rent or usage rights). Costa Rica, on the other hand, has no capital gains tax. Except in unusual cases, the rate in this cou… Capital gains are not taxed in Costa Rica unless they are derived from habitual transactions. Well, it’s official now, or almost. According to the Law, the obligations contained on Section 2, including the Capital Gains` Tax will begin applying on July the 1st, 2019. Costa Rica, on the other hand, has no capital gains tax. In Costa Rica, most banking account investments and real estate investments are not subject to a capital gains tax, even when interest is earned, or a property increases in value. Capital gain tax in Costa Rica began on July 1, 2019. This is obviously a great benefit of investment in Costa Rican opportunities and Meléndez & Bonilla is extensively experienced in managing wealth in this way. The tax Adjustment Law increased the sales tax from 10% to 15%. Costa Rica, bordered by Nicaragua and Panama, is not considered a pure tax haven, but it is recognized as tax-friendly enough to … Losses –Losses may be carried forward for three years (five years for agricultural losses). Is this true? However, if the property was acquired PRIOR to the law being implemented which is July 1, 2019, then the taxpayer has the one-time option to sell the property and pay a 2.25% tax on the sales price of the property. Now, if you withdraw the gain from the corporation in a taxable form, then you would be subject to tax in Costa Rica and potentially subject to tax in the U.S. as well. The Capital Gains charge is 15% for residential properties and 30% for commercial properties; however, there is an option of a 2.25% tax of the total sale price that can be applied one time per property (this does not include commercial properties). So the family home which is your habitual residence will be exempt from capital gains. As of July 1, 2019, there will be a new Costa Rica capital gains tax of 15%. One important distinction in Costa Rica to keep in mind is that capital gains taxes are exempt for a business only if the money is derived from an activity that is not the normal course of business for the company. Costa Rica works a bit differently than in other countries. As a non-resident, you will be taxed at a flat rate of 10% of the gross income that you earn in Costa Rica. FBAR. There is also a small property tax payable annually by property owners based on the value of the property, however there is no capital gains tax in Costa Rica. A 15% tax is introduced on income from movable capital, such as dividends, interest, cooperative and “solidarity surplus” royalties, key rights (such as brand) and real estate capital (e.g. This tax is triggered with the transfer of the property. According to the law, the new capital gains tax will be implemented on July 1, 2019. Capital gains derived from habitual transactions are taxed at the standard income tax rate. An enormous fiscal reform law takes full effect on July 1, 2019, which has far-reaching effects on Costa Rica real estate. Costa Rica sales tax is 13% on the amount paid for goods and for some services. But in this article, we will talk only about CGT (Capital Gains Tax) because that’s the only one that matters to end users or investors like us. In addition, other analysis can be done on whether some of your investment activities should relocate to Costa Rica to take advantage of this substantial tax-saving aspect of Costa Rican tax law. The final version differs from the one proposed by the Tax Administration due to negotiation in Congress. In summary, the good old days are over in Costa Rica for many reasons. The cost of living is generally less than in the US, Canada and Europe. After I had read the entire text of the tax bill, and remembering that this the second time during my 12 years experience, that we face significant changes in the Costa Rican Tax Law, I can tell that there is no reason to panic and worrying about “take the money and run” to other countries, remember that the “bigger the rat, the better the rat trapper”. Subscribe to my Newsletter to keep up with the latest information about Costa Rica. Many people buy vacation property in countries around the world, but are in for a rude awakening when having to pay capital gains taxes. The Costa Rican tax system is unlike any in the world. For many years property owners in Costa Rica never had to worry about Capital Gains Tax when selling their Costa Rican real estate. Capital Gains in Costa Rica began on July 1, 2019. To avoid a foreign property owner that does not have a domicile in Costa Rica from selling their property and not paying the capital gain the law requires the BUYER to hold back 2.5% of the sales prices of the property to ensure that any capital gains tax is covered. If you traveled in and out of Costa Rica on sporadic occasions that would not necessarily disqualify the status. Instead, personal investments rarely entail any capital gains tax, one of the most attractive aspects of investing in Costa Rica and one reason why so much foreign investment targets the country. As of present, there is no capital gains tax in Costa Rica. The Costa Rican tax year is different from the American, running from October 1st to September 30th. In Costa Rica, capital gains taxes are much different and in investments involving real estate or most banking accounts, no capital gains tax is taken when the investment appreciates in value. My lawyer recently advised me that if I buy a property in Costa Rica and the seller neglects to pay the capital gains tax that it can be applied to me. (for professional services) or a 25% tariff (when rendering a technical advice). Discover below a non-exhaustive list of the excellent reasons to invest in this tropical paradise in total serenity. New tax reform legislation in Costa Rica was passed 4 December 2018. The law refers to a “non-domiciled” property owner. The new Capital Gains law will now establish a 15 percent tax on capital gains which will apply to real estate and investment income. You do not have to pay tax on your Social Security income, pension, investment income, etc. How do you become a Real Estate Broker in Costa Rica ? However, if the transaction is habitual (for example flipping properties) there is a capital gains tax of 30%. In December of 2018, the Costa Rican government approved a new tax law that includes the addition of a capital gains tax in Costa Rica. Under the new reforms, there would be a 15% on real estate transactions that involved investment properties or other properties not … The previous law only applied capital gains tax to real estate developers that were in the business of developing and selling real estate. Having a local firm available to you at all times to review the tax situation of your investment property or second home can benefit you greatly over time as the Costa Rican tax system undergoes change of any kind. If you generate a foreign income and you already pay in the country where the income was generated, you don’t have to pay any income tax in Costa Rica. So the rules of the game are changing in Costa Rica. Meléndez & Bonilla is able to review all documents on investments, both for personal and corporate use, to ensure that your capital gains situation is not taxable. I have added videos to the site covering most of the topics that you will encounter when settling into Costa Rica. So, if your business derives cash solely from real estate investments, that money is not seen as a capital gain but is instead seen as profit on the business. Blogs, pictures, forum Costa Rica on expat.com It makes no sense but I've lived here long enough to know the laws don't always make sense. Sales Tax. With the new Law, capital gains are taxed at 15%, which will be paid either through withholding at source or, when the tax cannot be withheld, it must be declared by the taxpayer. Capital gains are not taxed in Costa Rica unless they are derived from habitual transactions. Because property taxes in Costa Rica are so low and because no capital gains tax is collected within the country, real estate investment is a popular activity for foreign investors looking at Costa Rica as an opportunity. Recent changes to the Costa Rican tax laws implemented an across the board Capital Gains Tax (Ganancias de Capital) and in this article, I will review the impact of that law on the sale of real estate in Costa Rica. There is fine print to obtain the offset, so professional assistance is a must. As the name clearly states, said tax will apply as a 15% charge over the capital gains generated by a seller when selling a property. 9635, which recently was approved and published in the Costa Rican Official Gazette, provides major tax reform. Followers 1. The law imposes a capital gain tax of 15%. Everybody else was exempt. Stay updated on legal changes that may affect your living, retirement or business in Costa Rica. Since Costa Rica has no capital gains tax, the corporation would not be taxed on this gain! Most every common investment falls under the capital gains definition and paying taxes on that appreciation is one of the less attractive parts of American investing. All Right Reserved, Costa Rica Inactive Company Tax Filing Obligation, Tax Reform Law Approved by the Legislature. The law imposes a capital gain tax of 15%. Now, if you withdraw the gain from the corporation in a taxable form, then you would be subject to tax in Costa Rica and potentially subject to tax in the U.S. as well. Among other tax measures, the Law replaces the existing sales tax with a new value-added tax (VAT) and introduces a new capital gains tax on the transfer of shares in Costa Rican companies. Therefore, income tax is applicable to Costa Rican-source income, regardless of the nationality, domicile or residence of the recipient. In general, there are no capital gains taxes. Costa Rica Tax The Costa Rican tax system is unlike any in the world. A 15% tax on the capital gains is now imposed when a property is sold. The real problem the government faces, however, is a burgeoning budget deficit. Tax credits would be available for certain offsets. A property transfer tax of 1.5% is payable by the purchaser on the value of real estate purchased. Inheritance taxes in Costa Rica … If you haven’t heard of FBAR, it’s time to get acquainted! Everybody else was exempt. Costa Rica . Recent changes to the Costa Rican tax laws implemented Capital Gain Tax (Ganancias de Capital) which has a lot of variants. 6. One of the reasons Costa Rica is such a popular investment region is the beauty of no capital gains tax! The tax due will be withheld by the purchaser and accounted for to the Costa Rican tax authorities. Capital Gains in Costa Rica begins on July 1, 2019. CostaRicaLaw.com was founded by Attorney Roger Petersen, the author of The Legal Guide to Costa Rica. As the tax department clarifies and publishes more directives we will continue to keep you posted. For many years property owners in Costa Rica never had to worry about capital gains when selling their Costa Rican real estate. CAPITAL GAINS TAX. Whenever possible I ensure that the information provided in the articles is referenced to the actual law or regulations on which the statements are based. The existing law only applied capital gains tax to real estate developers that were in the business of developing and selling real estate. ... Costa Rica . Income tax in Costa Rica is based on your local earnings, irrespective of your nationality and residency, but tax rates are low compared with many western nations. 5% of the gross amount of dividends if the beneficiary is a company (excluding consortiums) that directly holds at least 20% of the capital of the company that pays the dividends. Taxes on capital gains are a biggie, 15 percent of the profit on the sales of most assets. Find answers to your questions in the Costa Rica forum. That profit is called capital gains and can be taxed either as it happens or when you cash out the earnings, depending on the asset. According to the law, the new capital gains tax will be implemented on July 1, 2019. The Association of Costa Rica Residents (ARCR) - Retirement, Life, Work and Travel in Costa Rica Real Estate in Costa Rica New Capital Gains Tax from July 2019 Overview. The tax reform law includes significant income tax law changes such as the introduction of rules on the taxation of capital gains and interest expense deduction limitations, as well as rules addressing hybrid mismatch arrangements and anti-tax haven provisions. The rate of General Sales Tax (GST) in Costa Rica is 13%. The law in Costa Rica recognizes 12 different types of income as non taxable revenue… [custom_script adID=149] Among them the profits obtained by the sale of a property or real estate, whether these are vehicles, boats, properties, houses or buildings. For many years property owners in Costa Rica never had to worry about capital gains when selling their Costa Rican real estate. The second amendment introduces several changes to the Income Tax Law including the introduction of a capital gains tax. Capital gains tax on investment income - Portugal vs Costa Rica Costa Rica forum. Law No. Costa Rica’s capital gains tax is the highest in the region, and one of the highest in the world in terms of the impact on the productive sector. For corporate entities. Self-employed nonresidents working in Costa Rica are subject to a either a 15 percent tax rate on gross Costa Rican-sourced income received. 5. Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. Meléndez & Bonilla has experience dealing with these types of investment opportunity and would be glad to help you achieve your dream of the perfect foreign investment to complement your portfolio. Before July 1st, 2019, capital gains were only taxable in Costa Rica when derived from the sale of depreciable assets, or when derived from the ordinary trade of a course or business of the taxpayer, in which case, it was considered regular income and subject to the applicable Income Tax rate. Costa Rica one-year remote work visa for digital nomads, New Law to Attract Baby Boomers and Investors to Costa Rica. New tax reform legislation in Costa Rica was passed 4 December 2018. Recent changes to the Costa Rican tax laws implemented an across the board Capital Gains Tax (Ganancias de Capital) and in this article, I will review the impact of that law on the sale of real estate in Costa Rica. This has less bearing on a personal capital gains environment where there is no customary business practice to make a profit from. Costa Rica’s capital gains tax is the highest in the region, and one of the highest in the world in terms of the impact on the productive sector. Building ? The Costa Rica tax year runs from Oct. 1 to Sept. 30. Mandatory Disclosure of Corporation Shareholders and Beneficial Owners... How do you become a Real Estate Broker... Costa Rica Creates a Final Beneficiary Registry For... How to Apply for Residency in Costa Rica – a Step by Step Guide, Buying ? For individuals, you are considered domiciled if you have spent more than 183 days in Costa Rica. Everybody else was exempt. The tax Adjustment Law increased the sales tax from 10% to 15%. This tax will incur a 15% charge on the capital gains generated when selling a … Sales tax in Costa Rica. In fact, you will be able not only to carry out a significant capital gain in Costa Rica but also enjoy many other assets concerning taxation. Nonresidents working under an employment relationship are subject to a flat tax rate of 10 percent on gross Costa Rican-sourced income. Capital gains derived from habitual transactions are taxed at a flat rate of 30%. Moving to a Capital Gains Tax Regime. Many, especially realtors, are aghast at the nerve of the Costa Rican government for doing such a thing. A property transfer tax of 1.5% is payable by the purchaser on the value of real estate purchased. The new Law establishes withholdings for capital gains obtained by non-domiciled persons when it comes to the transfer of real estate located in Costa Rica, or when it deals with other assets or rights located in Costa Rica when the acquirer is a taxpayer of the tax on profits. Contact Meléndez & Bonilla directly to evaluate your personal situation and advise you on the legal ramifications of owning property in Costa Rica and your tax liabilities. Specifically, dividend distributions and shares are exempt from the capital gains tax. Costa Rica Tax. Costa Rican corporations that are registered in Costa Rica pursuant to Costa Rican law are considered to be domiciled in Costa Rica. For now many of us are still trying to sort out how this will impact the local real estate market and property sales. Many investors have made the plunge into the Costa Rican economy and with inviting tax laws such as Costa Rica’s stance on capital gains, Meléndez & Bonilla would love to help you do the same thing. Real Estate in Costa Rica ; New Capital Gains Tax from July 2019 Sign in to follow this . How much is the capital gain tax ? Capital gain tax in Costa Rica began on July 1, 2019. Cost of Living. [custom_script adID=151] So, you would be taxed in the U.S. on the sale of your Costa Rica property, but not in Costa Rica. Tax return are due by March 15th. For many years property owners in Costa Rica never had to worry about capital gains when selling their Costa Rican real estate. The previous law only applied capital gains tax to real estate developers that were in the business of developing and selling real estate. Interest paid from a financial entity supervised in Costa Rica to a financial entity outside Costa Rica subject to supervision is subject to a withholding of 5.5%. Medical Facilities. As discussed above, a rule on interest payments deduction is now part of the tax legislation in Costa Rica. New Law Goes Into Effect July 1, 2019 One of the best things for investors in Costa Rica real estate is there are no Capital Gains Tax when you sell a Read a little more about it below. Capital gains and sales tax. Capital Gains Tax Costa Rica. Costa Rica Property Taxes on Capital Gains Costa Rica property taxes underwent a change on July 1, 2019. If the partner is another corporation also subject to this withholding tax and with its capital duly registered in Costa Rica, the tax is not applicable. Gains tax will impact the local real estate purchased capital gains tax in costa rica such a thing specifically, dividend distributions shares... 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