Who pays taxes in Costa Rica
You are investigating the purchase of Costa Rica real estate. Before you move to Costa Rica, you would of course like to know what is waiting for you tax-wise. If you move to Costa Rica or buy real estate in Costa Rica, do you need to pay taxes in Costa Rica or not?
Capital Gain Taxes in Costa Rica
Let’s start with the best news: Costa Rica doesn’t have any capital gain taxes. This makes Costa Rica a great investment environment. When you retire to Costa Rica, no matter where you come from, you probably pay taxes on your retirement income already.
This exempts you from paying income tax in Costa Rica. Yes, retirees in Costa Rica do NOT pay any taxes on their foreign retirement income.
Allow me to tell you a bit about the tax system in Costa Rica. One thing is for sure, once you live here, you pay quite a bit of taxes in Costa Rica. The Costarican government needs of course income to pay their employees, build roads and run their state business. So they get their money from taxing all imported articles. That means all cars, jewelry, clothing liquor and many food products are taxed. Some are higher than others and are therefore more expensive here than in other countries. Do your homework on this before you decide to move to Costa Rica.
The household you might bring with you when you move to Costa Rica will be taxed, though very low as used goods. Depending on how you dress, many of us go to the States at least once a year for shopping. In another article, you can find out how to move your household without having to pay too much taxes in Costa Rica.
In other countries, you pay state tax or sales tax, VAT or whatever you might call it. In Costa Rica, we pay 13% sales tax on most everything, products and services, except for what we call “canasta básica” which is the basic necessities to be able to live on, like rice, beans, butter, milk, etc. Count of having to pay sales tax on almost everything on all your shopping.
When you sell your house through a real estate agent, you have to pay the agent the real estate commission PLUS 13% sales tax. The real estate agent is a collector for the state, you like a store or a restaurant is. This is the law.
Only if you run a business or work as an employee, you pay income tax. If you have a business, you pay income tax depending on your sales and you will be able to deduct certain costs for your business to function.
If you work as an employee (if you have a working permit), your employer will deduct a certain percentage of income taxes in Costa Rica, depending on how much you earn. We don’t have the deductibles you might know from your home country, like on studies, how many children you have or your mortgage.
Real Estate Tax and Luxury Home Tax
Property taxes in Costa Rica are ridiculously low. You will pay 0.25% property tax on the value appraised and registered by the city, which is always a lot lower than the real value. A $200,000 property might be registered by the city for $50K and will therefore pay $125/annually. You do NOT receive a notification from the city to tell you that have to pay. So you either pay your real estate tax every quarter or you get the amount for the whole year in February. When you purchase Costa Rica real estate, you pay property taxes at closing.
We have a Luxury Home Tax, only for luxury homes, used to eradicate the shacks of the poor. For all necessary information on this tax, on our website, we have an eBook to calculate the value of your house in Costa Rica, for filling out the luxury home tax forms, taking into account all the guidelines that are given my the Ministry of Tax.
Luxury home tax has to be paid every year before January 16th.
Property tax and municipal tax have to be paid every quarter. You can request the annual amount with your municipality before the end of January.
As of April 1st, 2012 all corporations in Costa Rica will have to pay an annual tax. How much corporation taxes in Costa Rica should you pay?
The taxes are based on a basic salary of a government employee, which is now 180,330
Colones [US$ 357]. This salary changes every year, so the amounts below are for this year. Besides, for the year 2012, the due date will be April 1st, so you’ll have an incomplete year.
• Active corporations (those that are used to run a business or own assets) pay 50% of the basic salary, which will be 135,000 Colones [$267] if the minimum salary doesn’t change before April.
• Not active corporations (those that are not being used) pay 25% of the basic salary, which will be 67,500 Colones [$134] if the minimum salary doesn’t change before April.
Before you go, read the latest on the Costa Rica corporation tax now.
The Tax Collector
The tax collector, Ministerio de Hacienda, is not very good at collecting; there is huge tax evasion on all levels. That’s the reason they are always trying to come up with new taxes, just like most governments do. Proposals like another tax on gas to build new roads, a tax on power bills to create fire departments in smaller towns and many others. Unfortunately, the money ends generally up in the wrong places, because of budget shortages they have everywhere. Costa Rica is 40 years behind on their tax system, which hurts the growth of the country.
It’s the reason there is never money to build new bridges, maintain roads, have up to date equipment to work with and training of their employees.
As you can see, you are pretty much free from paying ANY taxes in Costa Rica at all. You can choose pretty much your own lifestyle and get away from the bad weather. That way, you can enjoy the retirement you are dreaming of NOW.
We have the necessary knowledge to guide you through the process of buying a home in Costa Rica.
Contact us now.
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