Tax

Irrespective of the lenient rules pertaining to ownership of real estate property in Costa Rica, the transaction is not exempted from taxes. As part of the closing deal and even otherwise, taxes need to be paid in a timely manner in order to ensure speedy closing of the deal.

The formation of a corporation is taxable; even if this corporation is being formed so as to transfer the title to it rather than to an individual, so as to save on transfer taxes, this cannot be avoided. In this connection, one of the crucial issues to be decided is the capital of the corporation, since the higher the capital, the more registration taxes are required to be paid.

Similarly, before the closing of the deal, when the documents pertaining to the transfer of title are submitted with the Public Registry, one of the important matters that are cross checked is whether the seller is up to date on payment of property taxes. Property taxes range from 0.5% to 1.5% of the real estate property's declared value. Property tax laws have undergone revision over time and as per this, it now is the local governments' or municipalities' responsibility to ensure property appraisals are conducted at regular intervals and collect the corresponding property tax. The property tax is usually established and may be paid annually, or every semester or quarter depending on the location specific regulations.

The closing costs of a sale essentially include a transfer of title / land tax, a stamp tax, and legal / notary fees. Closing costs usually run at about 5% to 6% of the total sale price, and this expense is divided evenly among the buyer and seller most of the time. Other fees that may be chargeable in a property deal are survey fees, mortgage registration fees, escrow service charges and incorporation charges as the case may be.

There usually is a 3% property transfer tax. Title transfer tax and stamp tax is assessed based on the declared value of the real estate property in question, while the legal fees are based on the sale price of the property; this notary fees are usually 1.25%.

For help with taxation rules and procedures, drop us a line and we shall get back to you as soon as possible!