by Ivo Henfling

President of Costa Rica, doña Laura Chinchilla, proposes a new bill to control capital that flows in and out of the country. The Colon is the most depreciating amongst 19 Latin American and Caribbean economies tracked by Bloomberg.

Doña Laura Chinchilla announced measures to slow capital inflows that she called “weapons of mass destruction” against the nation’s economy.

Is this bill an effort of keeping retirees and foreign investors out of Costa Rica? Will it hurt Costa Rica real estate owners? The Costarican government has created the Luxury Home tax as well as the Corporation Tax, both overrated in the press, but that is another story. Many of my readers have asked me for a comment on this proposed bill, so here we go.

by Ivo Henfling

This week I have received an amazing amount of phone calls from home owners who did not know what to do about the Luxury Home tax Costa Rica 2013 and though I am not an expert on the Luxury home tax issue, I decided to update you all in a blog.

This tax, created by Ley Nº 8683, has to be paid before the 15th of January 2013.

The Luxury home tax law or Impuesto Solidario, was invented and approved by the Laura Chinchilla government in October 2009 to eradicate the slums on Costa Rica and they decided the rich should pay for that. If you are reading this blog, you might be rich in the eyes of the Costarican tax department and you better keep reading.

By Ivo Henfling

I remember the times we had cows and horses in the streets of Escazu and you could build anything in real estate in Escazu you felt like and those are long gone now. There were no controls, building permits were not important and zoning did not exist. The 4 year Costa Rica real estate boom changed all that and suddenly we had quite a few 7 story condos. That was more or less the only thing the engineering department of the city of Escazu controlled, no more than 7 floors, due to the seismic code.

Not only traffic in Escazu has gotten worse, it is the same thing throughout the Central Valley and the entire world. When I grew up, we had only 1 car at home. My Escazu neighbor’s family has 6 cars now. The Municipality of Escazu has always been a little slow on things but in the last 2 years, things have accelerated.

By Guestblogger I.J. Zemelman, EA.

Moving overseas mid tax year is not an uncommon venture for most expats.  When you think about it logically, the average taxpayer is not going to plan his/her move around the tax year.  Additionally, opportunities do not normally present themselves in a tax ideal situation.  No matter which day you actually move overseas, your move will undoubtedly have a moderate or huge impact on your US expat taxes. 

As you are probably are aware, moving to an international location may qualify you for the Foreign Earned Income Exclusion (FEIE).  US Citizens moving abroad mid tax year can request an extension for the due date of their US expat taxes so that they meet one of the 2 tests for qualification and are able to exclude a sizable portion of their foreign earned income.

By Ivo Henfling

Do not lose any sleepless nights over the new Costa Rica corporation tax, GoDutch Realty has the solution for you. Now, if you own a Costa Rica corporation or Sociedad Anonima or S.A. you are supposed to pay tax on this corporation. The new corporation tax in Costa Rica is something that many property owners do not know how to handle. Especially those who not live in Costa Rica don’t know how to pay these taxes. GoDutch Realty is of course the first Costa Rica real estate company offering a solution to this. There has been talk about this corporate tax for a year and now it has happened. For the exact details on the what, the how and how much, you can read our last blog about it and for even more details go to our blog on the American European Real estate Group’s website.

The fact is that many people own a corporation in Costa Rica which in turn owns a property or several properties or a car. Others had their attorney constitute a new corporation to start a business in Costa Rica or planned to buy a Costa Rica property but never got to it for some reason and left the company without use. Now is the time to act.

By Ivo Henfling

You are selling your Costa Rica property and your buyer needs financing from a local bank. If your real estate agent is the only agent involved, it will make it for both buyer and seller much easier to deal with as the bank’s loan officers need a constant reminder to keep working on the document of this particular buyer. I have done many real estate closings involving bank mortgages and in many, the sellers freak out unnecessarily. This is why I am writing this blog, so you don’t have to freak out.

Most Costarican banks will tell your buyer to get an option to purchase – sale agreement for 3 months because they might need that amount of time to process the documents. I have seen some take that amount of time and others do their due diligence and close in 3 weeks. Ask your real estate agent to keep you up to date during the process, this helps to calm the nerves and the agent will need your help.

By Ivo Henfling

The long discussed tax on corporations in Costa Rica was just approved. The first time I wrote a blog about the tax the Costa Rican government proposed on corporate tax was in December 2010, so the approval has taken quite a while.

That doesn’t mean, it’s 100% that this will all happen because the Costarican citizens have the option of what’s called Sala IV, a court where they can stop a train running at 100 miles an hour. But for now, congress as well as Costarican government has approved the new tax, and it is coming into effect on April 1st, 2012.

By Patricia Leitón and Juan Pablo Arias for La Nación on 17/01/2011

The Government yesterday presented to Congress a fiscal reform plan proposing to transform the sales tax on a value added tax (VAT) and increase its rate from 13% to 14%.

The original intention of the Executive Branch was to set a tax of 15%, but they decided to drop its claims as part of a strategy to try to reduce opposition from the deputies.

To replace the money that would be raised, the Chinchilla administration now seeks to raise two other charges: that of vehicle ownership in 10 points and the property title transfer, from 1.5% to 3%.

This was established in the bill called "solidarity tax" presented by the ministers of Finance, Fernando Herrero, and the presidency, Marco Vargas.

                                       by Juan Pablo Arias juan.arias@nacion.com  06/01/2011 for La Nación

On Jan. 17th is the deadline for owners of luxury homes cancel the tax for 2011.

Francisco Fonseca, Director of Taxation, said that this year, the administration expects to receive at least ¢ 2,600 million for this purpose, which is below the target of ¢ 10,000 million, but consistent with the revenue in previous years.

He added that in November last year they had received only ¢ 3,300 million from this tax for a portion of 2009 (three months) and the accumulated throughout 2010.

This tax applies to residential use properties worth more than ¢ 106 million.

 

by Patricia Leiton for La Nación on the 8th of December 2010.

Source: La Nacion

The Financial Affairs Committee on Thursday approved, unanimously, the annual tax of $ 200 (about ¢ 101,000, currently) to joint stock companies registered in the Property Registry.

The project, called "Tax on Legal Entities" - entered the Legislative Assembly in August 2006 and the amount collected will go to the Ministry of Public Security.

The initial proposal of the Ministry of Finance established a tax of $ 200, then increased to $ 300, and yesterday went back down to $ 200. The text of this tax exempts small businesses registered with the Ministry of Economy, Trade and Industry.

Solidarity tax debtors will be notified by Costa Rica Ministry of Finance.

by Patricia Leitón for La Nacion on 19th of february 2010.

Source: La Nación

The Directorate General of Taxation will begin next week to notify owners of luxury homes who did not pay the solidarity tax.

The Deputy Minister of Finance, Loretta Rodriguez, CEO of Taxation, Francisco Fonseca, reported yesterday that they will begin with taxpayers who must pay more.

Fonseca explained that the 10,000 homeowners who must pay this tribute, there are 500 contributors that cover 70% of the collection of the solidarity tax. Therefore, the Directorate of General Taxation will begin to notify these 500 homeowners and hopes to finish the process in May.

Luxury Tax generated ¢3,266M

Source: Patricia Leitón for La Nacion on 25th of May 2010.

Source: La Nación

The Ministry of Finance has raised so far ¢ 3.266 million ($6.5M) for the tax on luxury homes in force since October by the Directorate General of Taxation.

The amount of the Luxury Tax has been paid by 3,069 contributors, of whom 2,989 made the payment voluntarily and 80 have done so after the notification sent by the Ministry of Finance. The notification of the Luxury Tax was sent to the 500 largest tax payers who had not paid. According Taxation had estimated, the top 500 would provide 70% of the total. The calculation of revenue included in the Budget Act of this year amounted to ¢ 9,400 million.