Quite often, buyers of real estate in Costa Rica think that after the closing, specifically the payment of the transfer taxes and related fees to the attorney and commissions to the real estate broker if applicable, everything is done regarding the deal.
That is often – but not always true, because when the owner of the property starts looking for an accountant to take care of the related taxes, then surprise! Nobody told the new owner that a transfer process must also be held at the local municipality (municipalidad).
The first step is, with no doubt, to make sure that the deed was properly filed at the Public Record Office (Registro Nacional) and the property is now under the name of the new owner, whether this be an individual or a Corporation.
I strongly recommend owning the property in the name of a Corporation, since this might protect you from personal liabilities and also if you plan to sell in the future this property, it will make the transfer process easier, because you can transfer the corporation and all its assets, including the property, therefore no transferring taxes will have to be paid, this is a good and attractive incentive for a potential buyer.
As part of the transferring process, a copy of the deed must be filed at the local Municipality where the property is located, so the new owner of the property will be properly registered, otherwise, the previous owner would be responsible for the local property taxes and you know those won’t get paid.
Costa Rica Property Taxes – Why you should remember this?
Simple, the previous owner won’t care about and certainly won’t pay the quarterly property taxes, so there will be a balance in the account that must be paid and, in some cases the Municipality could end up auctioning the property due to a lack of taxes payment.
What Needs To Be Done?
First of all, the attorney has to make sure that the property value of the property on the deed matches the declared property value at the Municipalidad, remember that both, the registration at the Municipalidad and the Public Record Office are sworn statements, so you may want to give the right information.
The attorney normally is not obliged to file a copy of the deed at the local Municipality and up date the information of the new owner as part of their paid services, but a good honest attorney will do, otherwise you will need to negotiate a new fee for that service, but make sure that this is done and you get a copy of the document from the Municipalidad.
Now your accountant will be able to help you with your property taxes and make sure that these are paid before March 31, June 30, September 30 and December 31 of each year.
Randall Zamora, President and CEO of Costa Rica ABC, a former CFO of multinational companies like Health Care Merger Inc and Four Seasons Resort Costa Rica, with twelve years of experience in accounting, management and tax advisory. Randall is fluent in English and is our Preferred Costa Rica Tax Professional.
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Written by Randall Zamora who is the President and CEO of CostaRicaABC.com, former CFO and Head of Accounting Department of multinational companies like Four Seasons Resort Costa Rica, active member of the Interamerican Accounting Association, Pro Bono Local Partner of The World Bank and contributor to their yearly publication “Doing Business Report.”
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