[BUYING AND SELLING REAL ESTATE IN COSTA RICA]
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property valuations every five years. Failure to comply may lead to fines, interest, liens, and, in severe cases, foreclosure. Transfer of Real Estate Costs: Real estate transfers in Costa Rica involve three primary costs: Transfer Tax: A 1.5% tax is charged based on the higher of the fiscal value or the purchase price. Registration Fees: These are administrative charges of 0.9% for recording the transaction in the National Registry. Together, the Transfer Tax and Registration Fees total 2.4% of the property’s value and must be paid before registration is completed. Additionally, notary fees typically amount to around 1% of the property’s value. Capital Gains Tax: Since July 1, 2019, capital gains on property sales are taxed at 15%. However, for properties purchased before this date, sellers have the option to pay 2.25% of the sale price instead of the 15% tax on the gain. For non-resident sellers, buyers are required to withhold and remit 2.5% of the sale price as a final and definitive tax. Starting October 6, 2025, a new 2% withholding tax is applied to sales involving residents. The buyer is also the withholding agent. Clarification : It is important to note that both the transfer tax and the capital gains tax may be applicable in the same transaction. The transfer tax is levied when ownership is transferred, while the capital gains tax is applied to the seller’s profit. Furthermore, real estate transfers are exempt from VAT, but professional services associated with these transfers (such as those provided by notaries, brokers, and legal services) are subject to a 13% VAT. Indirect Transfers: The transfer of more than 50% of a company’s ownership (where the company owns real estate) triggers a 1.5% indirect transfer tax. This is in addition to any
applicable dividend, capital gains, or income tax obligations. Luxury Home Tax: High-value residences may be subject to the “luxury home tax,” which is assessed every three years based on revised valuation criteria. Rates for this tax vary from 0.25% to 0.55% of the assessed value, and the tax threshold is updated annually by the tax administration. Shoreline Concessions The Maritime Zone Law governs the 200-meter strip of land extending inland from the low-tide line, with certain exceptions. The first 50 meters of this zone are designated as public land and cannot be sold, leased, or privately owned; this area must remain open for public use and environmental protection. The subsequent 150 meters are classified as a “Restricted Area or Zone.” Private occupation within this restricted zone is only possible through a concession granted by the local municipality, subject to the approval of the Costa Rican Tourism Institute (ICT). It is crucial to understand that concessions do not transfer ownership; the land remains public, but concessionaires obtain the right to use and develop it under the specific terms of the concession contract. All concessions must comply with local zoning and regulatory plans. Key aspects of shoreline concessions include: • Term : General concessions are typically granted for periods ranging from 5 to 20 years, with renewal possible if requirements and fees are met. • Limitations : Concessions cannot be granted to foreigners without five years’ residence, bearer-share companies, foreign corporations, or entities majority-owned by foreigners. • Fees : Concession holders are required to pay annual concession fees to the respective municipalities.
ILN Real Estate Group – Buying and Selling Real Estate Series
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