The Costa Rican level of property taxation (currently 0.25 percent) is quite a savings from most North American countries, the United States included. You should contact your local tax office for details on when and how payments are to be made. If you reside in Costa Rica at least 183 days in a year and the home you sell is your habitual residence, the sale will be exempt from paying capital gains tax. Your options are to pay 15% of the gain (15% x $50,000 = $7500) or 2.25% of the sale price (2.25% x $250,000 = $5625). In Guanacaste, house prices fell by 2.8% y-o-y to an average of US$1,158 per sq. Now that the capital gains tax is in effect, the strategy changes. Among the new tax law measures are items related to income tax reform and to the reform of the general sales tax regime by replacing it with a value added tax (VAT) system. Property taxes are levied by the municipalities at the flat rate of 0.25%. First, the rate is 0.25%. However, a relatively newer tax has hit the real estate market that you should keep in mind should you consider purchasing property in Costa Rica. For example, suppose you bought a vacation condo for $200,000 before July 1, 2019. The local government also has the ability to set a payment schedule for property taxes. Only revenue earned by an individual within Costa Rica is subject to an assessment by the tax authorities. Local governments can waive this ban, but if you are looking to purchase beachfront property in the country, you should know that governments are prohibited from issuing waivers for foreigners that have not lived in Costa Rica for at least five years. Another effect of the new tax law is that it is now it is much more important to document the value of any property that is not exempt from capital gains tax. The law is officially known as law 9635 or the “Law to Strengthen Public Finances”. What if a house is sold at a loss from the cost to build or buy it? View our range of houses, villas and apartments for sale in Costa Rica. Meléndez & Bonilla has lawyers that specialize in these types of cases and would love to help you set up your dream home or dream investment property in Costa Rica. When and what to pay. New Costa Rica tax laws went into effect on July 1, 2019. 4 Note: The solidarity tax is a tax on dwellings (real estate properties), including those used habitually, occasionally, or for recreational use, established under Law 8683, to support Costa Rica’s social housing program (impuesto solidario para el fortalecimiento de programas de vivienda). For example, a US$ 500,000 property pays US$ 1,250 per year in property tax. But then Costa Rica passed a law whereby all corporations, active or inactive, would be subject to a yearly corporation tax. Those low property taxes and a lack of capital gains tax in Costa Rica makes real estate investment a viable opportunity for foreign investors. As well as Costa Rica having been known worldwide mainly for its stable democracy that abolished its army in 1948, the country has welcomed foreigners, is located three to five hours away from most major U.S. cities, has a low property tax compared to other countries, and has a very good quality of life. Are there any exceptions to the new capital gains tax? Hi Russ, Joe: This page was last updated on 16 August 2019. In Costa Rica, the taxation of individuals is based on the principle of territoriality, meaning that all personal income that has a foreign source is tax exempt. Property buyers should ensure that their “escritura” (deed) reflects the true purchase price. Costa Rica: Summary of tax reform changes, new VAT system Costa Rica: Summary of tax reform changes New law in Costa Rica provides a comprehensive reform of the tax system. The real problem the government faces, however, is a burgeoning budget deficit. Costa Rica Offers Tax Advantages . 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