Costa Rica Real Estate Buyer Guide Part 4 – Purchasing Methodologies
Reposted By: Jesse Montgomery, from The Costa Rica News
Part 4 of the Costa Rica Real Estate Buyers Guide series looks at Costa Rica real estate Purchasing methods, Costa Rica incorporation and Costa Rica taxes. Living in Costa Rica
There are only a 2 ways in which to acquire your property investment in Costa Rica
Acquiring Properties through direct transfer: A purchase process whereby one or more individuals acquire a property in their personal name
Acquiring Properties through corporations: A common practice in Costa Rica is to acquire properties through a new corporation or through an existing corporation that currently owns the property of interest. The process of setting up a corporation is not complicated, but does require a knowledgeable attorney who understands the exact protocols and procedures necessary to properly setup the corporation. The advantage of this system is that it allows a buyer to protect their asset anonymously. Further, if a purchaser acquires a property through an existing corporation that already owns the property, there are no government transfer taxes and stamps to pay. The reason is that transfer taxes and stamps must be paid anytime that there is a change in the ownership of the property.
If a buyer acquires the shares of an existing corporation, technically there is no change in the recorded owner of the property (i.e. the corporation still owns property). However, if a property is acquired through forming a new corporation to duty the property, the transfer taxes and stamps must be paid because the name of the property owner has changed. The risk for the buyer in acquiring an existing corporation is that the corporation might have other liabilities and there is no way to verify 100% that the corporation is clean.
When buying a Costa Rica corporation, it is important to keep in mind that there are other obligations and responsibilities that must be addressed. Examples include yearly tax declarations (even if the corporation is inactive), payment of income taxes if any, and keeping the legal books of the corporation up to date and in order.
Step –by-step through the purchase process: Once a buyer has seen a property of interest, the next step is to understand what the process of acquiring the property may entail. The following are the basic steps to follow when buying a property:
1. Sign an Option to Purchase/Sale with seller.
2. Deposit funds into escrow (if available).
3. Title research performed by the Notary Public/Lawyers (reviews if property is free and clear of defects).
4. Closing-Execution of Transfer Deed, Endorsement of Shares and/or Mortgage Deed and disburse funds
5. Register new owner with Public Registry
1. Transfer taxes, stamps and other charges: In order to record the transfer of the property, the government charges 1.5% of the purchase price and an additional 1% is charged for other stamps at the Public Registry.
2. Notary Fees: Notaries are required by law to charge 1.25% as their legal fees.
3. Survey fees: If you require or demand a new survey for your property, there are qualified surveyors available to perform this function. Pricing depends on the location and size of the property.
4. Mortgage registration fees: The government charges 0.6% of the mortgage value to register the mortgage deed on the property.
5. Escrow Fees: Fees are dependent on the escrow provider.
6. Incorporation: Fees for purchasing a corporation typically run between $500 – $1000+.