... Buying? Building? Here's what you need to know
(Part 2: Government Transfer Tax and Registration Fees) ...
by Lic. Roger A. Petersen
Attorney At Law
Author of The Legal Guide to Costa Rica
[A] Government Transfer Tax and Registration Fees
(1) Real Estate Transfer Tax. -
The government collects a property transfer tax (Impuesto de Traspaso ) which is
equal to 1.5% of the registered value of the property. The Public Registry will not record
a transfer deed unless the transfer taxes and documentary stamps have been paid. (The transfer tax was reduced from 3% to 1.5% by Law No. 7764
effective May 22, 1998)
(2) Documentary Stamps - The government also requires that documentary stamps be
affixed to the deed. These stamps include the following: Municipal Stamp: (Timbre Municipal) ;Legal Bar Association Stamp (Timbre del Colegio de Abogados); Agricultural Stamp (Timbre Agrario); National Archives
Stamp (Timbre del Archivo Nacional); Fiscal Stamp:(Especie Fiscal).
The Public Registry also imposes its own tax of .05% on documents presented for recordation to
the Public Registry. (Derechos de Registro)
[B] Notary Fees
The Notary that drafted the contract for sale and carried out the
closing is entitled by law (Decree 2307-J) to a fee equal to 1.5%
of the first one million Colones of the actual sales price and 1.25%
on the balance. The Attorney and Notary fee schedule which was established
by Executive Decree No. 2307-J on April 4, 1991 was repealed on February
9, 1999 (Decree No. 27624-J). However, in October of 1999, the Supreme
Court of Costa Rica ruled that the Decree which repealed the Fee schedule
was unconstitutional and reinstated the original fee schedule.
[C] Mortgage
costs. It is customary for the person who is receiving financing to
pay the costs of drafting and registering the mortgage instrument. A mortgage
can be created simultaneously at the time of sale by adding a mortgage
clause in the transfer deed. Or, a separate mortgage instrument can be
drafted. A mortgage document paysregistration fees of 1.00 Colon for every 1,000 Colones.
The mortgage document also pays documentary stamps. The Notary Public will also charge
for drafting the mortgage instrument and that fee can range from approximately 0.625
percent to 1.25 percent of the amount of the mortgage, depending on the
circumstances involved.
The buyer
should be aware that Costa Rican real estate transactions commonly operate
on a two-tiered system. since Costa Rican properties have a low property
tax appraisal base in relation to market value, it is a customary practice
to run property sales through at the registered value, which may be substantially
less than the actual sales price of the property. In such a case, all transfer
taxes and fees discussed above would apply to the registered value as opposed
to its sales price, with the exception of the notary fee. Buyers should
consult their attorney about the potential risks of this practice.
Registration
of the transfer deed.
Once all
the fees have been paid, it is the obligation of the notary who drafted
the transfer deed to ensure that the deed is presented (anotado) and registered (inscrito) in the Property Section of the Public Registry. I have stressed
the words presented and registered to highlight the importance of following
up with the notary to ensure registration. Although presentation guarantees
your priority (i.e., first in time, first in right), it does not automatically
guarantee registration. The Public Registry will not register a transfer
deed unless all taxes and registration fees are included; a certified copy
from the Municipality where the property is located is provided certifying
that the seller's property tax (bienes inmuebles) and municipal assesments (impuestos municipales) have been paid
through the date of closing. Likewise, any prior instruments that encumber the
property(i.e., mortgages, liens, judgments, etc.) must be lifted before
your transfer deed will be registered.
Once a transfer
deed is accepted for registration, the Public Registry will return the
original document with all the documentary stamps affixed to it and properly
sealed. Assuming no defects in the transfer deed, it should be registered
by the Public Registry with 45 to 60 days after presentation. It is therefore
important to follow up with the notary to ensure registration, otherwise
you will run into problems in the future when you decide to resell the
property and find out that your sale was not registered.
Beach Front Property.
In most cases, beach front property is untitled
property because in Costa Rica the ownership and possession of the shoreline is governed by the Maritime Zone Law (Ley Sobre la Zona Maritimo Terrestre) which restricts the possession and ownership of beach
front property. By law the first 200 meters of beach front starting at the high tide markers
is owned by the government. Of the 200 meters, the first 50 are deemed public zones and nobody may
posses or control that area. On the remaining 150 meters the government through the local Municipal
government will lease by way of concessions the land to private individuals. The Maritime Zone Law provides
restrictions as to foreign ownership or possession of beach front property so a more through and
careful study is always required when considering beach front property in Costa Rica.
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