Luxury Home Tax to House the Poor

October 10, 2009

taxes picCosta Rican legislators have approved a tax on luxury homes that will help eradicate “precarios” (shantytowns), although it is not known yet how much money the tax will raise and how it will actually be used.

The luxury home tax is for a period of 10 years and is applied to all homes valued at more than ¢110 million colones ($187,000 at the current exchange rate). The tax applies only to the value of the construction and not the land that the homes sit on.

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It will be calculated as following:

  • Between ¢100 million and ¢250 million = 0.25%.
  • Above ¢250 million and up to ¢500 million = 0.30%.
  • Above ¢500 million and up to ¢750 million = 0.35%.
  • Above ¢750 million and up to ¢1.000 million = 0.40%.
  • Aove ¢1.000 million and up to ¢1.250 million = 0.45%.
  • Above ¢1.250 million and up to ¢1.500 million = 0.50%.
  • Above ¢1.500 million = 0.55%

The new tax is to be paid on a yearly basis starting with the last quarter of year 2009 and would be due between the 1st and  the 15th of January of each year.  It is the obligation of the owner to declare the value of their property with the ‘Administracion Tributario’ of their jurisdiction.

3 Responses to “Luxury Home Tax to House the Poor”

  1. Felipe Beeche Says:

    Costa Rica enforced a new Ad Valorem Tax on Luxury Homes with a value which exceeds One Hundred Million Colones.- Law came into effect October 1st 2009.-

    Procedure to be followed in order to register properties y and comply with the law

    1) A property title search has to be performed at the National Register & have it sent to the City of Santa Cruz together with a copy of the transfer deed where it shows property registered value.-
    2) The City will change info in their data base (in case it differs from the one registered.- If higher!).-
    3) Most of the funds charged for property taxes are to be kept by the Local Governments but proceeds of this new tax will belong fully to the Central Government.-
    4) Local Governments will then have to report properties which match values of the new law to the Central Government.-
    5) Government will send their own people to perform appraisals & check current value.-
    6) Personally speaking I think Government appraisals will keep at least same value declared in deed.-
    7) If transfer deed shows a higher valued paid in the past (when properties had higher prices), appraisals will then have to be appealed.-
    7) Payment of this ne tax will have to be made at the Government and not at the Local Government.-
    8) Procedure of charging this new tax may change a little but I will follow up and keep the site posted.-

    Thank you
    Felipe Beeche


  2. Yalile Alpizar, wrote:

    After further clarifications with the Ministerio de Hacienda, and differently from what has been said in several articles and interviews from different media, the Solidary Tax includes the value of the land and constructions as part of the calculations of this new tax to luxury homes in Costa Rica. There has been some general confusion around this issue because people who own land in luxury locations, luxury gated communities and resorts, were also confused if their land would be subject to the new tax, but it is not. On the other hand the Articles 3 and 4 of the law were not clear enough. For this reason, the example of how to calculate the luxury tax without including land value, provided in our previous release, is not applicable.

    If you own a luxury property in Costa Rica or plan to own one, and the property has or will have constructions for housing purposes on top, it is important that you are aware of the following:

    1) There is time until December 31st to pay the first payment of this tax which corresponds to the last quarter of 2009. From there on the tax will be paid every year in January during the first 15 natural days.

    2) The property value has to be updated every three years.

    3) If the constructions are updated or remodeled in any way that improves the value of the property, a new declaration has to be registered within one month after the works are initiated. The new declared value will be applicable to the next fiscal period.

    4) Hacienda will compare the declared value with the parameters used by Hacienda to establish property values and construction values in the national territory. If the declared value agrees with their parameters with a difference of no more than 10%, Hacienda will give a bonus of 50% discount applicable to the amount of taxes payable for the next fiscal year. If the declared value differs with a margin or 10%, Hacienda is entitled to update the value according to their parameters and will just notify the owner.

    5) There is a fine of up to 5 times the amount of unpaid taxes for those who register values that are not in accordance with the real value of the property according to the parameters established by Hacienda.

    6) The value of the constructions will be based on market value. A manual of values known as Manual de Tipologías is used by the Ministerio de Hacienda to establish the cost per square meter of a construction according to several categories. Since the manual is very technical it is better to use the services of a professional to do the calculations if you are not sure about what is required.

    7) According to Article 9 of the law, every one owning a property for housing purposes will have to present the declaration. Even if you property is valued under 100,000,000 colones, you have to register the declaration. For those who refuse or forget there is a fine of half base salary. For those who own luxury properties with a value over 100,000,000 colones and forget or refuse to present the declaration, the fine is of 5 times the amount unpaid in taxes.

    8) Only properties with houses, condominiums and apartments for housing purposes are subject to the Solidary Tax to luxury homes. This includes properties with recreational areas for housing purposes.

    Also, please visit the following links to find all the forms that are to be filled out in order to pay the Solidary Tax which is due on December 31st, 2009 and corresponds to the last quarter of year 2009 (the tax is collected beginning October 1st, 2009):

    http://dgt.hacienda.go.cr/oficina/herramientas/Paginas/Programaparacalcularelimpuetosolidario.aspx

    http://dgt.hacienda.go.cr/valoraciones/Normativavaloraciontribadmin/Parametrosdevaloracion/Paginas/Reglasparaelimpuestosolidario.aspx

    The new law is published in full here: http://historico.gaceta.go.cr/pub/2009/09/29/ALCA40_29_09_2009.html

    Kindest regards,

    Yalile Alpizar, President

    Costa Rica Leading Estates CLE S. A.

  3. sendysainge Says:

    I really enjoyed reading this post, keep up creating such interesting posts!


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