The Costa Rica Luxury Home Tax, also known as the Impuesto Solidario para el Fortalecimiento de Programas de Vivienda (Solidarity Tax for Strengthening Housing Programs), is an annual tax applied to luxury residential properties. It was first established in 2009 to fund social housing programs throughout the country. The tax targets properties with a registered value that exceeds a predetermined threshold. For 2023 that threshold is US$276,000.
Calculation of the Luxury Home Tax:
The Luxury Home Tax is calculated based on a progressive rate system that considers the property’s construction value.
The value of the main construction and any additional structures (such as a gazebo, pool, walls, internal roads, etc.) must be known in order to complete the form. The tax department issues a construction valuation manual known as the Manual of Base Unit Values per Construction Typology and it is available to determine the declared value for the solidarity tax. If, once the value of the construction has been determined, it exceeds the exemption amount for the period, then, the value of the land must be added and calculated according to the valuation parameters and added to the construction value. The sum of these values will provide the total value of the property.
The construction value is determined by the Costa Rican tax authorities pursuant to the valuation manual, and it may differ from the property’s market value. The tax rates range from 0.25% to 0.55%, depending on the property’s valuation threshold.
To calculate the Luxury Home Tax, follow these steps:
- Determine the construction value of all the structures on your property as assessed by the tax authorities.
- Identify the corresponding tax rate based on the total.
- Multiply the registered value by the applicable tax rate to calculate the annual Luxury Home Tax.
It’s important to note that the tax rates and thresholds for the Luxury Home Tax may be subject to change. Therefore, it is advisable to consult with a local tax expert or the Costa Rican tax authorities for the most accurate and up-to-date information.
Implications and Exemptions
The Luxury Home Tax carries financial implications for property owners. The obligation to report is every three years. The current reporting period runs for 2022, 2023 to 2024 , and failure to comply may result in penalties and interest charges. Property owners should ensure they understand their obligations and meet the tax deadlines to avoid any legal issues.
It’s worth noting that certain properties may be exempt from the Luxury Home Tax. For instance, primary residences, properties used for agricultural purposes, and properties owned by the government or diplomatic missions are typically exempt. However, these exemptions can vary, so it’s essential to consult with a tax professional to determine your property’s eligibility. The current exemption and threshold are:
| Range | Colones | US Dollars | |
| Up to ¢371,000,000.00 | 371,000,000.00 | 693,457.94 | 0.30 |
| Excess over ¢371,000,000.00 up to ¢744,000,000.00 | 373,000,000.00 | 696,261.68 | 0.30 |
| Excess over ¢744,000,000.00 up to ¢1,116,000,000.00 | 371,000,000.00 | 693,457.94 | 0.35 |
| Excess over ¢1,116,000,000.00 up to ¢1,490,000,000.00 | 374,000,000.00 | 698,069.16 | 0.04 |
| Excess over ¢1,490,000,000.00 up to ¢1,859,000,000.00 | 369,000,000.00 | 689,719.63 | 0.05 |
| Excess over ¢1,859,000,000.00 up to ¢2,333,000,000.00 | 474,000,000.00 | 885,981.31 | 0.50 |
| Excess over ¢2,333,000,000.00 | 2,333,000,000.00 | 4,355,140.19 | 0.55 |
Conclusion
In conclusion, the Costa Rica Luxury Home Tax is a yearly tax imposed on residential properties of high value with the purpose of funding social housing initiatives. It is of utmost importance for property owners in Costa Rica to comprehend the calculation process and adhere to their tax responsibilities. By staying updated on tax rates, thresholds, and exemptions, homeowners can ensure they meet their tax obligations.
