In December of 2018, the Costa Rican government approved a new tax law that includes the addition of a capital gains tax in Costa Rica. According to the law, the new capital gains tax will be implemented on July 1, 2019. This tax will incur a 15% charge on the capital gains generated when selling a property in Costa Rica.
Special Cases
In the event someone had bought a property before July 1, 2019, there is a possibility of only incurring a one-time, reduced tax of 2.25% of the total sales price, instead of 15% on the capital gains. It is up to the seller to work out which is a better deal in this one-time scenario. In many cases, 2.25% will result in a lower payment.
Avoiding the Capital Gains Tax in the Short Term
If you sell before July 1, 2019, your sale will not incur a capital gains tax. In this scenario, the buyer will also eventually be able to apply for the 2.25% alternative if it was more beneficial financially speaking than the 15% capital gains tax.
Below are some key points to help you understand how the capital gains tax in Costa Rica may affect you:
- If you are a resident of Costa Rica and own property, the property you live in is considered your primary residence. You will not pay capital gains tax on your primary residence. You are only required to pay this tax on any additional properties you own in Costa Rica. The primary residence can be registered in the seller’s personal name or a corporation as long as it is very clearly proven that it is the shareholders’ primary residence. The law does not state how often someone can apply for this exemption. The primary residence exemption will likely continue to apply if you move properties.
- If you own a vacation home in Costa Rica but your primary residence is outside of Costa Rica, you will pay capital gains tax when selling your property in Costa Rica. In this instance, you will have to apply for a tax exemption in your home country on the sale of your Costa Rica property.
- If you own two or more properties in Costa Rica, as of July 1, 2019, you will pay a capital gains tax on the sale of your property unless it is your primary residence.
Our lawyers are advising that clients properly back up their land acquisition value by making sure their deed of purchase corresponds with the real purchase price. You will need to be able to back this up with official receipts of all costs and expenses incurred while making improvements to the property. This includes any remodeling, expansions, new constructions and so on. Your property costs will need to be formally approved as the “cost basis” so that the tax authorities only charge the 15% Capital Gains tax over the difference between a future total sale amount and the seller’s total cost basis.
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Thanks to Alberto Sáenz Roesch, from Invicta Legal Costa Rica, for supplying our office with the facts that went into this article.
Cal Wiltse
on said
I would like to talk to someone regarding selling my property at Ventana please?
Alexandra Luty
on said
Hi Cal! Thanks for your message. One of the OTP agents will be replying to you shortly.
Edward
on said
Will capital gains apply on the sale of the shares of the corporation that owns the property
Alexandra Luty
on said
Hi Edward. Great question! Here is a reply from local attorney, Alberto Sáenz Roesch:
“Yes capital gains tax applies both to the sale of properties purchased by individuals as well as by companies.
For primary residences being sold the exception also applies both to homes held personally or through a company as long as it can be proved without a doubt that it was the shareholders` residence.
If the investors/shareholders sell their companies holding the properties (their shares or quotas) and make a profit on it, instead of having their company sell the real estate, the capital gains will still exist and the capital gains tax will still have to be paid. The only difference is that the one having to report and pay instead of being the company as a consequence of the sale of the real estate, will be the shareholders as a consequence of the sale of the shares.”
Roberto Gutierrez
on said
What happen if you are not living in Costa Rica, and don’t pay your capital gains do?
Brianne Ribson Sturk
on said
Hello, Roberto.
Thank you for your inquiry!
For this specific question, we believe it is best that you speak with a Costa Rican lawyer so they can provide you with the correct legal advice so that you can avoid any complications in the future.
We highly recommend INVICTA legal and their team professional, bilingual and friendly lawyers!
Please do not hesitate to contact our team if there is anything else we can assist you with!
Jason
on said
Hello, we are looking at selling our home in Costa Rica. We are currently non-residents. We built out first home, primary residence and sold it in 2021, we were considered Non domicide and being in the country long enough therefore we did not have to pay capital gains. Now moving into 2022 we have a new primary residence we just built. If we sell this will we need to pay capital gains? Would this change if we were temporary residents? If so is it 15% on sale price of the house minus build expenses and land price? Thank you
Alexandra Luty
on said
Hi Jason. Thank you for your questions. Without knowing all of the details of your individual scenario, the simple answer is that if you are using your home in the same way that you did with the home you sold in 2021, you will not have to pay capital gains because that was already in place in 2021. If you did pay the optional 2.25 percent that was available to those who purchased before July of 2019, then yes, this time around you will have to pay the 15%. This does not change with your residence status but rather what your passport shows for how many days you have been in Costa Rica (it would have to be more than 180 days in the country per year). Finally, capital gains will be charged on any gains you have beyond what your property value is recorded with the tax authority. This is what bites the most people because they may have their properties listed for less than what they paid (for annual tax purposes) and will be paying capital gains taxes on anything above that, which ends up working out to much more than they saved. I hope these answers help but feel free to reach out with more questions if you need.
Jeany Lirette
on said
J’ai acheter une 2e propriété ( condo )en avril 2022 , je suis résidente temporaire depuis mars 2022 et je passe 6 mois par année au pays maintenant et à temps plein dans pas long . La 1er propriété ( Condo) je l’ai acheter en mars 2020 que j’habite . Je vend la 2e propriété que j’avais acheter pour ma famille sans location dois-je la déclarer comme ma résidence permanente pour ne pas payer l’impôt sur le plus valu de 15 % et après mettre ma résidence permanente ( soit le 1er Condo acheter ) comme résidence permanente et donc si je le revend dans un avenir je n’aurais pas à payer le 15 % !
Alexandra Luty
on said
According to OTP realtor, Marcia Oro: “It’s important to approach matters of taxation responsibly and in accordance with the law. I understand that you are seeking information regarding capital gains taxes in Costa Rica and exploring options to minimize tax liabilities. However, I would strongly recommend consulting with a qualified lawyer or accountant who specializes in tax law in Costa Rica. They will be able to provide you with accurate and up-to-date advice tailored to your specific situation. They can guide you on the proper procedures and legal options available to you. It’s always best to ensure compliance with tax regulations and seek professional guidance for any potential tax-related concerns.”
Il est important d’aborder les questions fiscales de manière responsable et en conformité avec la loi. Je comprends que vous recherchez des informations concernant les impôts sur les plus-values au Costa Rica et que vous explorez des options pour minimiser les obligations fiscales. Cependant, je vous recommande vivement de consulter un avocat ou un comptable qualifié spécialisé en droit fiscal au Costa Rica. Ils seront en mesure de vous fournir des conseils précis et à jour adaptés à votre situation spécifique. Ils pourront vous guider sur les procédures appropriées et les options légales qui s’offrent à vous. Il est toujours préférable de veiller à respecter les réglementations fiscales et de rechercher des conseils professionnels pour toute préoccupation potentielle liée aux impôts.