Buying Property in Costa Rica
by Nathaniel Jackson
Purchasing property here in Costa Rica has become a very transparent and straightforward process. Advancements in technology and more organized regulations have made for a fairly streamlined process, however it is still important that you have the correct guidance to help you along the way. The information below is a great introduction into the purchasing process. As always, our team of dedicated and knowledgable staff is here to help you along the way.
PROPERTY LAWS IN COSTA RICA
Unlike many other central American countries, foreigners in Costa Rica have the same rights as locals when it comes to purchasing properties. Properties are owned either under your own name, or under a corporation name. It is not required that you have a local partner in ownership, except when the property is considered a concession property.
A large benefit to buying here in Costa Rica is its central land registry which allows your lawyer to confirm that there is a clear title to your property and there are no issues that may effect the viability for building or resale.
CHOOSING A REAL ESTATE AGENT IN COSTA RICA
Choosing a real estate agent in Costa Rica is very important as he/she will be working with you on your behalf and making sure your interests are fully protected. It is very important that your agent knows the community in which they are representing. What sort of experience does the agent have? Do they know the local market? Are they representing a certain company or agency? And most importantly, do they respect the same values that you do? Finding an agent in Costa Rica who appreciates the same aspects of the country as you do will help to insure that there is a mutual understanding of what it is that you value in a property.
Due to the fact that real estate agent status is unregulated, licensing for agents is not required. Its important to do your research and make sure that the person representing you is a good honest person with a respected reputation in the area.
SETTING UP A CORPORATION IN COSTA RICA
There is nothing to prevent you from owning property under your own name, however the majority of buyers create a corporation. The benefits of creating a corporation are as follows: It may be more beneficial to have any rental income taxed within a Costa Rican Corporation rather than having it taxed personally. It also allows for a more simple estate planning in which you can give or will shares of your corporation to other members of your family or friends. The costs for this is typically $600-$1000 and will be covered in the buyer's closing costs.
MAKING AN OFFER & CLOSING PROCESS
An initial written/verbal offer is presented to the seller. Once an offer is negotiated and accepted your real estate agent will refer you to an attorney. Together they will write up the Purchase Sale Agreement (PSA) and work with you throughout the entirety of the transaction. The attorney will provide detailed knowledge about the property and make sure that there are no issues.
Typical closing periods are 45 days. 10 Days after the PSA is signed by all parties there will be 10% deposit due into a 3rd party Escrow account. The remaining 90% will be due by the closing date. At this time the buyer will also pay the closing costs which are an additional 5-6% of the total purchase price. Closing costs are paid in full by the buyer and the real estate commission is paid by she seller.
Closing costs are as follows:
- 1.3% for the notary to register the property in the National Property and perform closing duties.
- 2.4% in government stamps and fees
The remaining closing costs includes escrow service, building inspection, surveyor and any other service required for the closing. After closing, the title will be transferred and recorded in the Costa Rica Registry within the following weeks.
PROPERTY TAXES IN COSTA RICA
Property Tax
At only 0.25% of the appraised value, property taxes in Costa Rica are very affordable. You will be required to pay your property taxes on a quarterly basis, however you WILL NOT be notified of this in any way. It is important that you keep your taxes up to date every 3 months or arrange with someone who can take care of this for you.
Income Tax
Property Income Tax is bracketed and based on the income of the Rental Property vs the Expenses. For Corporations with Gross income of:
Up to 53,113,000 CRC per year (est. $93,180) = 10%
Up to 106,835,000 CRC (est. $187,429) = 20%
More than 106,835,000 CRC (est. $187,429) = 30%
Corporation Tax
There will be a fixed fee for inactive corporations and a progressive rate for active corporations depending on their income. The amounts go from US$ 120 -for inactive corporations- up to US$ 380 for active corporations.
APPLYING FOR RESIDENCY IN COSTA RICA
AS INVESTOR
The foreigner and direct family can apply for this type of residency once the foreigner has invested $150,000 or more into Costa Rica. Investments can include tourism, reforestation, shares in a CR corporation, or in most cases property purchases.
AS RENTER
The foreigner and direct family can apply for this type of residency if the foreigner receives $2,500 minimum monthly income for at least a 2 year period. The other option is to have $60,000 present in a Costa Rican bank account.
AS RETIREE
The foreigner can apply for this type of residency if he/she is entitled to a lifetime retirement pension of $1000 per month from their country of origin. The foreigner must obtain proof of this pension and have it authenticated.
ESTIMATED TIME REQUIREMENTS FOR RESIDENCY
The length of time it takes to acquire temporary residency varies according to the speed at which you submit the required documents. On average, it takes approximately 1-2 years. All 3 types of residency require at least 3 years of valid temporary residency before permanent residency can be applied for.