PROPERTY TAXES IN COSTA RICA: ESSENTIAL GUIDE

Property Tax (Real Estate Tax)

The property tax, regulated by Law 7509 and its amendments, is administered by municipalities and taxes all properties at a rate of 0.25% on the registered value of the property. This value includes both the land and permanent fixed structures.

The tax base is the value registered with the Tax Administration as of January 1st of each year. Owners must file a declaration every five years, and payment can be made annually, semi-annually, or quarterly, as determined by each municipality.

The Technical Standardization Body, created by the same law, establishes valuation methods to ensure uniformity throughout the national territory.

In addition to the property tax, municipalities can charge other fees for services such as garbage collection, park maintenance, and public lighting. These fees vary depending on each canton and are calculated based on factors like property size or the type of service provided.

Solidarity Tax (Luxury Home Tax)

Established by Law 8683, the "Solidarity Tax for the Strengthening of Housing Programs" taxes high-value residential properties, regardless of whether they are used regularly, occasionally, or recreationally.

For 2024-2025, properties with a main construction value starting from ¢145 million (approximately US$281,555) are subject to this tax. The calculation includes the value of the main construction, accessories (swimming pools, ranches, etc.), land, and common areas.

Unlike market value, the valuation for this tax primarily considers construction materials and the age of the property. Payment must be made annually before January 15th and requires an appraisal by a qualified engineer or architect.

The funds collected are used to finance housing programs for people in extreme poverty, which justifies its designation as a "solidarity tax."

Tax Exemptions

Costa Rican legislation provides various exemptions to the property tax:

1. Institutional exemptions: Properties of the State, municipalities, autonomous and semi-autonomous institutions with special law, properties of the Red Cross and firefighters.
2. Environmental and cultural exemptions: Watersheds, forest reserves, indigenous or biological reserves, national parks, church properties dedicated to worship.
3. Single dwelling exemption: Individuals with a single property whose value does not exceed 45 base salaries (¢20,799,000 for 2023). If the value exceeds this amount, tax is paid only on the excess.
4. Free Zone Regime: Companies under this regime enjoy a 10-year exemption from property tax from the start of operations.

To benefit from these exemptions, taxpayers must complete specific procedures with the corresponding municipality, as they are not applied automatically.

Recommendations for Owners and Investors

• Keep your property value declarations up to date to avoid fines.
• Consult with a qualified professional to determine if your property is subject to the solidarity tax.
• Check if you qualify for any exemption and complete the corresponding procedures.
• For foreign investors, consider these taxes in your financial analysis before acquiring properties in Costa Rica.

Understanding these tax obligations is essential for proper financial planning and compliance with Costa Rican tax legislation.