NEW TAX ON LUXURY HOMES

On December 10, 2008, Congress enacted the Law N 8683, which established an additional real estate tax for “luxury homes.” The funds obtained by the government through this tax are to be used to provide homes to persons and families under poverty. This law is scheduled to be in force and effect for ten years.

Stewart Title Costa Rica’s (STCR) Post Closing Services Department has drafted the following Frequently Asked Questions (FAQ) so that you are properly informed of this new tax.

What is considered a “luxury home?” The new luxury home tax applies for any properties valued at over 100 million colones (approximately $175,000).

When will this new tax be enforced? Although the new tax law has already been approved, the corresponding by-law needs to be issued by the government in order for this new tax to be applicable.

Is this new luxury home tax additional to the property tax I already have to pay? This new luxury home tax is additional to the property tax that must be paid on a quarterly basis.

How much do I have to pay for this new tax? The tax is based on a percentage of the property’s construction value; the range goes from 0.25% to 0.55%. The higher the property’s value, the higher the percentage.

Is payment of this new luxury home tax included as part of the payments offered in Post Closing Services? Yes, payment of the new luxury home tax is included in the Basic, Premium and Premium Plus Packages. It is also included if you acquired a Property Tax package.

Do I need to do anything to pay for this new tax? You need to declare your property’s construction value every three years with the tax authorities. Otherwise, the tax authorities will send an appraiser of their own and assign the value they consider appropriate.

Can STCR help me declare the value of my property? Yes, STCR can assist in this process.

How often does this tax have to be paid? The luxury home tax is due on a yearly basis, payable as of January 1st of each year.

For further questions or concerns regarding this new luxury home tax, contact Luis Rodriguez at lrodriguez@stewartcr.com.

To read Law N 8683 please visit the website for the Sistema Costarricense de Información Jurídica www.pgr.go.cr/Scij

STCR does not have a license granted by government of Costa Rica and is not subject to supervision by Costa Rican financial regulators to sell internal loan services.

The Mortgage Alliance Program (MAP) is not affiliated with Stewart Information Service Corporation, Stewart Title Guaranty Company or any of its subsidiaries and affiliates.

This newsletter is for informational purposes only, and does not constitute either legal or financial advice. It is based on material that we believe to be reliable. While every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors.