Capital Gains Tax Costa Rica
Many people buy vacation property in countries around the world, but are in for a rude awakening when having to pay capital gains taxes. Costa Rica works a bit differently than in other countries. For example, in the USA, you must pay capital gains tax if your real estate investments appreciate in value. These profits must be taxed as they appreciate or when you sell the property. These taxes are one of the downsides to purchasing property for investment.
In Costa Rica, most banking account investments and real estate investments are not subject to a capital gains tax, even when interest is earned, or a property increases in value. This opens up many financial opportunities to the foreign investor wishing to make a move to this country.
These rules are applicable to individuals. Where capital gains taxes may be required is for certain types of business investments. Businesses normally pay taxes. In order for taxes to be exempt, the business must be participating in a business activity that is separate, or different from their regular business operations. If your business is solely real estate investments, then those profits are taxable.
For an individual buying property, it’s considered a personal capital gains environment. It’s considered that this individual has no intention of making a profit, as there is no business registered. Thus, the individual is exempt from capital gains taxes.
These tax rules make Costa Rica an attractive place for foreign investors to move to. In fact, there is plenty of foreign investment in the country.
If you’re planning on moving to Costa Rica and planning on buying a property or two for investment, there won’t be any capital gains taxes. But once you start building up your portfolio, you may need to consult an expert on whether your new investments will be subject to capital gains tax or not. Your real estate broker will be able to advise you as to whether your new property purchases will be considered as part of a business or not.
Your real estate agent can review purchase documents for your potential investments, to ensure that your new property is not taxable.
Many people also consider moving their investments to a new Costa Rican bank account, in order to take advantage of the country’s tax saving benefits.
Another great aspect to living in Costa Rica is that property taxes are also low, they are only 0.25% of the property value. This makes purchasing property in Costa Rica doubly beneficial to individuals and families looking for a home away from home. Playa Dominical, Uvita, and Manuel Antonio are popular residential locations for foreigners along the southern Pacific coast.
There are many investment opportunities in Playa Dominical and Costa Rica that are attractive to the foreign investor who wants a secondary way of making some extra cash, or who wishes to have a vacation home. Before embarking on real estate investment activities, consult with your real estate broker to ensure that properties are free of capital gains taxes.