Costa Rica Real Estate Magazine

ARTICLE | REAL ESTATE

Capital Gains Tax In Costa Rica always important to check this situa tion with the tax advisor, for a donation made just to avoid the present payment of capital gain tax is not always a good idea because it may affect future trans fers. lows to apply a formula to compensate such inflation and convert the old price into a present value. It is better to ask your accountant to apply this formula since they are very knowledgeable about the specific point. Can I add other costs or taxes when calculating the real profit?

What is the rate to be paid for such tax? The rate is 15% of the Net profits. How ever, there is a kind of grandfathered clause in the law, which allows apply ing a different rate (2.25% of the Gross price) if the transmitter acquired the property before July 1st, 2019. How is the Gross Sale Price (transmis sion price) calculated for these purpos es? It is the real selling price minus: i) The costs of the investments and im provements made on the property sold ii) The transfer taxes and costs paid for the transfer of the property. iii) Notary fee and closing costs paid for the transfer of ownership. While the law does not state it specifi cally, in my opinion, a Real Estate Bro ker fee may also be deducted if it must be paid by the Seller. How must the Seller calculate the ac quirement price that must be deducted from the Gross Sale Price for the pur pose of defining the profit? To the real price paid for the property one should add the following: i) The costs of the investments and im provements made on the property now sold. ii) The transfer taxes and costs paid to buy the property. iii) Notary fee and closing costs for the transfer of ownership. Again, the law does not establish it, but in my opinion, a Real Estate Broker fee may also be deducted if it was paid when the property was bought or ac quired. Because of economic inflation, the acquirement value may be unreal and too low. Therefore, the law also al

No. Only the ones mentioned in the law, which are the ones I mentioned in the 2 previous answers. You may add other costs and taxes only if we are not using the capital gain regime, but the income tax regime. If one or both prices are in US Dollars, how must the calculation be made? The current regulations require in these cases that all prices be converted into Colones at the selling exchange rate of the Central Bank of Costa Rica. ( www. bccr.fi.cr ) for the respective date. Example: If the property was bought on July 1st, 2018, for a price of US$300,000, then this amount must be converted into CR Colones according to the selling ex change rate in effect on July 1st, 2018. If the property is sold later on May 15th, 2022 in the sum of US$450,000, then this amount must be converted into CR Colones according to the selling exchange rate in effect on May 15th, 2022. Based on these CR Colones val ues, we calculate the real profit. Once the property is sold, when must I pay the capital gain tax (if any)? The law requires that the tax be paid on or before the 15th day of the next month from closing date. It is important to mention that these answers are just a guide to have a better approach to the subject, but it cannot be taken as a le gal or tax advice since there are many small issues to take into consideration. Therefore, it is always important to check with your attorney, accountant and/or tax advisor.

By Casimiro Vargas Law and Notary Public CV Firm www.cvfirm.com

S hould I pay Capital Gain tax if I sell my real estate property in Costa Rica? That is a question that we need to an swer in detail. It all depends on the ac tivities your company runs. If you or the company owning the property is run ning some commercial activities and the property has been used in such ac tivity, then you don’t have to pay capital gain tax. However, you must include the proceeds of the sale as part of your regular income for the purpose of the income tax payment. If the property is not used in the com mercial activities (what is also known as “affected to such activity”), then you must pay capital gain tax if you get some profits when you sell it. Do I have to pay if I donate the prop erty to anybody else or if the property is transferred by inheritance to my chil dren or somebody else? The answer is NO. In such cases, this tax is not paid, but the future transfer of the property may be negatively af fected by the previous donation. It is

42 COSTA RICA REAL ESTATE MAGAZINE