Costa Rica Real Estate Legal path for homes for sale
Are you dreaming of a new life in a tropical paradise to invest in? Welcome to Costa Rica, a beautiful country with a lot to offer expat investors.
Imagine waking up to the sound of waves crashing on the shores of a beautiful beach or enjoying your morning coffee on your ocean-view balcony. Now, wake up! let’s talk about the legal considerations in reality.
Exploring Costa Rica’s Real Estate Options
This market is a tapestry of possibilities, offering real estate listings of homes for all tastes, from a warm house for your rest to a luxurious ocean view villa for a 5-star vacation, but “not all that glitters is gold”; you should seek advice from a recognized and solid firm as AG Legal, do not rely only on a Real Estate agency that could be composed of foreigners or Costa Ricans without a license, explore the featured properties for owning a dream home in Costa Rica, but take precautions to avoid turning your dream into a nightmare.
Real Estate Investment Prospects:
Tamarindo, Liberia, Jaco, Uvita, Dominical, Matapalo, Samara, Santa Teresa, Flamingo, Arenal, and Nosara.
The Costa Rican real estate market is booming, and prices are steadily increasing. However, there are still several affordable properties available, especially in rural areas. The most popular and expensive areas for expats include San José, the capital, and the beach towns of Guanacaste, Puntarenas, and Alajuela like Tamarindo, Liberia, Jaco, Matapalo, Uvita, Dominical, Manuel Antonio, Samara, Santa Teresa, Flamingo, Arenal, and Nosara.
Doing business in Costa Rica is very possible and open to US, Canadian and European citizens; very tolerable if you have a legal team dedicated to your needs and deadlines to complete your investment project or move to Costa Rica.
Steps to buy safely and correctly.
The first mistake you should not make is to be rushed; try not to let the real estate agents put too much pressure on you to close a sale; as a foreigner, they can see you as a sales commission. Understanding the legal landscape of property in Costa Rica is essential; there are many properties for sale and investment opportunities, with conditions that must be previously reviewed, such as the complexities of the land, construction, institutional permits, complete review of property taxes, title transfers, safe ways to transfer purchase money, neighborhood where it is located, construction plans, swimming pool permits and legality of the person signing the transfer.
Some of the real estate agents in Costa Rica are unaware of everything, and they generate work for us Lawyers later.
Learn about the process from a legal practice perspective:
- Request your visa to enter the country; if you are a US or Canadian citizen, you do not need a visa. if you are from another country, have a look at our publication in this regard CLICK HERE
- Meet with your lawyer to start collecting the requirements to apply for a residence in the country. there are several types, but if you are determined to buy a property, the residence that best fits your profile is the investor residence, the government of Costa Rica has implemented a new law with benefits to attract foreigners to the country, and the ideal is that while deciding to buy your property, you also collect the official documents required to upload the residency application.
- Visit the property with a legal team; the experience of attorneys goes beyond the normal vision of a person who is enthusiastic about a beautiful property; therefore, due diligence is started to verify that this property is optimal and not a fraud, in Costa Rica there are many good people, but there are also those who seek to take advantage of foreigners. Your lawyer will check if the property is subject to a lease. This may be a problem, depending on the legal term the tenant has left.
- Make a purchase option contract drawn up by your lawyer; this is a contract of commitment to sell the property in exchange, usually for an advance of money. This contract protects the purchase against impossibilities that arise along the way to the property purchase.
- If, in the said period, you need to leave Costa Rica, you can grant a power of attorney to your lawyer or anybody else to take care of the purchase process; likewise, it is recommended that the money destined for the purchase be managed by a “trust” or “escrow” and once everything has been reviewed and you have the approval of your legal representative, authorize your payment to the seller, so your money will be safe. AG Legal, due to its experience, has a “Trust” company registered with the Costa Rican Regulatory Authority for these procedures, a client facility.
- Once the property is purchased, your residency application will be completed, and you can begin your new life in Costa Rica with peace of mind.
Costa Rica Tax Implications:
There are taxes involved in purchasing real estate which you need to know about:
Property transfer tax: This is 1.5% of the value of the transaction.
Legal fees: These are usually between 1-2% of the property’s sale value.
Government Fees: They are mandatory for the effective registration as a new owner in the National Registry of Costa Rica, it provides legal security as an owner, and these are paid at the same time as the property transfer tax, normally.
Capital gains tax: This tax is equal to 15% of the gain on the sale of the property. The first time the property is sold, you can choose between paying 2.25% of the property’s value transaction or 15% on the gain. All subsequent sales will pay 15% of the gain. This tax does not apply if you sell your primary residence.
Taxes on rentals: 13% VAT applies to rentals for more than 1.5 monthly basic salary (approx. 680,000 colones). Applies to the total amount paid monthly.
Commercial rentals: 13% VAT applies to the entire rental amount, with no exceptions. Small and medium-sized companies can have a different VAT treatment if they are registered before the MEIC.
Property transfer tax: This is 1.5% of the value of the transaction or the value registered, whatever is the higher.
Legal fees: These are usually between 1-2% of the property’s sale value.
Never miss the tax of a luxury home!
The Costa Rican government has created a tax law on luxury homes; for the year 2023, the owners of properties with a value greater than one hundred and forty-eight million colones (¢148,000,000.00) will be obliged to make the payment of this solidarity tax, which is described below:
RATE STEP TO APPLY
Up to ¢371,000,000.00 0.25%
On the excess of ¢371,000,000.00 and up to ¢744,000,000.00 0.30%
On the excess of ¢744,000,000.00 and up to ¢1,116,000,000.00 0.35%
On the excess of ¢1,116,000,000.00 and up to ¢1,490,000,000.00 0.40%
On the excess of ¢1,490,000,000.00 and up to ¢1,859,000,000.00 0.45%
On the excess of ¢1,859,000,000.00 and up to ¢2,333,000,000.00 0.50%
On the excess of ¢2,233,000,000.00 0.55%
Almost all dream homes in Costa Rica with pools and luxury structures, especially in the capital and Guanacaste province, must pay this solidarity luxury tax.
Buying Property in Costa Rica – Customs:
The buyer of the property can choose the notary of his choice for the purchase. However, he pays 100% of the notary fees.
Even though the rule is upon agreement by both parties, usually, the buyer pays all expenses and transfers taxes.
The seller must help in the due diligence to obtain the correct information, the identification number of the property, the cadastre plan, proof of being up to date with the payment of public services, being up to date with municipal taxes, building permits in order and last information in case the property is mortgaged before a financial entity in Costa Rica. The seller assumes payment to real estate agents (realtors) in Costa Rica.
The term for the eviction of the property is agreed between the parties. ¡Be careful if there are tenants!
Questions about Costa Rica real estate
How much does it cost to get a real estate license in Costa Rica?
In Costa Rica, there is a Costa Rican Chamber of Real Estate Brokers, which offers official courses to approve your incorporation as an Associate. The Government of Costa Rica passed a law that requires all real estate agents and property managers to be registered with SUGEF. SUGEF authority oversees all banking, investment, and monetary transactions. For example, escrow agents and trust companies are registered with SUGEF. So, the cost is not that high, but it requires time and formalities before the authorities.
How much do real estate agents cost in Costa Rica?
Most listing brokers in Costa Rica charge a commission of 5% to 8% on successful sales transactions; they also charge a residential rental commission equivalent to 1 month + VAT, a commercial/industrial rental commission of 5% of the total value + VAT, vacation rental of 15-25% of the value + VAT.
Can a US citizen buy a property in Costa Rica?
Yes, a US citizen can buy property in Costa Rica. The Costa Rican constitution grants the same property rights to foreigners as it does to Costa Rican citizens; as long as you pay attention to the step-by-step that we gave you previously, any foreigner can buy properties in Costa Rica.
Is it worth buying property in Costa Rica?
Yes, it is worth the risk to invest in Costa Rica if you do it with legal advice; this is the only way to enjoy tax incentives linked to the laws applicable to foreigners, and you will not be subject to fraud or overvalued sale, if you try to buy property as a foreigner without help you are likely to acquire a problem.
For example, residency investors may qualify for credits and benefits such as reduced rental income taxes, capped capital gains taxes, and estate and transfer tax exemptions.
Where is the cheapest place to live in Costa Rica?
The cheapest places to live in Costa Rica are in the provinces of Cartago and Limón, where you will find less touristy towns and where real estate is much cheaper than in other places where foreigners usually choose to retire. Other cheap places to live and buy land are San Ramon, Grecia, Nicoya peninsula, San Isidro, and Atenas.
What is the average price of a house in Costa Rica?
The price can vary depending on the location, house size, and amenities. For example, a three-bedroom house at Hermosa in the Central Pacific region might be $190,000, a house in Cartago in the Central Valley might be $150,000, and your next beach home in Playa Flamingo might be $350,000. Though these prices are just an idea, you need to be advised by a good realtor, who can lead you to what you are looking for. you can find wonderful properties that are for sale in Costa Rica.
What is a residency for investors in Costa Rica?
You may qualify for temporary residency as an investor in Costa Rica if you or your spouse are willing to invest USD 150,000 in a business or real estate properties in Costa Rica, or USD 100,000 in a forestry project.
Under this category, the principal applicant may receive residency for a spouse and children as dependents and is valid for 2 years.
It can be renewed for another 2 years if you keep the project you invested in (business, property, etc).
After 3 years of holding temporary residency, you will become eligible for permanent residency.
Amenities and features that Costa Rica offers
Without a doubt, you can generate a great business in the world of real estate; you can sell and buy in this tropical paradise, from luxurious beachfront villas to cozy condos tucked away in gated communities throughout Costa Rica, offers a diverse range of properties that cater to every taste, you can find a from luxurious beachfront villas to cozy condos tucked away in gated communities, vacation home, apartments for sale, single family homes for sale, luxurious houses or find commercial real estate properties.
Navigating this market is made easier with Costa Rica’s diverse listings, and we at AG Legal can help you find your dream property in the best of Costa Rica.
Your Real Estate and Immigration Allies
With our assistance, you’ll unlock the full potential of Costa Rican real estate and business prospects; visit our offices located in the best part of downtown San José, Barrio Escalante. You’ll love talking about listing in Costa Rica and having lunch in one of the delicious restaurants surrounding our office.
Your Costa Rican dream starts here.
