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 Capital Gain Tax in Costa Rica

Capital gain is a crucial concept in the world of investments and real estate. In Costa Rica, as in many other countries, this gain is subject to taxes. But what does this really mean? How does it affect property owners and investors? In this article, we will explore in detail the capital gain tax in Costa Rica, focusing specifically on its application to real estate transactions.

 What is the Capital Gain Tax in Costa Rica?

The capital gain tax in Costa Rica applies to real estate transactions, including the sale and purchase of houses, apartments, lands, and offices. However, it is important to note that this tax only applies to properties that are not the primary residence of the owner. If you sell the house you currently reside in, this tax does not apply.

The tax is generated when a property is alienated, that is, when the property is transferred. This can occur through a direct sale or indirectly, such as through the endorsement of shares of a company that owns the property.

How and When Does the Capital Gain Tax Apply in Costa Rica?

To be subject to the capital gain tax in Costa Rica, you must calculate the difference between the acquisition or purchase value and the transmission or sale value of the property. It is essential to be able to demonstrate to the Tax Administration the acquisition value. This value is updated with the consumer price index calculated by the National Institute of Statistics and Censuses, in addition to adding the investments and improvements made to the property.

The law establishes that in cases of capital gains from the sale of the primary residence or other depreciable assets, the tax will not be applied if the seller demonstrates that the proceeds have been reinvested in acquiring another primary residence or similar depreciable asset within six months following the transfer.

If the first sale of a property occurs after July 1, 2019, there is the option to pay a 2.25% tax on the sale value. It is essential to consult with an advisor to determine the best option in specific cases.

When Does Capital Loss Occur?

Capital loss occurs when the value of the taxpayers’ assets decreases due to an alteration, such as selling a capital asset for less than its acquisition value. To determine if there is a capital loss or gain, the following formula is used:

V=real amount of acquisition value, investment, or improvements

D1,D2,D3,Dn=variation of the Consumer Price IndexD1,D2,D3,Dn=variation of the Consumer Price Index

How to Declare the Capital Gain Tax in Costa Rica?

The declaration and payment of the tax on capital gains when selling a property is an obligation that must be fulfilled by the seller. To do this, the form D-162 “Declaration of Capital Gains and Losses” must be used, available on the ATV portal of the Ministry of Finance.

 Capital Gain for Non-Residents in Costa Rica

When a non-resident generates a capital gain from the sale of an asset in Costa Rica, the buyer must withhold 2.25% of the sale price or apply a 15% rate on the gain, depending on the date of acquisition of the asset.

The capital gain tax in Costa Rica is an important aspect to consider for those involved in real estate transactions. Understanding how this tax works and how it affects different situations can help make more informed financial decisions and avoid possible penalties for tax non-compliance. Always remember to consult with a specialist for personalized advice in your particular case.

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