In accordance with the provisions of Law No. 7509 “Tax Law on Real Estate”, it is established that the owners of real estate are in the taxes obligation to declare the value of their properties in the Municipality of the canton where the property is located. The tax is calculated based on the value of the land and buildings (in this case the declared value if accepted by the Municipality will be taken as a basis for calculating the tax), as recorded in the respective Municipality on the first day of January of the same year in which the tax will be collected; for this reason, it is that every property must have a registered value.

There are several ways to establish the value of a property. The general rule is that as indicated above, the owners declare the value of their assets to the Municipality where each of them is located, and it is the taxpayer’s obligation to update their declaration every five years.

The value of the goods can be modified automatically when a property is sold for a greater amount than the one registered by the Municipality. The same happens if a mortgage lien (either a common mortgage or mortgage bonds) is constituted for a higher value than the one registered; or if the land is divided or constructions or improvements are made that represent a value equal to or greater than 20% of the registered value.

The Municipalities have the power to sanction the taxpayer who does not present the value statements on their properties in time. The fine consists of an amount equal to the difference left to pay; that is, the sum of the tax that was not paid precisely for the failure to update the value of the asset.

This means that if the taxpayer is late or simply does not declare the value of his property with the periodicity that the law indicates (5 years), the taxes that are not paid for, will incur a fine. For this purpose, the Municipality is authorized to carry out, on its own initiative, the valuation of any real estate whose value was not declared, or its owners did not update. This mechanism works to recover all unpaid taxes.

Regarding the declaration of real estate

The declaration of real estate is the determination and updating of the property’s value, by which the characteristics of the land and the construction (s) that comprise the property are considered. It is the duty of the taxpayer to present his declaration at least once every 5 years through the Declaration of Property Taxes Form provided by the Municipalities for such purposes. All natural or legal persons who own properties registered or not before the National Registry must declare their properties, in the case of ommision to present the declaration, the Municipality will be empowered to officially assess all undeclared property.

The tax is calculated on the total value of the property (the land plus construction) to which a fee of 0.25% will be applied, resulting in the amount of the Real Estate Taxes, for which it is appropriate to charge the sum of ¢2,500,00 for each million of the value of the property. The tax is annually established, with the facility to fully cancel it in advance, or by quarterly installments, with the understanding that each quarter due generates the surcharges for corresponding interest. If the Real Estate Tax is not paid on time, it is exposed to the debt being transferred to the Judicial Collection, which would entail other charges for costs and attorney fees, as well as imposing a lien for a preferential legal mortgage on the property and an eventual auction of the property.

Exemption from tax payment

For 2019, the base salary of Clerk 1 was established in the sum of ¢446,200.00 according to the benchmark of the Judicial Branch, which serves as a parameter for the determination of the value that each year allows only natural persons who have only one property registered in their name in the Real Estate Registry, to manage before the respective Municipalities the exemption from the territorial tax that they have to pay.This is stated in Article 4 of that regulation:

“Article 4.- Property not subject to tax 

They are not subject to this tax: (…) e) The property that constitutes a single asset of the taxpayers (natural persons) and has a maximum value equivalent to forty-five base salaries; nevertheless, the tax must be paid on the excess of that sum (…) “               Therefore, natural persons with a single immovable property with a fiscal value less than or equal to ¢ 20,079,000.00 (twenty million, seventy-nine thousand colones) will not have to pay the property tax on real estate. Likewise, those goods that, nevertheless, constitute a unique good but whose value exceeds the amount indicated, must pay the corresponding tax but calculated on the excess of the amount previously indicated.

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