On the 5th July 2010 a new tool was completed which is to be used by all the 81 municipalities in Costa Rica to prevent property tax tax evasion and underpayment.

This tool is basically a sophisticated software platform which contains updated information on all the registered properties in Costa Rica, including aerial pictures, plot plans and the geological, social and economic characteristic of the properties.

The objective of this properties inventory is to set up a firewall and to screen all the information provided by the property owner.

How does it work?

Individual persons and corporation which own property in Costa Rica must pay their property taxes on a quarterly or annual basis. These taxes are based on the reported value, which is determined by the mandatory property tax return which must be filed every five years.

So, the software contains information such as area, location, the area of construction, utilities and of course, the value of the property according to the information which has been provided by the owner of the property. This information has a “sworn statement” value, which means that the Municipality accepts this information as fact and uses it to calculate your property taxes.

This is where many property owners under report the value of the property, often using quite ridiculous values not even close to the minimum value chart available at every Municipality, in effect evading the payment of property taxes.

Now, the system will automatically compare the owner’s information on the tax return versus the information in the municipality’s database, so immediately the clerk will make all the necessary adjustments in order to bring the reported value to a more accurate one if the reported value is under the data base value.

Is there any change on the filing or the payment?

The property tax return must be filed every 5 years as usual, and the payments made, at least, every quarter (March 31st, June 30th, September 30th and December 31st), although these payments can also be made on a yearly basis.

To rent or buy this one hour video with Costa Rica Tax Expert Randall Zamora, please visit our Video On Demand page here.

The new feature added to this new system is the payment method, since now every time that you want to pay the property taxes a form, not a return, must be filed with the necessary information so the clerk at the Municipality can double check that information and adjust the property value immediately, therefore the payment.

So if you don’t like paperwork – and who does – the smartest thing to do is to pay your taxes on a yearly basis so you only have to go through the additional paperwork once a year and keep in mind that is not only about paying taxes, you have to make sure that you are paying taxes properly.

The municipalities are always entitled to perform an appraisal. If the value of the property was not accurate or perhaps never even reported, with this new tool, the municipality will have an instant, complete and updated list of properties with no reported value, value under reported or pending property taxes, so they are now able to start a collections process and visit the property in order to perform their own appraisal.

And for sure they will use the highest value possible to try and get the best possible return, so it really is important that you do your homework, report a fair value otherwise if the municipality does do an appraisal that you disagree with, challenging that appraisal could waste 3 – 4 years in a lot of paperwork!

Written by Randall Zamora who is the President and CEO of CostaRicaABC.com, former CFO and Head of Accounting Department of multinational companies like Four Seasons Resort Costa Rica, active member of the Interamerican Accounting Association, Pro Bono Local Partner of The World Bank and contributor to their yearly publication “Doing Business Report.”

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Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.