ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

[BUYING AND SELLING REAL ESTATE IN COSTA RICA]

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to obtain proper professional advice regarding these new rules. Taxation is basically the same if ownership of a company (or other entity) owning real estate is transfer. However, 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 1973, Costa Rica passed legislation that regulated the ownership, sale and purchase of properties located on the Shoreline. The Shoreline is a trip of land measuring of 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 physical or legal person. 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 instated for the use of 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 owns 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 more than fifty percent of the capital stock is owned by foreigners. New legislation is currently being discussed in the Costa Rican Congress to eliminate the prohibitions restricting the concession of shoreline areas to foreigners. ❖ Regulatory Plans In order 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 plan has 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. ❖ Procedure to Register a Concession The procedure to be followed for a land grant or concession consists mainly of submitting a request before the local Municipality. The request will be reviewed, and the land will be inspected, and if approved, the local Municipality will issue a notice that must be published in the official newspaper, providing an opportunity for interested parties to manifest the concerns, complaints or opposition regarding usage rights that may

ILN Real Estate Group – Buying and Selling Real Estate Series

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