Every 3 years, homeowners must perform a luxury home tax evaluation with the purpose to determine if their house, condominium unit or apartment in Costa Rica is subject or not to the Luxury Home Tax.
The tax rates start with 0.25% and ends in 0.55% of the home’s value, determined by the home evaluation performed specifically for the luxury home tax.
In the last two years (2020-2021) the tax threshold has been ¢133,000,000.00 (approximately US$ 214,500).
Therefore, based on the existing law, all homeowners should do the evaluations every three years. However, not all homeowners need to file a tax declaration or pay the tax. In any event, you should take into consideration the following scenarios under which you should definitely proceed with the evaluation:
a) Homeowners that are currently paying the tax should definitely perform a new valuation to determine if the home remains subject to the tax for the next 3 years or if there are any changes with regards to how much the tax would be for those 3 years or even if the home is no longer subject to the tax;
b) Homeowners that bought new houses during 2019-2021 should perform the evaluation to determine if the house is or not subject to the tax for the next three years;
c) Condominium units owners with an area of over 120 square meters or 1,292 square feet should at least contact the condominium administrator to determine if there is a decision about addressing the valuation as a group and if not, consider performing his/her own evaluation.
Please be advised that the Luxury Home Tax must be paid by January 15th, 2022. Also, take into consideration that the 2022 Luxury Home Tax declaration must be completed and filed on or before that date. In order for the tax declaration to be filed, the valuation needs to be performed.
The new declaration and the valuation of your property is only valid for 3 years, according to article 7 of Law Nº 8683.
The Tax Administration has not published the new valuation parameters required to calculate this tax; they must do so within 45 days before the year’s end. If the new parameters are not published pursuant to the above set dates, the values and amounts for the previous year will apply.
If you consider that your home is not subject to this tax due to its new appraisal value, you will be forced to request a separate process to deregister as taxpayer for this tax.
Important: The new valuation could be performed based on previous valuations. It is possible to use the information contained in previous valuations to perform the new one, as long as all required values were included in the previous valuation.
The valuation of the property must be sent or confirmed to Cordero & Cordero Abogados by December 13th, 2021. All amounts must be received before January 7th, 2022 to allow us to pay and avoid setbacks with the Tax Administration red tape and its ability to process all payments.
Please feel free to reach out to us if you need more information on this subject or if you wish to retain our services to assist you with the 2022 luxury home tax declaration.
Note: The purpose of the present publication is to provide general information on the updates for Real Estate regulations in Costa Rica and it is not intended to be legal advice as such. In case more specific information is required regarding these topics, please Cordero & Cordero Abogados at firstname.lastname@example.org or visit our web page at www.corderoabogados.com