Costa Rica Luxury Estates, the number one luxury real estate company of Costa Rica. Luxury homes and high-end properties for sale in Costa Rica.

Answers to questions about the Solidarity Tax to luxury homes in Costa Rica

Yalile Alpizar, President of www.costaricaluxuryestates.com and www.costaricamilliondollarhomes.com, answers questions from multiple readers of Yalile Alpizar´s latest Press Release on the Solidarity Tax or Impuesto Solidario

FOR IMMEDIATE RELEASE– Oct 13, 2009 –

Is the Solidarity Tax part of the Property Taxes already paid to local Municipalities of Costa Rica?
“No. The new tax or Impuesto Solidario is separate from the regular municipal and property tax paid to the local municipalities.
The new solidarity tax is in addition to the increase in the property tax that has taken place this year in Costa Rica. This year we experienced a tax increase in the regular property taxes or “Impuesto Territorial and Municipal” because most property values in Costa Rica had not been updated for decades. For example, a house presently for sale at $3,9 million was paying $300 in annual property taxes and with the updated municipal appraisal will now pay $5,000 a year. Even if the increase is considerably high in comparison to the original payment of $300, the new tax is very low in comparison to what a $3,9 million dollar house would pay in other countries. The increase in property taxes is taking place all over the country, as an effort to update property records and be able to collect the necessary funds for works of infrastructure that each Province needs. Everybody is demanding better roads, better water systems, better electricity and phone line systems, better housing conditions,... and the funds have to come out of these new taxes unless the government continues getting one loan after the other from the international banks and putting the country into more and more debt.”

What is the Solidarity Tax and how it relates to the Property Tax?
"The Solidarity Tax is completely separate to the Property Tax. The Solidarity Tax is a social tax and is going to be used for providing of better housing to the poor."

What government institution will be collecting the Impuesto Solidario?
“The Impuesto Solidario will be collected by the Ministerio de Hacienda and not by the Municipalities." "By going to this link and clicking in the blue link that reads: Registro Impuesto Solidario. you will find the different forms that are to be filled out to declare the new tax."

Is replacement cost or market value considered as part of the equation?
“The values will be based on market value.”

Do you self declare the value of your property?
“Each owner can self declare the value of its property and each property has to be declared separately. The forms are a bit complicated if you are not familiar with the terminology. Since there are high fines you might want to use the services of a professional to do this."

Property taxes in Costa Rica increased dramatically over this past year, how is that happening?
Most families have seeing their property taxes going up double or triple this year due to the fact that declared values were very low and the government has intensified efforts to correct that situation. The usual practice that lawyers used for registering the deeds at the Public Registry for a lower value is not a common practice anymore as lawyers can be sued by the government for registering false information. Most lawyers are been very cautious and are registering the value of the transfer of the property in the real amount of the transaction. That might help in levering the gap within a few years.”

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.
9) Luxury homes in the maritime zone (titled, as a derecho or under concession) are also subject of this tax.