Closing costs and property taxes in Costa Rica

What you pay to close

Transfer tax, the impuesto de traspaso, is the largest single item and is customarily 1.5 percent of the registered value.

Documentary stamps, the timbres, are a set of small levies that go to the National Registry, the municipality, the bar association, the agrarian institute and a few others. Together they land somewhere under 1 percent.

Notary fees follow a published tariff rather than a negotiation, and are tiered: a higher percentage on the first slice of value and lower percentages above it. On a parcel in the range this site lists, expect notary fees to be the second largest item after the transfer tax.

Add it up and the customary rule of thumb is 3.5 to 4 percent of the registered value. Who pays is negotiable and is frequently split fifty fifty; whatever you agree, put it in the purchase contract rather than discovering it at signing.

These are the customary figures and the rates do change. Ask your attorney for a written estimate for your specific transaction before you commit, and treat this page as orientation rather than as a quote.

A word about the declared value

Every one of those percentages is calculated on the value declared in the deed. It is tempting, and it is still common, to declare a value lower than the price actually paid in order to reduce the tax.

Do not. It is tax fraud, the tax authority has been pursuing it, and it creates two problems for you specifically. First, your acquisition cost on record is now artificially low, so when you sell, your taxable gain is artificially high, and you pay the difference back with interest. Second, if anything ever goes wrong with the title, the amount you can recover is the amount on the deed.

What you pay every year

Property tax, the impuesto sobre bienes inmuebles, is 0.25 percent of the registered value, paid to the municipality where the land sits, usually quarterly. On a parcel at these prices that is a modest annual figure, and it is one of the reasons holding land in Costa Rica is cheap compared with holding it in the United States.

Every five years the municipality asks you to file a declaration of value. File it. If you do not, they assign a value themselves, and their number is rarely lower than yours would have been.

There is also a separate luxury property tax, the impuesto solidario, which applies only when the construction value of a home exceeds a threshold updated each year. Raw land does not trigger it. A large house eventually might, and it is worth asking about before you design one.

If you hold the property inside a Costa Rican corporation, the corporation pays an annual tax of its own and has filing obligations. That is part of the cost of that structure and belongs in the comparison when you decide whether to use one.

What you pay when you sell

Capital gains tax is generally 15 percent of the gain. Property acquired before the 2019 reform has a one time alternative of paying a flat percentage of the sale price instead, and a primary residence is exempt.

Because the gain is measured against your declared acquisition value, the deed you sign today determines the tax you pay years from now. This is the second reason not to under declare.

And if you are a US taxpayer

You remain one. A sale of foreign property is reportable on your US return, rental income is reportable, and there is a foreign tax credit mechanism so that the same gain is not fully taxed twice. Foreign financial accounts above the threshold require an FBAR.

Owning foreign real estate in your own name generally creates no extra US filing by itself. Owning it inside a foreign corporation can create a great deal. Ask a US accountant who has seen this before you choose the structure, not after.