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A.M. Costa Rica

Public Service Page
to help readers with the luxury tax filing
posted Nov. 2, 2009
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Costa Rican property owners need to know about the new law

One of the principal priorities of A.M. Costa Rica is to protect foreigners and their property here.

We oppose editorially the new luxury tax law, but even more troubling is the way the Dirección General de Tributación (the tax collectors) have failed to explain the measure to the public.

Expats who cannot read legal mumbo jumbo in Spanish and property owners who are in Costa Rica part-time are very vulnerable.

The measure has been described as a luxury home tax, but the tax begins with homes worth about $172,000. This is hardly a luxury home by expat standards. Condos are covered, too, even if they are used just a few times a year.

If you fail to register for the tax or if your registration does not follow the very complex Tributación guidelines, you can face massive fines.

The first set of paperwork has to be presented by Dec. 31. It is unlikely that anyone can do this without professional help. And we don't mean some lawyer. Most lawyers and accountants have no clue either.

We are not promoting anyone. If they advertise with us, they most likely are legitimate professionals. We reject one out of every six ads. But real estate brokers and other professionals
 with whom you have done business in the past must have some
contacts. Evaluate them carefully because what Tributación has created makes the U.S. tax code look like a primary school reader.

Be prepared to pay money.  Our sources say that a reasonable fee would be a bit more than $1,000.

We think it is outrageous that the central government has imposed this work on the citizens. We hope that the law is frozen by the constitutional court. But if it is not, property owners face confiscatory fines.

If you fail to register your property and the tax should be about $1,000, Tributación can assess fines up to 10 times the unpaid tax. That's a $10,000 fine, plus you still have to pay the tax.

So please read what we have written and will write. Our interest is in protecting our readers and foreign property owners and expats here.

Don't call us with technical questions. Many of the correct answers are still in the minds of public employees. Do send us e-mails with questions, and we will do the best to answer them in the pages of A.M. Costa Rica:

Good luck

Jay Brodell
editor of A.M. Costa Rica

Read about the tax

Expats likely to be blindsided by new 'luxury home' tax

Most expats who own what the government categorizes as a luxury home probably are unaware that they are subject to a special tax Jan. 1. Published Oct. 12.

Tributación tries to reduce land value to a math formula

Someone stayed up nights exerting gigantic effort to make the new luxury tax law as complex as possible. Published Oct. 12.

Here's 20 questions about the tax on luxury homes

A news story Monday about the tax on luxury homes that went into effect Oct. 1 has generated lots of questions. Not all of them are answered easily. Here are 20. Published Oct. 13.

Editorial: Sala IV should ashcan unfair 'luxury home tax'

The Sala IV, when asked, should void the luxury home tax because it is unfair. Published Oct. 28.

Luxury home tax may influence political campaign

Foreign owners of property here and Costa Ricans are just waking up to the fact that the luxury home tax will take a bite out of their wallet this Christmas season. Published Oct. 19

Luxury home tax fine can be 10 times the tax

Foreign nationals should be especially careful about the new luxury home tax (casa de lujo in Spanish) because Tico attorneys and accountants have expressed confusion about how this new law affects owners.  The penalty for not filing is 10 times the tax and five times the tax if the declaration is not within 10 percent of what the Hacienda determines. Published Nov. 2.

Sharp buyers will consider tax when making offer

What is hard to determine now is the effect Costa Rica's new luxury tax law will have on real estate values. Published Nov. 2.

Can a mere mortal evaluate a dwellling?

Can a normal human compute the new tax on so-called luxury homes? Editors asked Dennis Rogers, a fluent Spanish speaker and frequent contributer, to try to do it. He's also pretty smart. This is his report. Published Nov. 25.

A reader argues luxury tax is unconstituional

Most laws passed in Costa Rica are eventually challenged in the supreme court and ruled unconstitutional.  I would hope that this will happen in the case of the Costa Rica luxury tax on homes. Published Dec. 9.
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