Selling property in Costa Rica involves various costs and considerations, and understanding the financial implications is crucial for a smooth and successful transaction.
From commission fees to capital gains taxes and closing costs, here’s a detailed overview of the expenses associated with selling your property in the tropical paradise.
1. Commission Fees:
- Real estate commission fees typically amount to 6% of the property’s selling price. While negotiation is possible, reputable agents often adhere to this standard rate. Additionally, a Value Added Tax (VAT) of 13% is applied to the commission amount. It’s important to factor in these costs when determining the overall expenses associated with selling your property.
2. Capital Gains Taxes:
- Capital gains taxes in Costa Rica vary based on specific criteria related to the property and its usage:
- Primary Residence for at Least 183 Days:
- If your property serves as your primary residence for at least 183 days per year and doesn’t generate rental income, you are exempt from capital gains taxes.
- Primary Residence for Less Than 183 Days (Purchased Before July 1, 2019):
- Two options: a flat 2.25% of the selling price or 15% of the selling price less the purchase price plus improvements.
- Primary Residence for Less Than 183 Days (Purchased After July 1, 2019):
- Capital gains tax is 15% of the sales price less the purchase price plus improvements.
- Rental Income (Considered an Active Corporation):
- Similar rules apply, and the cost basis can be intricate. Seeking advice from an Attorney and Accountant is recommended.
- Primary Residence for at Least 183 Days:
- Note: Improvements, including furniture and appliances, should be documented with receipts, as they factor into the capital gains calculation.
3. Closing Costs:
- Closing costs encompass several components, including property transfer taxes, attorney fees, VAT on attorney fees (13%), and escrow company fees. The allocation of these costs depends on the buyer’s offer:
- Seller’s Responsibility: In certain scenarios, the seller may bear 50% of the 4.4% closing costs. This is typically shared between buyer and seller for a full-price offer, with the buyer covering 100% for less than a full-price offer.
- Corporate Property Closure: If the property is held in a corporation and the seller is leaving the country, closing the corporation may cost approximately $1,000.
Example Calculations for a Primary Residence (Purchased Before July 1, 2019):
Selling Price: $500,000 USD
- Commission (6%): $30,000
- VAT on Commission (13%): $3,900
- Half of Closing Costs (2.2%): $11,000
- Close Corporation: $1,000
- Total Fees: $45,900
- Net Proceeds: $454,100
Selling Price: $300,000 USD
- Commission (6%): $18,000
- VAT on Commission (13%): $2,340
- Half of Closing Costs (2.2%): $6,600
- Close Corporation: $1,000
- Total Fees: $27,940
- Net Proceeds: $272,060
Understanding these costs allows sellers to make informed decisions, navigate negotiations effectively, and ensure a transparent and successful property sale in Costa Rica. Consulting with experienced real estate professionals, attorneys, and accountants can provide valuable insights tailored to your specific circumstances.