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Call me nuts, but I like to sleep at night, knowing that my taxes are paid and I am complying with local laws. In Costa Rica, many people say, ‘Yep you are nuts’.
Humor my insanity for a moment though. Are there any other lunatics out there with experience of paying the luxury property tax?
If so, I have the following questions:
1. How do you value your property?
Does the value include land, walls etc or just the building?
2. A local accountant suggested that I hire a specialist firm to appraise the current value. Does anyone really do this or is there a simple building value you can use per square foot?
3. How do you report the value to the authorities?Last year, at about this time, was the first time the luxury property tax was in effect. On this website, an attorney pulled together and posted detailed instructions for performing your own analysis to determine if the tax applied to you. There were a number of links to government websites where you could look up essential information.
So far this year, I’ve heard nothing more about it.
The procedure the attorney outlined according to the law took into account everything that applies to the value of the property. The government published a value per square meter for every minuscule political subdivision in the country. That was where the fun began. Then you had to compute the size of each structure, determine its characteristics and features, add in for things like retaining walls, security bars, and (maybe) landscaping, deduct for appreciation, and on and on. I suspect the process would have daunted a corporate tax department. And when it was all done, I still had questions.
Our home was not subject to the tax, but I felt like having paid for the directions and having gone through the misery, at least I ought to show good faith and submit the findings. Only there was no place to send them! I finally found a fax number for the Ministry of Hacienda and sent it there. And never heard a word.
At one point, if you had a citizen’s cedula number, you could file your report online and give the government the right to debit your bank account for the tax due. That went over like a tunnel and was soon rescinded, but the rest remains in place.
It seems like some 1,700 or so declarations were submitted last year out of an estimated 10,000 or so homes that were thought to qualify. This year, the one mention has been that compliance is much, much lower.
Were it mine to do, I’d play dumb and let ’em come and get me. I’m not going through all that again.
I’m fortunate in that I do need to “play” dumb…
Hee! Hee!
So far I ‘forgot’ to pay for the corporation tax (for about a dozen corporations) and although my apartment really should fall within luxury tax category, I have 30+ neighbours in my building (including the former president of the Banco Central de Costa Rica) who would probably lynch me if I did pay the luxury tax…
And apart from numerous tax officials who have been caught NOT paying the correct amount of property and income taxes, you saw that the President’s husband had a car accident a week or so ago and it was discovered that he had been driving for years with an expired licence?
Scott
To answer your questions regarding the payment of the Luxury Home Tax, due January 15th of each year, is as follows:
You should have an Architect, or Engineer complete the property evaluation Form D-179 found on the Ministry of Hacienda’s web site. This provides for an evaluation of the improvements (structures) on the property initially. If the value of the improvements is less than 100,000,000 colones (approx. $200,000.00 U.S. at current exchange rates), the Luxury Tax does not apply. However, if the value of the improvements on the property equals, or exceeds 100,000,000 colones, the Tax applies to a combined evaluation of both improvements and the property value, on a sliding scale, starting at .25% of the combined improvements/property value per year. The Tax is payable to the Ministry of Hacienda.
Note from Scott: ‘WatchDog’ is the username for my friend and attorney Richard (Rick) Philps who 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. Mr. Philps the earned his Bachelor of Laws and Licensing Degrees (Civil Law), 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 practices law in Costa Rica in the areas of real estate and development, corporate, commercial, contract, immigration, and banking with the Law Firm of Petersen & Philps.
To speak with Attorney Rick Philps or Attorney Roger Petersen about hiring them as your Costa Rica attorneys, please contact them using the information below:
Lic. Rick Philps and Lic. Roger A. Petersen – Attorneys at Law, San Jose, Costa Rica Tel: 506-2288-4381, Ext. 102; Email: rpetersen@plawcr.com Email: rphilps@plawcr.com Website: http://www.plawcr.com or http://www.costaricalaw.com
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