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Municipal Taxes in Costa Rica for Properties:

Municipal taxes in Costa Rica play an essential role in financing public services, improving infrastructure and promoting economic and social development. This knowledge is crucial before considering real estate investments in the country.

Real Estate Tax (IBI):

The IBI, one of the most prominent municipal taxes in Costa Rica, taxes the ownership of real estate such as land, residences and commercial premises. The tax rate, determined by each municipality, varies depending on the cadastral value and location. The revenue generated goes towards local services such as trash collection and street and park maintenance.

Meeting these tax obligations not only ensures efficient local services, but also preserves and increases property values, creating an environment conducive to long-term investments.

How is the IBI amount calculated?

The law states that properties must be revalued every five years. After submitting a sworn declaration to the Municipality, it calculates the value based on variables such as meters of frontage, location and total area, among others.

How are municipal taxes paid in Costa Rica?

When property taxes are due, property owners must contact the City and provide the property number and owner information. In case of change of ownership, supporting documents will be required before payment. Land taxes are paid quarterly, but annual prepayment is recommended to take advantage of discounts.

Third party use is viable, especially for those outside of Costa Rica or with language barriers. Hiring an experienced third party facilitates compliance with tax obligations, allowing effective payment without physical presence.

The specific formula for calculating municipal taxes in Costa Rica may vary depending on the municipality and the type of tax in question. However, I can give you an overview of how some taxes are calculated, such as the Real Estate Tax (IBI), which is one of the most relevant municipal taxes in the country.

General IBI formula:

The basic formula for calculating the Real Estate Tax (IBI) in Costa Rica generally involves the property’s cadastral value, the tax rate established by the municipality, and possibly other factors specific to each jurisdiction. The general equation would be:

IBI Amount=Catastral Value×Tax Rate

The cadastral value is an official valuation of the property determined by the Municipality, and the tax rate is the percentage set by the same entity. These values may vary depending on the location and specific characteristics of the property.

Additional considerations:

  1. Periodic revaluation: The law establishes that properties must be revalued every five years, which can influence the cadastral value and, therefore, the amount of the IBI.
  2. Affidavit: Owners must submit an affidavit to the Municipality, providing detailed information about the property. This information can influence the valuation and, therefore, the calculation of the tax.

It is essential to keep in mind that these are generalizations and the exact details may vary by municipality and type of tax. I would recommend consulting directly with the corresponding Municipality or a tax professional in Costa Rica to obtain precise information on the specific formula that applies in your area.

Other Municipal Taxes in Costa Rica:

In addition to the IBI, there are other municipal taxes and fees, such as corporate taxes, municipal patents, taxes on public entertainment and fees for municipal services. It is crucial to verify the applicability of these taxes to ensure effective compliance.

Failure to comply with tax duties may give rise to a judicial collection process by the Municipality. Properly starting the tax processes when acquiring a property is essential. Payment processes vary between municipalities, so it is recommended to obtain exhaustive information and clarify doubts with the corresponding local authorities.

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