Fees
Due: March 31st of Each Year
Property owners must pay two fees to the local municipal government:
- Property Tax (Impuesto sobre Bienes Inmuebles): This tax is 0.25% of the registered value of the property as per the municipality’s valuation. It’s the property owner’s responsibility to update the property value every five years.
- Garbage Collection Fees: This fee covers waste collection services, which are typically three times per week. The garbage collection fee is determined by the municipality based on property usage (residential or commercial) and location. For 2021, residential properties had an annual fee starting at US$74, while commercial properties started at US$221. These fees can be paid either quarterly or annually.
Avoiding Penalties
It’s crucial to pay all applicable taxes on time to avoid any fines or penalties. Stay up-to-date with your property tax, corporate tax, luxury tax, and garbage collection fees to ensure compliance with Costa Rican law.
By staying informed and adhering to these tax regulations, you can avoid unnecessary complications and ensure that your property ownership in Costa Rica is both smooth and legally compliant.