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grb, if you are being told that you will get a 40-50% increase a year, you are being lied to, big time. I do think it’s a great time to buy, and the real estate market in CR is cyclical, like anywhere else. But you are not going to make bank anytime soon these days, at least until the credit crisis is eased. People come to CR, mostly from the states and Canada, and understandably fall in love and buy a dream property with disposable income that they have immediately available. (I know, I know, people buy from everywhere in the world, europe, latin america, etc. and financing is possible – please don’t kill me.) The feedback that I am getting from real estate agents (that I know personally) is that things have slowed down like they have never seen before. Some who were making a killing have told me that they haven’t sold anything in many months. Everyone says that things have stabilized but my view is that is because no one is selling. People that can afford to invest in Costa Rica usually don’t need to sell and can hold on to the properties indefinitely – this is a double edged sword – I think it maintains prices but also makes it harder to sell. One major reason for all of this is that it is still near impossible for foreigners to (practically and logistically) finance a purchase – making it necessary for buyers to have all the money at hand at purchase. I’m not trying to be a d!ck. These are just my honest views and in the states if you can’t sell for 6 months you cut the listing price by 20% until you can, like what is happening now. I have owned a couple properties over the past 5 years, gated communities and land, and have made good money so I am one of the last people to dis the CR real estate market. But I have had alot of trouble selling lately and wanted to relay my experiences (over the past year). When I made money when the market was good, I made around 15-20% a year. good not great considering the relative risk level. i don’t live there even close to full time and so of course have been at a disadvantage. It still is a great investment though. I think I am was just venting because it always amazes me that not everyone in the world is as head over heels in love with Costa Rica as myself cause you are not going to find a better place to retire, live or vacation in my view, and because if they would buy my darn properties I could finally retire there myself and live the good life.
Thank you Scott and guru. Scott, this website and your book is by far the best source of information on Costa Rica that is out there.
So I guess that this means that buying and selling real estate through an S.A. or some variation thereof does not help. I have been told (by dubious sources) that since an offshore corporation is domiciled outside of the U.S., it does not have an obligation to pay taxes upon the sale of its Shares, as an individual owner would. Is there any truth to this?
From some research elsewhere (on the internet), I have learned that you are obligated to file a Form 5471 with the IRS for every year that you own a foreign corporation (basically just indicates ownership) or else be subject to a 10,000 dollar penalty. I have read that if you have failed to do so, you may be able to avoid the penalty by filing and explaining the “reasonable cause” for not doing so in the past.
In any event, I would be hesitant to not report capital gains to the IRS because when you receive funds from sale (over 10,000) and the proceeds of the sale are transferred to your US bank account, the banks are required under U.S. Bank Secrecy Laws to report that transaction to the IRS. A large deposit might send a red flag to the IRS to take a closer look. Also, if you attempt to use your corporation for fraudulent purposes, you are asking for big trouble, which begs the question of whether using the corporation to not pay capital gains is a fraudulent purpose.
If you attempt to have the proceeds from sale deposited in a Costa Rican Bank, you still might have problems because Costa Rica’s Bank Secrecy laws are not foolproof and Costa Rica has been far more cooperative with the US since 9/11.
This is still all a little confusing to me, because as you mentioned, everyone you ask has a different take on these issues. Please let me know if any of the information above is in need of clarification.
I am but a humble servant of the U.S. tax system, desperately trying to comply with its demands, so that Premier Bush and Halliburton can fund its bloody wars and politics of fear.
I just wanted to re-emphasize that I believe the symbolic message Costa Rica sends to the world (i.e. through the passage of CAFTA) is more important than the thousands of pages of the document and conflicting propaganda interpreting those pages that we have been inundated with over the past several years. The truth is that when it comes to democracy on a mass scale, which by the way Costa Rica has demonstrated in a much purer way than the US ever has, especially insofar as it has put a referendum of such importance in the hands of the people, the vote is for a larger ideal, which I like to hope is peace and openness to tourism, foreign investment and a free market economy, in which Costa Rica will have greater space to thrive and define itself.
I plan on writing a more detailed response to this, but unfortunately can’t write much now because I am busy working at my job at a respected, multinational company, which pays my bills, has allowed me to buy a home, pay for my children’s education and for the healthcare of my family. Why should a society like Costa Rica that noblely places such an emphasis on education, have no options to implement those skills in their own country? While wages at companies domiciled in Costa Rica may not be as high as those in New York City, they will be higher than those generally paid to Costa Rican employees. This brings money into the economy and creates the potential for a middle class. Multinational companies have money and so yes, can increase efficiency by creating competition amongst private companies to provide efficient internet service and the like, or for private enforcement and legal services that will actually be able to trace and respond to crime.
As for your statement that you need a yacht to enjoy the biodiversity of Costa Rica, I can say from personal experience that this is certainly not the case, and I think that one only needs to travel around the country a little bit to appreciate the vastness and pristine nature of the country. I’m not exactly sure what multinationals would find so appealing to pillage here. It is not space that they need to operate and thrive in, but a willing and able work force. If Costa Ricans don’t want to be part of that work force, they will simply take their business elsewhere.
I agree. Globalization is a natural and inevitable progression. So many of my friends who visit Costa Rica for the first time are actually struck by how “under”developed even the well known tourist areas are, because they have been inundated with diatribes about how Costa Rica has lost its soul and had its ecological treasures devoured overnight. I actually think Arias has been a consistent proponent of moderated development that respects the surrounding environment and that CAFTA is not necessarily incompatible with that, and for goodness sake over 70% of the country is protected land. The reality is that the ratification of CAFTA is of more symbolic importance than anything else. The best thing that could happen to Costa Rica is for respected multinational companies to domicile in the major cities of this country. It would employ people, raise wages, reduce crime and increase efficiency of the governent and telecommunications system. Costa Rica has the right to compete in the global economy and the citizens of the country should be able to make enough money to travel the world in search of paradise as we have. And yes, Costa Rica voted for the referendum, not the US.
