Costa Rica Real Estate & Property Taxes
[A] Government Transfer Tax and Registration Fees
(1) Real Estate Transfer Tax. - The government collects a property transfer tax (Impuesto de Traspaso ) which is equal to 1.5% of the registered value of the property. The Public Registry will not record a transfer deed unless the transfer taxes and documentary stamps have been paid. (The transfer tax was reduced from 3% to 1.5% by Law No. 7764 effective May 22, 1998)
(2) Documentary Stamps - The government also requires that documentary stamps be affixed to the deed. These stamps include the following: The Municipal Stamp: (Timbre Municipal) ;The Legal Bar Association Stamp (Timbre del Colegio de Abogados); The Agricultural Stamp (Timbre Agrario); The National Archives Stamp (Timbre del Archivo Nacional); The Fiscal Stamp:(Especie Fiscal). The Public Registry also imposes its own tax of .05% on documents presented for recordation to the Public Registry. (Derechos de Registro)
[B] Notary Fees
The Notary that drafted the contract for sale and carried out the closing is entitled by law (Decree 2307-J) to a fee equal to 1.5% of the first one million Colones of the actual sales price and 1.25% on the balance. The Attorney and Notary fee schedule which was established by Executive Decree No. 2307-J on April 4, 1991 was repealed on February 9, 1999 (Decree No. 27624-J). However, in October of 1999, the Supreme Court of Costa Rica ruled that the Decree which repealed the Fee schedule was unconstitutional and reinstated the original fee schedule.
[C] Mortgage costs. It is customary for the person who is receiving financing to pay the costs of drafting and registering the mortgage instrument. A mortgage can be created simultaneously at the time of sale by adding a mortgage clause in the transfer deed. Or, a separate mortgage instrument can be drafted. A mortgage document paysregistration fees of 1.00 Colon for every 1,000 Colones. The mortgage document also pays documentary stamps. The Notary Public will also charge for drafting the mortgage instrument and that fee can range from approximately 0.625 percent to 1.25 percent of the amount of the mortgage, depending on the circumstances involved. The buyer should be aware that Costa Rican real estate transactions commonly operate on a two-tiered system. since Costa Rican properties have a low property tax appraisal base in relation to market value, it is a customary practice to run property sales through at the registered value, which may be substantially less than the actual sales price of the property. In such a case, all transfer taxes and fees discussed above would apply to the registered value as opposed to its sales price, with the exception of the notary fee. Buyers should consult their attorney about the potential risks of this practice.
Registration of the transfer deed.
Once all the fees have been paid, it is the obligation of the notary who drafted the transfer deed to ensure that the deed is presented and registered in the Property Section of the Public Registry. I have stressed the words presented and registered to highlight the importance of following up with the notary to ensure registration. Although presentation guarantees your priority (i.e., first in time, first in right), it does not automatically guarantee registration. The Public Registry will not register a transfer deed unless all taxes and registration fees are included; a certified copy from the Municipality where the property is located is provided certifying that the seller's property tax and municipal assesments have been paid through the date of closing. Likewise, any prior instruments that encumber the property(i.e., mortgages, liens, judgments, etc.) must be lifted before your transfer deed will be registered.
Once a transfer deed is accepted for registration, the Public Registry will return the original document with all the documentary stamps affixed to it and properly sealed. Assuming no defects in the transfer deed, it should be registered by the Public Registry with 45 to 60 days after presentation. It is therefore important to follow up with the notary to ensure registration, otherwise you will run into problems in the future when you decide to resell the property and find out that your sale was not registered.