Apart from the fact that all normal due diligence steps must be taken prior to purchasing property, such as property title searches in the Costa Rica National Registry, inquires in the applicable Municipality regarding development and land use issues, and addressing the issues of escrowing funds with a third party where various permitting issues are pending for a developer/seller, etc.,

Canadians have a distinct tax advantage over their American cousins, in not having to declare their world income to Canada Customs and Revenue and pay taxes based on it, if they enjoy “non-resident tax status”.

Only income earned in Canada, such as Canada Pension Plan income, is taxable in Canada for those Canadians who enjoy this tax status. This issue is discussed in much greater detail in Revenue Canada Income Tax Folio S5-F1-C1, issued pursuant to the Canada Income Tax Act and Regulations, and may be found online at the Canada Revenue Agency website.

Clearly, the trick is to qualify for this particular non-resident tax status, which essentially means severing all business and professional connections with Canada, not having immediate family dependents in Canada, and not spending any greater time than a cumulative total of 182 days in Canada in any calendar year.

The Bulletin goes into much greater detail of the considerations which must be taken into account when one is considering a declaration of this tax status with Canada Customs and Revenue. It is also imperative to seek legal advice from a Canadian tax attorney when considering this tax status.

Having qualified for the non-resident tax status, purchasing property in Costa Rica then becomes a significant investment opportunity, in not having to pay any capital gains tax on the sale of the property to either Canada, or Costa Rica, where such a tax doesn’t apply to individual property sales (only multiple sales by developers in developments).

Income earned from a rental property in Costa Rica, would be taxable in Costa Rica, as would interest earned in a Costa Rican bank, but it would not be taxable in Canada, for those who enjoy this tax status.

In these troubled economic times in Canada and elsewhere, purchasing real estate in Costa Rica to live, or as an investment, is clearly an option worth exploring. Real estate may be owned by foreigners in Costa Rica, without acquiring any particular immigration status in the Country, other than visitor status.

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Written by Lic. Rick Philps. Richard (Rick) Philps is a Canadian citizen, naturalized as a citizen of Costa Rica. Rick practiced law in Canada as a member of the Law Society of British Columbia, for fourteen years, prior to moving to Costa Rica in 1998.

He the earned his Bachelor of Laws and Licensing Degrees (Civil Law) from the Metropolitana Castro Carazo University, and a Post-Graduate Degree in Notary and Registry Law, from the Escuela Libre de Derecho University, in San Jose, is a member of the Costa Rica College of Lawyers, and has practiced law in Costa Rica for six years. Rick practices law in the areas of real estate and development, corporate, commercial, contract, immigration, and banking.

To speak with Attorney Rick Philps and Attorney Roger Petersen about hiring them as your Costa Rica attorneys, please contact them using the information below:

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.