Frequently Asked Questions on Costa Rica Real Estate Taxation
 
How are entities typically organized in Costa Rica?  How do these entities compare to US Companies?  How are these ebntities recognised in the US?

   The Country of Costa Rica has the same types of entities as the United States, two of which are a Sociedad Anonima (S.A) and a Sociedad de Responsabilidad Limitada (SRL). An S.A. is equivalent to a U.S. Corporation while an SRL is equivalent to a US Limited Liability Company (LLC).  The income of a Costa Rican SRL owned by a US citizen is subject to US income tax and Costa Rican income tax.  If the entity pays income taxes in Costa Rica, the partners/members will receive a foreign tax credit in the states.

   Again, S.A.’s are taxed similar to corporations.  They pay Costa Rican taxes, but no tax is paid in the U.S. until the entity pays a dividend or liquidates. Obviously, any fees paid to a US citizen (i.e. for management fees) would still be taxable to that person in the United States.
 
How are S.A.’s and SRL’s taxed in costa Rica?
There is no distinction between how an S.A. and an SRL are taxed in Costa Rica.  They each are required to file the same tax form and pay tax based on their gross income and taxable income in accordance with the following table:
 
If Gross Receipts are less than
 Approx $50,000
 Approx $100,000
 Over $100,000
 Tax is paid on all net income at
10%
20%
30%
 
 In contrast with US law, these are not progressive tax tables.  If one’s gross income receipts are over $100,000, a flat 30% is paid on all of the net income.
 
Generally, a US citizen that pays Costa Rican tax at the 10% rate will be able to offset his US tax, dollar for dollar.  However, the US Alternative Minimum Tax can limit the credits, especially when the higher rates are paid.
 
A 15% Costa Rican tax is withheld upon the payment of dividends by an S.A.
 
What is the year end of a Costa Rican entity?
By law, all entities have a September 30 year end; however, one may be able to receive authorization to adopt a calendar year end.
 
Does Costa Rica have a transfer tax on the sale of real estate?
Yes, the tax rate is 1.5% of the “declared” value; however, it is customary for a property owner to declare a value of less than cost.  Also, similar to the laws in Michigan and certain other States, the sale of the S.A. or the SRL that holds real estate is exempt from this tax.
The tax is assessed 50%/50% between buyer and seller unless they agree otherwize.
 
What is the real estate tax rate in Costa Rica?
.25% (i.e. $1,000 on $400,000 in stated value)
 
The tax information discussed is the interpretation of the developer  and their counsel.  Before undertaking any tax filing, we suggest that you consult your tax advisor. We recommend that you consult your tax advisor for your specific tax situation.
* Limited Liability Company
**Sociedad de Responsabilidad Limitada

 

 

Big Blue Marble Properties, P.O. Box 14245, Chicago IL 60614-0245, Phone:773 572 6522 Fax:773 572 6572 Email:bbmp@bigbluemarbleproperties.com