[BUYING AND SELLING REAL ESTATE IN COSTA RICA]
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derived from the disposal of a property are taxed at a 15% tax rate. Owners that became property owners before July 1st, 2019, have the alternative to pay 2.25% of the sales price instead of 15% on the gain. The Costa Rican Tax Code requires the buyer to withhold, declare, and pay on behalf of a non-domiciled real estate seller 2.5% of the sales price to be used as an estimated tax payment towards any tax liability on the gain realized from the sale. Some Sellers may be eligible for an exemption. A new chapter regulates capital income taxation and capital gains from Costa Rican sources. It is highly advisable to retain the services of a local tax advisor and/or an accountant to obtain proper professional advice regarding these new rules. Transfer of ownership of 50% or more of the control of a corporation or a company owning real estate triggers a 1.5% indirect transfer tax. It is important to take into consideration that when and if the company or corporation decides to distribute dividends among its members/shareholders, there will be an additional 15% withholding/dividend tax, on top of any ordinary income tax – if applicable – to be paid by the company or corporation. Shoreline Concessions In 1977, Costa Rica passed legislation regulating properties on the Shoreline. The Shoreline is a strip of land measuring two hundred meters wide, starting from the line set by the lowest tide and moving inward two hundred meters. Of those two hundred meters, the first fifty have been declared to be of public domain and therefore cannot be owned by any person or legal entity. Access to that fifty-meter strip is free since it is meant to be for public use. The administration of the remaining strip measuring one hundred and fifty meters wide, also known as the Restricted Area, has been awarded to the local Municipalities, who may grant
concessions for its use. These regulations are governed by the Shoreline Zone Act (“Ley Zona Marítimo Terrestre”), which establishes several conditions and regulations for using concessions granted in the maritime-terrestrial zone. These conditions and regulations are described below. ❖ Requesting a Concession Concessions for land use can be requested by those persons who are in valid possession of a property located within the Shoreline Zone or by persons who own properties bordering on the restricted area. ❖ Limitations to Possessing Concessions The Shoreline Zone Act establishes that the following persons and corporations cannot be granted concessions in the Shoreline Zone: i- foreigners who have not resided in the country for at least five years; ii- corporations with bearer shares; iii- corporations registered or established abroad; iv- corporations and entities constituted by foreigners; and v- corporations in which foreigners own more than fifty percent of the capital stock. ❖ Regulatory Plans To file a concession request, the area in which the concession is located must have an approved and published Municipal Regulatory Plan. However, due to lack of adequate funding in some Municipalities, local regulatory plans have not been issued and concessions cannot be validly granted. In the face of this obstacle, some investors and real estate developers have opted to prepare a regulatory plan on behalf of the Municipality, assuming the costs involved. Municipalities will most likely accept this kind of offer, as long as the regulatory plan complies with the conditions set forth by the Municipality.
ILN Real Estate Group – Buying and Selling Real Estate Series
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