What Is the Luxury Tax on Costa Rican Real Estate?

by Quatro Legal Real Estate Team | Mar. 08, 2024 | Article, Real Estate

Welcome to another video of the Quatro Legal real estate series. Today, we’ll be talking about the luxury tax in Costa Rica.

All properties are subject to taxes in Costa Rica and all owners must pay them, without exception, as the trigger for the tax is owning a property. However, there are other taxes that are paid in accordance with the type of property that is owned.

For example, the solidarity or luxury tax.

What Is the Luxury Tax?

The solidarity tax or the tax on luxury homes is an annual tax applicable to residential properties that are used habitually, occasionally, or recreationally. The tax purpose is to finance dignified housing for the population living in extreme poverty.

Owners of residential properties, including concessionaries, permit holders, and occupants of the shoreline and of any other real estate granted by the state or its institutions are considered taxpayers.

To calculate the solidarity tax owed, taxpayers must know the value of the main construction. The law publishes different tax percentages over fixed amounts, which are updated periodically by executive decree.

Therefore, and in accordance with the last amendment in 2024, all owners of homes with a main construction value starting at $282,000 USD are subject to luxury tax. If the construction value is above this amount, taxpayers must add tax the value of the land, the accessories, the common areas accessories, and condominiums common land, if applicable, to the final amount.

This final value is the amount that needs to be taken into consideration to confirm the percentage that will be applicable, and consequently, the amount that will be paid to the tax agency.

The Property Tax Declaration

The property tax declaration must be done every three years, no later than January 5th. This declaration is filed before the Virtual Tax Administration website through the form D 179. The tax payment is due on January 5th of every year, and if the tax is not paid, a fine can be applicable.

How Do I Know If My Property Is Subject To the Luxury Tax?

To know if your property is subject to luxury tax, an appraisal needs to be done by an engineer or an architect. The engineer will do an inspection on the property and will take into consideration the tax agency guidelines and regulations. A complete appraisal must include the value of the main construction, accessories, land value, and condominiums, common areas, if any.

It is important to stay away from accountants, lawyers, real estate agents, or any other non-qualified professional that provides these appraisal services, as there are technical rules and professional training that are required for this task.

The luxury tax is very different from the market value. The luxury tax is based just on the construction of the house. Items like construction materials and how old the property is are taken into consideration on the appraisal. The market value is based not only on the construction but the location of the property, amenities, the area of the land, and if it has ocean view, to name a few.

Therefore, a homeowner shouldn’t be worried if the appraisal of the construction is much less than the market value. This is due to the guidelines that the tax agency takes into consideration when considering a property subject or not to this tax.

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