Taxes and costs when buying or selling a property in Costa Rica

The question always comes at the same point in the conversation: "and besides the price, how much more do I have to put in?". It is worth having that number clear from the start, because closing costs in Costa Rica move within a fairly predictable range and should not be a surprise on signing day.

Closing costs, roughly

When a property is transferred before a notary, three blocks of cost almost always show up together:

• Transfer tax. It is 1.5%, calculated on the transaction value, which cannot be lower than the property's registered value.
• Stamp duties and registration fees. A set of stamps — National Registry, municipal, agrarian, Bar Association, National Archive, among others — which together usually come to around 1% of the value.
• Notary fees. These are set by the official notarial fee schedule, with tiered percentages that fall as the transaction amount rises.

In practice, adding the three blocks together, most closings land between 3.5% and 4.5% of the property price. On a US$250,000 house that is roughly US$9,000 to US$11,000 in closing costs.

Custom in Costa Rica is for buyer and seller to split closing costs in half. It is custom, not law: it can be negotiated, and it is worth putting in writing in the offer.

The annual property tax

This one is different, and it recurs. It is charged by the municipality where the property sits, at 0.25% a year on the value registered with that municipality, and it is usually paid quarterly or annually.

Two things that matter to the seller:

• The owner must declare the property's value every five years to the municipality. If they do not, the municipality may assess it on its own initiative.
• To transfer, the property must be up to date with this tax and with municipal services. It is one of the items that most often delays closings when left to the last minute.

There is also a luxury-home tax on residential properties whose construction value exceeds a threshold that is updated every year. If your home is in that range, your accountant or notary should confirm it.

What about capital gains tax?

Since the 2018 tax reform there is a capital gains tax that applies when a property is sold at a profit. The general rule is 15% on the gain, with two important caveats:

• For properties acquired before July 2019, the law allowed a one-time election to pay a reduced percentage on the total transfer value instead of 15% on the gain. It is worth checking which of the two works out better for you.
• The taxpayer's primary residence is exempt, under the conditions set out in the regulations.

This is the item that varies most from case to case. Do not settle it with a table off the internet: spend half an hour with an accountant before setting a price.

What the buyer should check before signing

Closing costs are predictable. What gets expensive is whatever went unchecked. Before signing, your notary should hand you:

• A registry search on the title: who the owner is, and whether there are mortgages, liens, easements or annotations.
• A current cadastral survey that matches what is being purchased.
• Land-use certificate from the municipality, if you plan to build or change the use of the property.
• Water availability from AyA or the local ASADA. On lots and farms this decides whether the land can be built on at all.
• Municipal and utility account statements, to confirm there are no outstanding balances.

How to budget for it without surprises

A rule of thumb: add 2% to the purchase price if you are splitting the closing costs, and set aside an extra cushion for the title search, the appraisal the bank will ask for if you are financing, and the first municipal payments of the year.

If you are selling, do the exercise in reverse: from the sale price subtract your share of the closing costs, any capital gains tax and the brokerage commission. That number — not the list price — is what you actually keep.