Foreigners owning property or companies in Costa Rica have a fairly strong tendency to neglect certain types of taxes, namely land and corporate taxes.
Land Tax. Many foreigners who purchase land in Costa Rica, perhaps accustomed to more advanced taxcollection systems in their countries of origin, erroneously assume that they will receive a notice from the tax authorities when their land-tax payments are due.
In Costa Rica, land taxes are administered and collected by the municipality that has jurisdiction over the county in which the property is located. These taxes, which correspond to 0.25% of the property’s value as established by the municipality, are used to directly benefit the municipality and the county.
When land taxes are due, property owners must go to their respective municipality’s offices and provide the property number (folio real) and the name and identification of the property owner. If property transfer to the current owner was not reported, the appropriate documentation must be presented prior to payment so that records may be updated.
Land taxes are due quarterly; however, prepayment of the full year is possible and advisable, for convenience and for the substantial discounts offered by most municipalities for early payment.
If a landowner fails to pay these taxes, even though he or she has never received a notice requesting payment, his or her property is subject to foreclosure procedures so the municipality can collect – plenty of reason to keep payments and records with the municipality up to date.
When distance is an issue, many municipalities allow phone consultations to calculate the amount due. In such cases, payment is made through a deposit to the municipality’s account with a local bank, and the deposit slip is faxed to the municipality, which in turn faxes a receipt to the taxpayer.
Even this system, which at least simplifies the procedure, can be challenging, especially with respect to proper crediting of funds and the prerequisite of registration of the current owner with the municipality.
The law requires the properties to be appraised every five years, with a sworn statement made by the owner to the municipality.
After the sworn declaration is made, the value of the property is calculated and determined by the municipality according to several variables, such as street frontage, location and total area, among others. If this mandatory sworn statement for property appraisal is not filed when due, the owner is subject to often arbitrary appraisals by the municipality. Negotiation of what is a fair value for the property is often more likely if this requirement is met voluntarily.
Municipalities often collect other moneys on properties in their jurisdiction, referred to generally as municipal taxes, which may include local roads, garbage collection and maintenance of public lighting, among others.
Corporate Taxes. Local corporations do not always need to file income tax statements at the end of each fiscal year (Sept. 30 in Costa Rica). Consulting with an accountant and an attorney is a good way to start in determining if declarations and possible income tax payments are required.
Whether a company declares and pays income tax or not, a special tax called the timbre de educación y cultura (education and culture stamp) must be paid every March, and is applicable to all Costa Rican corporations. The amount is usually relatively small – the maximum is ¢9,000 ($18) and can be paid at the tax authorities’ offices or at most banks.
As in the case of land taxes, you will not receive a notice that this tax is due, but must take the initiative to fill out the special form and make payment. If payment is not made, penalties apply that increase over time, and the corporation will not be in good standing.
Third Parties. When distance is an issue, especially when the taxpayer is not in Costa Rica or has difficulty with Spanish, a knowledgeable third party, usually an attorney or accountant, may be retained to assist.
The speed and ease with which such advisors will be able to get the property owner or corporation in good standing will depend on how many of the abovementioned steps have been met in the past.