That is a question that we need to answer with detail. It all depends on the activities your company runs.
If you or the company owning the property is running some commercial activities and the property has been used in such activity, then you don’t have to pay capital gain tax. However, you must include the proceeds of the sale as part of your regular income for the purpose of the income tax payment.
If the property is not used in the commercial activities (what is also known as “affected to such activity”), then you must pay capital gain tax if you get some profits when you sell it.
Do I have to pay if I donate the property to anybody else or if the property is transferred by inheritance to my children or somebody else?
The answer is NO. In such cases, this tax is not paid, but the future transfer of the property may be negatively affected by the previous donation. It is always important to check this situation with the tax advisor, for a donation made just to avoid the present payment of capital gain tax is not always a good idea because it may affect future transfers.
Which is the rate to pay for such tax?
The rate is 15% of the Net profits. However, there is a kind of grandfathered clause in the law, which permits to apply a different rate (2.25% of the Gross price) if the transmitter acquired the property before July 1st, 2019.
How is the Gross Sale Price (transmission price) calculated for these purposes?
It is the real selling price minus:
- The costs of the investments and improvements made on the property sold
- The transfer taxes and costs paid for the transfer of the property.
- Notary fee and closing costs paid for the transfer of ownership.
The law does not state it, but in my opinion, a Real Estate Broker fee may also be deducted if it must be paid by the Seller.
How must the Seller calculate the acquirement price that must be deducted from the Gross Sale Price for the purpose of defining the profit?
To the real price paid for the property it must be added:
- The costs of the investments and improvements made on the property now sold.
- The transfer taxes and costs paid to buy the property.
- Notary fee and closing costs for the transfer of ownership.
Again, the law does not establish it, but in my opinion, a Real Estate Broker fee may also be deducted if it was paid when the property was bought or acquired.
Because of economic inflation, the acquirement value may be unreal and too low. Therefore, the law also allows to apply a formula to compensate such inflation and convert the old price into a present value. It is better to ask your accountant to apply this formula since they are very knowledgeable about the specific point.
Can I add other costs or taxes when calculating the real profit?
No. Only the ones mentioned in the law, which are the ones I mentioned in the 2 previous answers. You may add other costs and taxes only if we are not using the capital gain regime, but the income tax regime.
If one or both prices are in US Dollars, how must the calculation be made?
The current regulations require in these cases that all prices be converted into Colones at the selling exchange rate of the Central Bank of Costa Rica. ( www.bccr.fi.cr ) for the respective date.
If the property was bought on July 1st, 2018 for a price of US$300,000.00, then this amount must be converted into CR colones according to the selling exchange rate in effect on July 1st, 2018.
If the property is sold later on May 15th, 2022 in the sum of US$450,000.00, then this amount must be converted into CR colones according to the selling exchange rate in effect on May 15th, 2022.
Based on these CR Colones values, we calculate the real profit.
Once the property is sold, when must I pay the capital gain tax (if any)?
The law requires that the tax be paid on or before the 15th day of the next month from closing date.
It is important to mention that these answers are just a guide to have a better approach to the subject, but it cannot be taken as a legal or tax advice since there are many small issues to take into consideration. Therefore, it is always important to check with your attorney, accountant and/or tax advisor.