This month we are discussing Costa Rica’s “home luxury tax,” Impuesto Solidario para el Fortalecimiento de Programas de Vivienda (Law # 8683). This tax only applies to houses and condos or apartments over a specific construction value. 

The entity or person obliged to file and pay this tax is the ¨luxury home¨ owner as of January 1,of each year. This includes parties in a co-ownership as well. 

The real estate owner must determine the value of the main residential building, plus additional facilities such as palapas, swimming pools, perimeter walls, internal streets and sports courts. The Manual of Unitary Base Values for Constructive Typology and tools are available for payors to assess the value to be declared for the luxury tax. Click this tax office link to access these resources.

See this article in the magazine

Once you’ve determined the construction value, if it exceeds the exempted amount established by the tax office for that year, you must calculate the value of the associated land as per the valuation parameters and then add it. The sum of these values will provide you with the total property value to be declared.

Those liable for this tax must:

1. Fill out this form every three years: Formulario Único de Inscripción, Declaración y Pago Impuesto Solidario para el Fortalecimiento de Programas de Vivienda (Law # 8683) 
2. Pay the tax every year by the January 15 due date.

Note: For 2021, the amount was USD $240,000 (₡133,000,000,00 colones). This amount is adjusted each year. 

A new assessment will be made before January 15, 2022, and the tax office will announce that new amount for 2022 in December 2021. 

Who is responsible to pay the tax?

Buyers often wonder who is responsible to pay the luxury tax on the home, and about their liability if the seller did not pay the tax in the past.

Buyers are only jointly liable for the tax payment in the fiscal period when they are buying the home. The buyer would not be responsible for the previous years. 

According to section 7 of Law # 8683 and section 20 of the Regulation of the Solidarity Tax law, the buyer would not be responsible for the previous years:

“SECTION 7.- Affidavit

Taxpayers must submit, every three (3) years, from the effective date of this Law, within the first fifteen (15) calendar days of January of the corresponding fiscal period, a sworn statement that updates the value of the real estate, per the form and the conditions defined by the General Directorate of Taxation. If the appraised value is greater than the value registered by the administration, the new declared value will automatically modify the applicable tax base for the fiscal period in which it is filed. 

 When the real estate object of this tax belongs to several co-owners, they must declare it jointly.

The owner of two or more adjoining and/or overlapping real estate must accumulate them in a single declaration for this tax, as long as their use coincides with those indicated in article 2 of this Law, and said assets form a housing use unit.

In the condominium property regime, the declaration of each condominium must include the corresponding proportional value for the common areas.

In case of transfer of ownership of the real estate, the new owner will be jointly and severally liable for the tax payment of the fiscal period in force on the date of acquisition and the related interest. (The previous paragraph as amended by Article 3, section a) of Law No. 8981 of August 25th, 2011)”

Also, the Regulation of the Solidarity Tax law states:

 “Section 20.-Material obligation of taxpayers. The taxpayers indicated in section 3 of the Law will be responsible for paying the tax and its surcharges.

In case of transfer of ownership of the real estate, the new owner will be jointly and severally liable for the tax payment of the fiscal period in force on the date of acquisition and the related interest.

 The Tax Administration may collect the tax from previous periods with the respective surcharges and penalties to whoever holds the taxpayer’s status in those periods.

No agreement entered into between individuals regarding the payment of the Solidarity Tax for the Strengthening of Housing Programs requires the tax administration.”

Real estate laws and the tax implications can be complex. Consulting with an attorney can help avoid costly non-payment fines.

Should you have any questions about this matter, we are at your service at info@gmattorneyscr.com or, please go to our blog to find relevant briefs about legal topics. https://www.gmattorneyscr.com/gm_website/html/blog.php