Quite often on my seminars, I employ myself really hard to make people understand, or better said, believe that in Costa Rica every single property has a different deadline when it comes to the Property Tax Return (Declaracion de Bienes Inmuebles), and that is the actual case.
The Basics of Property Tax
The Property Tax Return, which only purpose is to bring up to date the value of the property (land + building if any) must be filed every five years , the new reported value will be used by the local Municipality as the Property Tax Calculation basis.
Now, when a property’s title is transferred, a new Property Tax Return must be filed, the reason for this is that there is no communication between the Registro Nacional which manages the title and the Municipality which manages the property taxes, therefore if the Municipality is not aware of the new owner then the tax liability remains on the previous owner.
The number one mistake when it comes to property title transfer in Costa Rica is precisely that one: Not to file a new property tax return reporting the new owner of the property.
So, why is this important now?
Well, every five years and by default the Costa Rican Tax Administration update the so called Property Values Official Guide, this guide divides the country in different areas and assign minimum values to both the land and type of construction, and this is the year when that is done.
So, the Costa Rican Tax Administration urges all the property owners in Costa Rica to file a Property Tax Return in case they haven’t before January 1st, 2010, otherwise the Tax Administration and the local Municipality will re assess the property and will base the property tax on that new value.
Who should pay special attention to this?
- Those who had purchased a property within January 1st, 2010 and today and are not sure if the attorney filed the Property Tax Return at the local Municipality as part of the title transfer process as it should be.
- Those who already owned a property and the last time a Property Tax Return was filed was before January 1st, 2010
Keep in mind that even if you bought a property thru a corporation, meaning that the actual owner of the property is a corporation and you got the shares of that corporation, the Property Tax rules apply exactly the same as if the owner would be an individual.
So, grab your file double check the date when the last time a property tax return was filed and if the stamp reads any date after January 1st, 2010 you do not have to worry but start planning to file a fresh one very soon, if you do not find a Property Tax Return and you recently bought the property pick up the phone and contact your attorney and ask why the hell there is none there!