This month we are beginning to see some details regarding the long-awaited Luxury Tax. Since the new law went into effect on Oct. 1, there has been a lot of confusion around the specific details. This article includes information about calculating your tax liability and registering your property value—all of it online.
The new tax is officially the “Ley Impuesto Solidario Para el Fortalecimiento de Programas de Vivienda” (Solidarity Tax For the Strengthening of Housing Programs). Monies raised are intended to assist Costa Rica’s poorest communities. The tax is due by January 15, 2010, and is in addition to the local Municipal property tax. Note that there are stiff penalties for under reporting home values—something that has been common in the past.
There have been several recent articles about this issue on both the AM Costa Rica and Inside Costa Rica web sites.
- New Luxury Tax in Costa Rica &ndash A Contribution to the Poor,
by Yalile Alpizar for InsideCostaRica, - Expats likely to be blindsided by new ‘luxury home’ tax,
by A.M. Costa Rica staff, - Here’s 20 questions about the tax on luxury homes,
by A.M. Costa Rica staff, - Costa Rica’s Luxury Home Tax: Targeting Shanty Towns,
by Yemisrach Kifle at NuWire Investor (older article from 2008)
Disclaimer: There is conflicting information surrounding this tax. If you have spent much time in Costa Rica, this is nothing new. The details here are the latest as I know them. Special thanks go to Yalile Alpizar for her insight.
The text of the new law is available for those who enjoy reading legal documents in español.
Declaring Your Property Value
Property owners are responsible for declaring their property values to the Ministerio de Hacienda. Sample forms are available online. It also is possible to register your property value online. However, before declaring your property value, whether online or on paper, read the following warning.
Warning: Be very careful before declaring your property value to Ministerio de Hacienda. It would be a good idea to visit your local Municipality and find out what your declared value is currently. The Solidarity Tax is separate from normal Property Tax, and it is best to keep these two declarations the same. Also, consider talking with an attorney before you proceed with this. Getting this wrong would be a bad idea.
When you are positive you have it right and you elect to declare online, visit the Ministerio de Hacienda web site to declare your property value. On the above page, click on the link that is labeled: “Registro Impuesto Solidario” (or just click this 2nd link, but the 1st link gives you some additional context).
Online Tax Calculator
As a first step in determining your tax liability, an online tax calculator is available. It allows using Colonies, Dollars, Euros, or any other exchange rate that you prefer. For Dollars and Euros, it will look up the current exchange rate values.
Simply select an exchange rate, enter the full value of your home in the currency that you have selected, and click the “Calculate” button. The tax amount will then be shown in Colones, and also in your preferred currency. For home value using the actual construction costs is a best, if you have that. Using replacement cost or listing prices is not a good idea.
Note that there are some limitations. This calculator does not work with older versions of Internet Explorer so, if you are not using IE 8 yet, best to use Firefox or Safari.
A Solidarity Tax Calculator is available online
Land Value
First land value was not to be included. Then that changed. However, at this moment, it appears that land values will not be included in the new tax, and the tax calculator on the above web page does not include land values. As more information is available on this, I will update this article. Stay tuned for further details.
Update (20-Oct): Land value will be taxed, but only when a luxury home exists on the property. Further details.
