Owning property in Costa Rica does not involve just one tax. Instead, property ownership may trigger several different tax obligations at different times: some arise simply from owning the property, others only if the property is rented, and additional obligations may apply if the property is held through a corporation.
In our practice, most problems do not arise because tax rates are particularly high. They usually result from overlooked obligations: an expired property value declaration, a luxury home tax that was never filed, or rental income collected for years without proper registration with the Costa Rican Tax Administration.
When these issues eventually come to light—often when the property is sold, mortgaged, or used in connection with a residency application—the cost of correcting them can significantly exceed the original tax liability.
This guide explains the four main tax obligations property owners should understand.
1. Municipal Property Tax
Costa Rica’s municipal property tax is governed by Law No. 7509. It is collected by the municipality where the property is located, rather than by the Ministry of Finance.
- Rate: 0.25% per year on the property’s registered value with the municipality.
- Payment: Annually or quarterly, depending on the municipality. Some municipalities offer discounts for paying the full year in advance.
- Property value declaration: Property owners must declare the value of their property at least once every five years. This is not automatic. If the owner fails to file the declaration, the municipality may conduct its own official appraisal, which will generally result in a higher registered value than the owner might otherwise have declared. That value will then remain applicable for the following five years.
- Single-property exemption: Individuals who own only one property anywhere in Costa Rica may apply for an exemption when the property’s value does not exceed 45 base salaries. Based on the 2026 base salary of ₡462,200, the exemption threshold is ₡20,799,000. If the property’s value exceeds this amount, the tax applies only to the excess. The exemption is not automatic: it must be requested and properly documented.
Important point for foreign buyers: When a property is purchased, its registered value is often updated based on the transaction price. As a result, it is common for the municipal property tax bill to increase significantly in the year following the purchase. Buyers should factor this into their ownership costs from the time of closing.
2. Solidarity Tax (“Luxury Home Tax”)
Established under Law No. 8683, the Solidarity Tax is a national tax paid to the Costa Rican Tax Administration. It applies to residential properties—including vacation homes and properties used only occasionally—when the value of the construction exceeds the applicable exemption threshold.
- 2026 threshold: The tax applies when the value of the construction and fixed and permanent installations exceeds ₡143 million. The value of the land is not considered when determining whether the property is subject to the tax.
- Taxable base: Once the construction exceeds the threshold, however, the tax is calculated on the total value of the property: construction plus land. This is one of the most common areas of confusion. Many owners assume that only the house is taxed, or that a high land value somehow excludes them from the tax. Neither assumption is correct.
- Rate: Progressive, beginning at 0.25% for the first taxable bracket and increasing to 0.55% for the highest brackets.
- Tax return: The declaration must be filed every three years using Form D-174 through the TRIBU-CR Virtual Office (previously Form D-179 through ATV). During the intervening years, no new declaration is required, but the tax must still be paid annually.
- Deadline: January 15 of each year to file the declaration, when applicable, and pay the tax without penalties or interest.
- Owners required to file outside the regular three-year cycle: This includes taxpayers who acquire a residential property, complete a new construction, or make improvements that increase the property’s value above the exemption threshold.
Penalties: Failure to file the required declaration may result in a penalty equal to 50% of one base salary. This penalty may be reduced when the taxpayer voluntarily corrects the omission before the Tax Administration initiates enforcement action. Interest may also apply. For properties acquired several years ago where the required filings were never made, the accumulated exposure can become significant.
3. If the Property Is Rented: Real Estate Capital Income Tax
Rental income triggers a separate tax obligation in addition to the taxes described above.
- Rate: 15% on the taxable base, which is equal to 85% of gross rental income. The law provides an automatic 15% deduction for expenses without requiring supporting documentation. The effective tax rate is therefore 12.75% of gross rental income.
- Example: For monthly rent of ₡500,000, the taxable base is ₡425,000 and the monthly tax is ₡63,750.
- Tax return: Filed monthly, within the first 15 calendar days of the following month, using Form 116 for individuals, Form 117 for legal entities, or Form 118 for public entities through TRIBU-CR.
- Alternative tax regime: A taxpayer with at least one employee registered with the Costa Rican Social Security Administration (CCSS) may elect to pay tax under the ordinary corporate or individual income tax regime (Forms 101–103), allowing the deduction of actual business expenses. This election is binding for at least five years, so the financial impact should be carefully evaluated before making the election.
For non-resident property owners, the general principle remains the same: rental income generated by property located in Costa Rica is Costa Rican-source income and is taxable in Costa Rica, regardless of where the owner resides or where the rental payments are received.
4. If the Property Is Rented: Value Added Tax (VAT)
Renting property may also constitute a service subject to Costa Rica’s Value Added Tax (VAT).
- Residential property: Residential rent is exempt when the monthly rent does not exceed 1.5 base salaries, or ₡693,300 in 2026. If the rent exceeds this threshold, 13% VAT applies to the entire rental amount, not merely the portion exceeding the threshold.
- Commercial property: The rental of commercial premises, offices, and warehouses is subject to 13% VAT regardless of the rental amount.
- Formal obligations: Depending on the applicable tax treatment, landlords may be required to register with the Tax Administration, issue electronic invoices, and file Form 150 monthly, including in months when no VAT is payable or when the rental agreements are exempt.
Warning: The Tax Administration may scrutinize arrangements that artificially split a rental agreement or divide the payment into separate concepts such as “rent” and “maintenance fees” solely to remain below the exemption threshold. Structures that lack a genuine economic basis can result in reassessments, interest, and penalties.
Additional Consideration: Property Owned Through a Corporation
If the property is held through a Costa Rican corporation—a structure commonly used by foreign property owners—the Annual Corporate Tax (Impuesto a las Personas Jurídicas) must also be considered. The tax is due by January 31 each year.
The applicable amounts for 2026 are:
| Corporate Status | 2026 Amount |
|---|---|
| Inactive corporation | ₡69,330 |
| Active corporation with gross income below 120 base salaries | ₡115,550 |
| Active corporation with gross income between 120 and 280 base salaries | ₡138,660 |
| Active corporation with gross income above 280 base salaries | ₡231,100 |
Failure to pay the corporate tax for three consecutive periods may result in the administrative dissolution of the corporation by the National Registry. In addition, while the corporation remains delinquent, the National Registry may refuse to register documents in its favor.
A dissolved corporation that still owns real estate can turn what should have been a straightforward property sale into a significantly more complicated liquidation and legal process.
Property Owner’s Tax Calendar
| Date | Obligation |
|---|---|
| January 15 | Solidarity Tax: annual payment and declaration when applicable |
| January 31 | Annual Corporate Tax |
| Quarterly / annually | Municipal Property Tax |
| First 15 days of each month | Real Estate Capital Income Tax and VAT for the previous month |
| Every 5 years | Property value declaration before the municipality |
| Every 3 years | Solidarity Tax declaration |
Five Mistakes That Can Become Expensive
- Assuming municipal property tax is the only tax. It is only one of several potential obligations.
- Believing the Solidarity Tax applies only to mansions. With a 2026 construction-value threshold of ₡143 million, many beach homes, vacation properties, and higher-end condominiums may fall within its scope without the owner realizing it.
- Allowing the property value declaration to expire. An official municipal appraisal can result in a substantially higher registered value.
- Renting property without properly registering and reporting the activity. This is particularly relevant for short-term vacation rentals, where rental platforms and electronic payments create a clear transactional record.
- Discovering tax problems during the closing process. Correcting years of noncompliance under the pressure of a pending sale is usually more expensive and can weaken the seller’s negotiating position.
How We Approach Property Tax Compliance at MAGMA Legal
A property tax review can identify potential issues before they become expensive problems. At MAGMA Legal, we review the property’s registered municipal value and the status of its municipal declaration, determine whether the property may be subject to the Solidarity Tax and review its filing status, evaluate the ownership structure, and, when the property generates rental income, assess the applicable income tax and VAT obligations.
If you own property in Costa Rica and are unsure whether your tax obligations are up to date—or if you are considering purchasing property and want to understand the true cost of ownership before closing—contact us at +50689204859 or schedule a consultation at magmalegal.cr.