Costa Rica Property Tax (“Impuesto sobre Bienes Inmuebles”)

Costa Rica Property Tax (“Impuesto sobre Bienes Inmuebles”)

Law Number 7509, enacted on June 6th, 1995, created this tax. According to it, every landowner must pay a 0.25% yearly tax to the local government (“Municipality”) of the county where the property is located. It may be paid by yearly quarters, but usually it is better to pay it once a year during January or February.

The base to calculate it, will be the sum of the registered values of all properties owned by the same landowner in the respective Municipality. (All properties owned by such person on January 1st of every year. The tax period starts on January 1^st and finishes on Dec 31^st of every year.)

From time to time, every local government may decide to make a general appraisal of all the properties in its county. However, it will not be allowed to make it if the last one was made less than 5 years ago. Once the general appraisal is made, the values of all properties of the county will be automatically adjusted according to this general appraisal. However, most of the local governments have not been doing this kind of general appraisals very often.

The law created an obligation for every landowner, to present a Declaration to the respective local government at least once every 5 years. In such declaration, the owner must say how much he/she/it estimates the value of this property. It will also be important to present this declaration to the Municipality when, after buying the property, the transfer of ownership has been submitted and Registered in Costa Rica National Registry.

Municipality will be allowed to reject the value given in such declaration within the next tax period from the date in which the declaration is presented. If for example you presented your Declaration on Oct 1^st, 2009, the next tax period started on Jan 1^st, 2010. Therefore, local government was allowed to reject the value until December 31^st, 2010. If by this date the value was not rejected, then this will be taken as the Registered Value starting on January 1^st, 2011.

If the landowner does not present its declaration, or if the declared value is not accepted, then the local government will be allowed to make an individual appraisal of the property. Because of this, it is important to present your declaration. By doing so and if you declare an acceptable value, you will be closing the door for the municipality to send an appraiser to your property.

Every registered value will be good for at least five years, but it may be automatically modified in the following cases:

1.      If the property is sold by a declared price higher than the registered value;

2.      If a Mortgage is registered in the property for an amount higher than the registered value;

3.      A registered correction in the total area of the property;

4.      The fact that the landowner provides a higher value in a new declaration presented by him;

5.      The property subdivision; and,

6.      The building or improvements made to the property, if they require building permits for a value more than 20% of the registered property value;

The local government will automatically make the aforementioned modifications without making any new appraisal.

There are other cases in which the local government is allowed to change the registered value of the property before the 5 years period, but these ones will not be made in an automatic way. They will require for the Municipality to send an appraiser to the property and follow the procedure for new appraisals. These cases are the following ones:

a.)    The building of highways, public roads or other important improvements that my increase the property value;

b.)    Damages suffered by a property for situations like earthquakes, river floods, etc.;

c.)    The fact that the National Government, through a Section of the National Tax Administration named “Organo de Normalización Técnica”, define new technical rules that, when applied to the property, increase its value.

Municipalities must send a notice to the Property owner each time they make a new appraisal of the property. The landowner will be allowed to appeal such appraisal within the next 15 business days from the date in which the notice is received.  And this is another reason why the landowner must present the declaration to the local government. In such declaration it will be included the address where the notice must be send. Therefore, in some cases this 15 business days will expire without the landowner know it, if the declaration has not been presented

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