Property Taxes: The Basics
Purchasing property in Costa Rica presents a unique advantage— the annual property tax on "Fee Simple Title" properties is just 0.25% of the fiscal value registered with the local municipality and national property register. Unlike in some countries where the national government collects property taxes, these funds help support local municipalities.
The Luxury Tax on High-Value Properties Started in 2009
Since 2009, Costa Rica has implemented a "Luxury Property Tax" for properties valued over approximately $260,000*. This progressive tax helps fund housing programs for low-income families. The tax rate increases with the property value, and the declaration is updated every three years. The tax is due annually by March 31st.
How Property Taxes Are Assessed
Property taxes in Costa Rica are based on the "fiscal value," determined by the local municipality. Property owners must file a property tax declaration every five years or whenever a property transfer occurs. The higher value between the current fiscal value and the new transfer value becomes the fiscal value for the next year. Registered mortgages can also influence this value. Importantly, fiscal values never decrease; if you purchase a property for less than its fiscal value, the higher amount will be used for tax purposes.
Tax Rates for Fee Simple Title Properties
The tax rate for Fee Simple Title properties is relatively low at 0.25%, applied to the registered property value.
Tax Rates for Concession Properties
Concession properties, leased by municipalities to individuals or companies, are taxed differently. This "Canon Municipal" varies between 2% and 5%, based on appraised value by the Tax Authority and ratified by each municipality.
General Property Tax Information
Property taxes are typically paid annually by March 31st, but you can opt for trimester or semester payments. Property values should be updated every five years; otherwise, the municipality may reassess them. Property owners can challenge assessments if they believe the municipality has overvalued their property.
Penalties for Non-Payment
Timely property tax payments are crucial to avoid fines and interest charges. Municipalities may place a lien on the property or initiate legal proceedings to collect overdue taxes, potentially leading to property (or investment property profit) loss.
Effective Property Tax Management
- Stay Informed: Keep up with changes in property tax laws and regulations.
- Plan Ahead: Budget for property taxes as part of your annual expenses.
- Consult a Professional: Seek advice from a tax professional or real estate attorney.
- Review Valuations: Regularly check your property's valuation and appeal if necessary.
Calculating Property Taxes in Costa Rica
Property taxes in Costa Rica are calculated as a straight percentage of your home's value: 0.25% for all properties, with an additional 0% to 0.55% depending on the property's value.
To determine your property's value:
1. Municipality Contact: Call your municipality's tax department or visit in person with the necessary identification and documentation.
2. New Property Purchase: Notify your municipality to update the tax information when purchasing a new property. The valuation will be your purchase price.
Property Taxes in Costa Rica: A Sliding Scale
Here's how it works:
- Base Rate: All homes are taxed at 0.25%.
- Luxury Homes: Properties above ₡137,000,000 (~$260,000) are subject to the solidarity tax, which is added to the base rate.
Exemption or Payment
Determine if you are exempt based on the calculated value. If not, add the land valuation to your total.
Declaration
Submit the Formulario Único de Inscripción, Declaración y Pago Impuesto Solidario para el Fortalecimiento de Programas every three years. Payments are due annually during the first two weeks of January.
Solidarity Tax Rates
- Up to USD$660,000: 0.25%
- $660,000 to $1,328,000: 0.30%
- $1,328,000 to $1,992,000: 0.35%
- $1,992,000 to $2,660,000: 0.40%
- $2,660,000 to $3,319,000: 0.45%
- $3,319,000 to $3,987,000: 0.50%
- Above $3,987,000: 0.55%
Property Taxes: Planning is Important
Property taxes are essential for funding local municipalities and are a key consideration for property owners in Costa Rica. Proceeds from the luxury home tax provide housing for those living in extreme poverty. Staying informed and managing these taxes effectively can help avoid unnecessary financial burdens.
Note: All information in this post is current as of publication but is not legal advice. Please consult your real estate attorney for current laws and personalized guidance. If you do not have a real estate attorney please contact me and I will be glad to introduce you to one.
Exchange rate used in this article is USD$1 = ₡520.
*Tax rates are calculated based on local currency valuations. Therefore the actual $USD amount taxable changes based on the current exchange rate.