The “Solidarity Tax” (also known as “Tax on luxury houses”) was formally established in Costa Rica, through law no. 8683 on November 19th, 2008. Such tax falls back onto the value of the properties that are destined for housing purposes, whether the properties are regularly used, occasionally or just for recreation purposes. Such tax is intended to finance and/or provide dignified homes to population in condition of extreme poverty.

How do you qualify?

Aforementioned, the tax is paid over the construction’s (including principal and secondary construction such like pools, warehouses, garages and such) and land’s value, just in case the construction’s value itself is superior to the value established by the law cited above. As of 2022, the tax applied starting on a construction value of ₡133,000,000 (one hundred thirty-three million colones), approximately US$207,600. Such tax involves the filling of a mandatory declaration every three (3) years and the act of submitting before the Costa Rican Internal Revenue. Even though you have to file a declaration every three years, the tax has to be paid annually.

In other words: if the construction’s value is superior to the limit mentioned above, then the taxpayer has to add the land’s value, to calculate the final taxable amount for this luxury tax.

Property value

The value to take into account, is the one that is currently recorded before the corresponding municipality. If that recorded value is below the threshold, such property is not subject to this tax. The value of a property must be updated with the corresponding Municipality, depending on where the property is located, every five (5) years through a form that every homeowner has to fill out, as is established in article 16 of the Tax Property Law number 7509 “Declarations of real estate. The tax-payers of real estate shall declare, at least every five years, the value of their property to the Municipality where it is located. The declared value shall be taken as the basis for the real estate tax, (this is a different tax, is has to be paid annually to the Municipality) if it is not corrected within the fiscal period following the filing of the declaration“.

In this form, the Municipality will require specific information about the property, such as the materials the house is made of, and will also request if there are any additional features such as pools or BBQ ranch, or any other infrastructures that should be included in the construction value.

Therefore, the procedure of making the real estate declaration is important because besides representing the amount that will be taken into account for the collection of the property tax, it will also be the amount from which we can justify to the Ministry of Finance that our property is not subject to this luxury tax. Or in the opposite case, the amount on which the total to be paid for this tax, is calculated.

In case of

Now, what happens if for any reason you did not file a real estate declaration before the Municipality? The Municipality will take as base, the value that is in the Public Registry of the Property. This will be known as the fiscal value. This happens when a property is purchased, because it is the value that is recorded before the Public Registry and often considered market value and usually does not reflect the real value of the property.

Finally, if you want to make sure you are doing the declaration right and avoid any possible concerns, the recommendation is to have an home inspection done by an accredited engineer who can professionally determine the real value of the property. If the house is still of high value and you have no other option but to pay the tax, we will provide you with the necessary assistance so that you do not have to worry about fines, long processes and long-term headaches.

In Outlier Legal, we are happy to help you meet your tax obligations and can handle the payments of your property taxes for you should you need. Please reach out to our Real Estate team for more help.