Can I Avoid Paying The Costa Rica Transfer Tax?

There has been some confusion among property owners and buyers regarding property transfer laws and closing costs. Our goal is to clear up that confusion by explaining the new Transfer Law passed in 2012 and the process all property lawyers must follow.

 

Costa Rican Property Transfer Law requires all transfers of property recorded in the National Registry are subject to a transfer tax of 1.5% of the value. In the past, property owners and buyers used to avoid paying this tax by transferring the shares of the corporation that holds the property to the new owners. Thanks to law number 9069 (Ley de Fortalecimiento de la Gestión Tributaria), this is no longer possible.

For those interested in specifics, Law #9069 modifies Law #6999 (Ley de Impuesto Sobre El Traspaso de Bienes Inmuebles), which is thelaw that governs the real estate transfer process. Once a property transfers and it records in the National Registry it prompts registration fees and stamps, which added to the transaction costs as well.

With the new law requiring annual corporate meetings (which in the future will have to be presented to the government), the transfer will be obvious to the tax office. If the new shareholders get caught, they will have to pay the transfer tax plus a big fine.

The transfer tax equals roughly 1.5% of the 4% we usually estimate for closing costs. Closing costs are usually split between buyer and seller, so 2% on the buying side and 2% on the selling side.

If you have any questions about property transfer tax or closing costs associated with Costa Rica real estate, please contact us here.