Real Estate Law, Taxes & Residency Information
Property Rights
Costa Rica's laws and constitution, based on a well-developed tradition of Democratic government, include secure property rights for the private ownership of land. These laws are extended equally to foreigners as well as residents. Neither citizenship, nor residency, or even a presence in the country is required for land ownership. There are almost no restrictions to the ownership of land in Costa Rica, with the exception of direct beach front property. Few countries in the world welcome foreigners so well and have laws that protect the property rights of foreign investors. Costa Rica's open door policy to foreign investment combined with secure property rights has made it a number one pick for foreign Real Estate investment.
Types of Land
Just like in the United States, Canada, and Europe, there are different types of property available to buyers. Understanding the various types that are available for purchase is critical in the evaluation process. Below are the property types that can be purchased in Costa Rica and the implications of each type of ownership for the buyer.
Titled/Fee Simple Land
In Costa Rica, foreigners can own titled property in their own name and can share the same rights as a Costa Rican citizen. There are two documents which, similar to the states, describe "titled" or fee simple property. Titles are registered in the National Registry and show ownership along with any liens, mortgages, or judgments. The second document is the registered survey map, or the Plano. The plano serves the purpose of recording measurements, size and location along with other useful information like whether the land falls inside restricted areas. The Title and the Plano are individual documents referring to the same piece of property. Both documents must be checked to verify that ownership and mapping coincide with the same piece of land. Concession Land
Beachfront property around the world is more commonly know as "concession property." In Costa Rica, 95% of beachfront property is concession property and is governed by the Shoreline Zone Law and other specific regulations. These legal dispositions set forth the conditions under which foreigners and local residents can lease concession property.
Untitled/Possession Land
Untitled land is also called "possession" land. Most of the land in Costa Rica falls in this category. Even though many lands are untitled, it does not mean that they do not qualify for title. In a possession scenario, it is the recording of the legal transaction that establishes possession or ownership rights... not a title. The bill of sale shows transfer of ownership. This information, typically obtained with the help of a lawyer, can then be added to the National Registry.
Land Taxes
Collection of land taxes was turned over to the local municipalities several years ago. Before 1995, property tax on private land was 6% of the declared value. In May of 1995, this code was changed and the tax was lowered. Now, taxes are based on 0.25% of the declared value. In most cases, values claimed are lower than the actual selling price. Maritime properties pay an "occupation tax" called a canon. Once a beach property has been awarded a concession the tax goes up dramatically and depends on how the property was zoned.
Other Taxes
Residents, non-residents and corporations generally are subject to tax only on their Costa Rican source income. For this reason, Costa Rica offers no credit for foreign taxes paid on foreign source income by Costa Rican residents or non-residents. Tax rates are 30% on corporations, 30% catch-all rate on non-residents, and a graduated scale of 10% - 25% for nationals, depending on the type of income. Currently, there is no capital gains tax in Costa Rica, unless the income is derived from "habitual" activities (some expect this to change in the near future, however). National sales tax is 13%.
Building
The process of getting permission to build can be complicated depending on where the property is located. Beachfront property is governed by a different set of rules compared to private land. Although it is national code that regulates building, practical application will vary in populated versus rural areas. Code is not nearly as strict as in the United States. For larger projects, an environmental impact study, and possibly another study for supporting infrastructure may be required, at the expense of the landowner. For residential construction, there is a single permit issued at the local municipality with a one-time inspection to occur before construction begins. It is the architect's responsibility to make sure approved plans are followed. A proper septic system and water supply must be in place in order to build.
Capital Gains
Currently, there is no capital gains tax in Costa Rican unless the income is derived from "habitual" activities. Although many expect this to change at some point in the future.
Foreign Rights/Residency
Under certain conditions, Costa Rica allows foreigners to gain residency status. Residency is not to be confused with citizenship. Being a Costa Rican resident allows certain benefits while residing here, but still allows for citizenship in your home country. As a tourist, a visa must be renewed every 90 days (depending on the country of origin) by checking out of the country for 72 hours. Aside from not having to renew a tourist visa, benefits of residency include access and discounts on some public services like health care, insurance, and education. In years past, Costa Rica was a haven for retirees, offering foreign residents certain incentives like importation of household goods and a vehicle exempt from import duties. These incentives were discontinued several years ago. Today, benefits are few unless you qualify through an investment scenario. It is possible to own property in Costa Rica as a foreigner and to live here on a tourist visa.
One of the confusing issues is gaining residency and the right to work. Work status is not part of gaining residency and is given only under special circumstances. This process can be lengthy and bureaucratic.
Qualification categories are as follows:
• Pensionado Status - Permanent income from a retirement source such as a pension must be demonstrated. The minimum amount is $600 per month and the applicant must reside in the country for at least 4 months each year.
• Rentista Status - This is for individuals who do not have retirement income but can show income from other capital investments. You must provide documentation that you receive a minimum of $1,000 each month individuals who do not have retirement income but can show income from other capital investments may apply for this type of residency. Documentation that states that a minimum of $1,000 is received each month for a period of at least five years must be provided. Also, a minimum of $12,000 per year must be changed into colones through the Costa Rican National Banking System.
• Investor Status - Those making a minimum investment of $50,000 in Costa Rica can qualify for residency if the investment is made in a priority industry, such as non-traditional exports or tourism. Residency, along with other incentives, is offered with investments of $100,000 in reforestation projects or of $200,000 in non-priority industries. Ask an attorney for further details.
• Permanent Residency - People who marry Costa Ricans, have a child born in Costa Rica, or are seeking political asylum may be eligible for this type of residency.
• Temporary residency - People employed by international companies or students and teachers participating in official exchange programs with the Costa Rican Universities may receive this type of residency.
In all cases, a series of documentation from the home country, such as certificate of birth, marital status, police report, photos, income certification, etc. must be provided. All documents must be certified by the Costa Rican Embassy in the home country and then must be translated into Spanish in Costa Rica. Fingerprints and a written declaration are taken in Costa Rica at the immigration office. If investor status is requested, a financial study of the project must be provided. If the project involves real property, proof of ownership must be provided. In theory, the process should only take a few months but can actually take up to a year or more.