Lic Giovanna Barrantes, TheCostaRicaNews.com
One of the questions that gets asked frequently regarding buying real estate in Costa Rica is about the closing costs – how much are they and what’s involved?
In Costa Rica, closing costs on a sale typically include a transfer land tax, a stamp tax and legal fees. A standard closing cost would amount to somewhere between 3 and 6 per cent of the transaction sales price, and is usually paid buy the buyer.
The transfer land tax is calculated based on the property’s declared value, while legal fees are charged based on the sales price of the property. But if a property is owned by a Costa Rican corporation, these taxes and fees can be significantly reduced or even eliminated.
One new change to real estate transactions in Costa Rica that will be of particular interest to buyers from the United States, Canada and other countries is the change in currency law.
The country recently changed the currency law to allow real estate contracts to be written in dollars when the sale was negotiated in dollars. Up until recently, transactions made in dollars had to have contracts written using the Costa Rican currency of colones.
This change gives both buyer and seller a peace of mind and relieves a lot of hassles, as previously deals had to be translated back and forth between dollars and colones.
This also opens the possibility of having mortgages in dollars. These types of mortgages are often leveraged by the seller and can be prepared by an attorney and guaranteed by the property. Once sellers understand the benefits of being able to offer this type of mortgage, it will likely become the most common type of financing.
Buyers should note that local municipalities are responsible for collecting property taxes in Costa Rica, and every Costa Rican property owner is subject to the payment of property taxes according to the location of the land. The value of the land has to be declared by the owner of the land every five years. Failing that, an appraiser can be appointed to determine the value of the land.
The Costa Rican property tax rate is up to a maximum of 0.25 per cent on the value of the property. In real estate transactions, the lawyer or Notary Public will request from the seller a certificate of payment of the municipal taxes. Municipalities are allowed to initiate collection procedures for non-payment of property taxes.