Costa Rican Luxury Home Tax
Passed in 2008 and formally known as the “Solidarity Tax for Strengthening Housing Programs”, the Luxury Home Tax was passed to remove and/or improve shanty towns in Costa Rica by levying a tax on luxury homes.
Depending on the value of your home, you may annually owe between .25% – .55% of the property valuation. As always, consult your attorney about to see if this tax will apply to you.
This tax provision applies to construction above a certain threshold value and a homeowner is supposed to declare the value of the home prior to January 15 and every 3 years thereafter before the Dirección General de Tributación. The tax is also due before January 15. There is no distinction made between primary residence or vacation home since vacation rentals are not deemed a commercial purpose.
The Luxury Tax on Houses is based on the market value of the house. It is levied on houses with a construction value over 126,000,000 colones (2016 threshold). The value is determined by considering variables such as: the age of the home and the materials used in construction. If the value of the construction exceeds the minimum threshold then the total value of the property, including the value of the land, will be taxes. Owners should consult an appraiser to value your home and proceed to pay the tax as mandated.
Tax rates (2017)
- From ¢131,000 to ¢329.000.000 – 0.25%
- From ¢329.000.000 to ¢659.000.000 – 0.30%
- From ¢659.000.000 to ¢988.000.000 – 0.35%
- From ¢988.000.000 to ¢1.318.000.000 – 0.40%
- From ¢1.318.000.000 to 1.646.000.000 – 0.45%
- From ¢1.646.000.000 to 1.978.000.000 – 0.50%
- Over ¢1.978.000.000 – 0.55%
The following are types of properties are exempt from the Luxury Home Tax: properties destined for agricultural or commercial purposes, raw land, properties owned by non-profits, churches, or the government.
The penalties are extremely severe for faulty compliance or non-compliance. If the Tax Department deems that the amount paid is 10% less than should have been paid, the penalty is 5 times the tax amount that was not declared and paid. Worse still, is if an owner does not submit the declaration at all and one should have been filed, the penalty is up to 10 times the tax that was not paid.
Consult with your real estate attorney and an appraiser to determine if your property falls under this law.