If you are thinking of buying real estate in Costa Rica or are a property owner, it is essential to know the tax obligations involved. From local taxes to rental taxes. In this article you will learn about the tax obligations for real estate in Costa Rica.

Property tax is a municipal tax payable by all owners of real estate in Costa Rica. It is calculated on the assessed value of the property and its payment is intended to finance the municipalities.

This type of tax is calculated on the basis of 0.25% per year of the fiscal value of the property and its payment can be made annually or in quarterly installments. Therefore, property owners can request a total settlement of the amount or installment payments.

In addition, municipalities have the power to update the tax value of the property every 5 years, which may change the amount of the tax. Some homes, such as those for public use, non-profit organizations or some social interest housing, may be exempt from paying this tax according to current legislation.

In Costa Rica, this applies to residential properties whose value exceeds a certain amount set annually by the Ministry of Finance. Normally, this threshold covers those properties whose value exceeds ₡109 million colones (this amount receives annual adjustments).

This tax varies between 0.25% and 0.55% of the value of the property, depending on the value bracket in which the property is located. This tax can be declared and paid annually to the Ministry of Finance before January 15th of each year.

It should be noted that owners must submit an appraisal to determine if the property qualifies as a luxury home. If this is not provided, the Ministry of Finance may use its own appraisal.

Rental income may also be subject to income tax. Landlords must pay tax according to the appropriate regime.

• Presumptive income regime: Applies a flat rate of 15% to gross rental income, with no deduction for expenses. This is the simplest and most common option for individual landlords.
• Ordinary Regime: Allows the deduction of expenses related to the generation of income (maintenance, repairs, administration, insurance, among others). The final rate varies according to the net income obtained after deductions.

In addition, landlords should issue electronic invoices to their tenants.

When a property is sold or transferred, a transfer tax must be paid to the National Registry. This consists of a fee of 1.5% of the value of the transaction and according to the amount declared in the public deed. Generally, this tax is paid by the buyer, although the parties may agree to split it.

When it comes to the sale or rental of real estate, Value Added Tax (VAT) may affect some real estate transactions. The sale of real estate is subject to VAT at a rate of 13% for transactions carried out through companies that deal with the construction and sale of real estate.

On the other hand, for the rental of real estate, those intended for residential use are exempt from VAT if the monthly canon is less than 1.5 times the basic salary (approximately ₡615,000 in 2024). If the amount is higher, the landlord must charge 13% VAT. On the other hand, if the lease is for commercial use, it will always be subject to 13% VAT.

In addition to the aforementioned taxes, there are other fiscal and administrative responsibilities that may apply depending on the owner’s situation.

Corporate tax:

• Applies to properties registered in the name of a corporation.
• The annual amount varies between ₡160,000 and ₡640,000 depending on the type of company.

Capital registration with the Internal Revenue Service:

• Owners who engage in commercial activities with their property (rental, lodging, etc.) must register with the Internal Revenue Service as active taxpayers.
• Income and expense statements must be filed periodically.

Municipal obligations:

• If the property is used for commercial purposes, a municipal patent may be required.
• Additional permits may be required for protected areas or special regulations.

Compliance with these obligations is essential to avoid fines and penalties and to maintain the legality of real estate transactions in Costa Rica. Owners and buyers are advised to consult with tax advisors and notaries to ensure compliance with all applicable regulations.

At Nativu Costa Rica we will help you find your ideal home, our advisors are experts and locals, they will help you with the whole process of buying or selling a property.