Property Taxes: The Basics
Buying property in Costa Rica comes with a perk—property tax on “Fee Simple Title” properties is just 0.25% of the fiscal value recorded with the local municipality and national property register. These taxes help fund local municipalities, unlike in some countries where the national government collects them.
How Property Taxes Are Assessed
In Costa Rica, property taxes 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 affect this value. Fiscal values never decrease, so even if you buy a property for less than its fiscal value, the higher amount is used for tax purposes.
Tax Rates for Fee Simple Title Properties
The tax rate for these 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 appraisals by the Tax Authority and ratified by each municipality.
General Property Tax Info
Property taxes are usually paid annually by March 31st, though you can opt for trimester or semester payments. Property values should be updated every five years; otherwise, the municipality might reassess them. Property owners can challenge assessments if they feel the municipality has overvalued their property.
Penalties for Non-Payment
Staying on top of property tax payments is 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 loss.
Luxury Tax on High-Value Properties
Since 2009, Costa Rica has had a “Luxury Tax” for properties valued over approximately $278,850. 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 January 15th.
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: Get advice from a tax professional or real estate attorney.
- Review Valuations: Regularly check your property’s valuation and appeal if necessary.
Property taxes are essential for funding local municipalities and are a key consideration for property owners in Costa Rica. Staying informed and managing these taxes effectively can help avoid unnecessary financial burdens.
