Costa Rica Taxes

Poll #1 Results – Top Reasons To Buy Property In The Zone

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I was excited to find the Poll functionality on LinkedIn a couple of weeks ago. The question I came up with “What is the top reason to buy land in Costa Rica’s southern Pacific zone?” seemed like a good jumping off point for this regular feature on the blog. Although the sample size was small, … Read more

What People Are Buying In Costa Rica

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Who needs a pool when you have a river?

It’s one of the most popular questions we, the Guys In The Zone, field— “What’s been selling? We get this question from both buyers and sellers. Generally speaking, the answer is— great deals.

PRICE

Price is the #1 determining factor for a great deal, but there is another factor that is equally important— the living experience. Ben, my business partner in Costa Rica real estate, phrases it this way, “do any unique features of the property significantly affect the quality of the living experience?”

Who needs a pool when you have a river?
This gorgeous natural swimming hole sits below one of the nicer homes in Uvita.

There are very few remaining places on the planet where things are (1) inexpensive and (2) incredible.  During the boom years of 2004-2008, Costa Rica real estate was inexpensive and incredible.  Large farms were purchased $1.00/meter squared and nice ocean view lots were under $100,000.

Three years after the peak of 2008, property values across the border came down between 40-50%.  Many houses are now selling for replacement cost or less.  Once again, we have large farms for $1.00/m2.  The obvious reason was the global economic downturn and continual 10:1 ratio of sellers to buyers.  Basic economics tells us that price, or in this case property value, had to come down.  Our listing database is now filled with good properties in every category—houses, land, large parcels and commercial.

THE LIVING EXPERIENCE

For most people, buying real estate in Costa Rica isn’t just about getting a great deal.  You can move to Orlando, Florida if that is your only goal.  It is about the unique features that significantly enrich the living experience.  When Ben and I get a new land or house listing that has an ocean view and a trail to a nearby river…

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Mental Meanderings in The Zone

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Property Values In The New World

It would seem that life has settled into a routine now in our “new world” setting here in Uvita Costa Rica.  What’s it been, 2 years since the global economy went into the stink house?  My how time flies.  Our real estate company is cooking right along actually doing some business.  The business that happened so rarely during the recession was mostly for under $100k  lot sales and $300k was the upper edge of house sales.  The prices in our market have dropped 40% – 50% across the board.  And there are still some highly motivated  sellers out there.  I’ve started a list of these sellers.  Originally I was going to call it the “Desperate Sellers” list, but I have re-thunk it and come up with the “Motivated Sellers” list.  Right now I’ve got 5 properties on the list.  The top deal there at this writing is the 57 acres farm in Uvita for $250,000. (Updated: property sold or unavailable.)

The point is that the market has definitely re-defined itself and numerous sellers are adapting.  We went through a time here in The Zone when it was pure death, nothing sold and there was no one looking.  Some real estate offices closed down and others (like GITZ) tightened their belts and survived.  Now we are watching and learning what the new world looks like.  Here’s some of what we’re finding out.

Money is tight (duh!).  But, there are buyers here, and they aren’t just the $100k lot or $300k house buyer variety.  There is a recent sale of a Lagunas house for $750k and an Ojochal house at $850k, so we seem to be breaking out of the old restraints.  This isn’t to say that things are hopping again here in the zone, but they are a sight better than they’ve been for a couple of years.  The Guys In The Zone are enjoying doing some business, but again, it’s all been for steeply reduced pricing.  We had a client come down looking for a $100k ocean view property, of which we have some to show, but these clients morphed their criteria while here, and were enamored with some very fine properties at great prices.  End of the story? 2 lots at just a little over $500k.  If you’d like to see what the properties were, click here for one, and here for the other. (Links no longer available).

Conversations about current values abound.  Methods for establishing the values

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Why Canadians LOVE Costa Rica!

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A few years ago, when I moved down to Costa Rica full time, I realized there are a lot of Canadians visiting (102,471 in 2009*) and living the area. One of the main reason Canadians (virtually all nationalities for that matter) visit, buy land, and in some cases, relocate to Costa Rica is

Did Taxes & Tourism Blow Costa Rica Real Estate Out?

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Costa Rica Real Estate Listings

I just received an e-mail from a reader that shamed me into sitting right down and writing.

I have read your face book page and articles on the tax issue there.

I had been planning to take a trip in March in the hopes to travel to Domincal and Uvita nd look at some land that over looks (has view of) the playa. But with all this discussion of election and no tourism and the tricky tax factor it sort of puts a damper on it.  Was this a major blow to the real estate and tourism market, and did it blow you out?

I’m sorry but I’m not aware of the negative effect that the election could have on a land purchase in Costa Rica so I’m not able to address that.

As for tourism – well now that’s an interesting topic.

Tourism has been as hot here over this last holiday season as I have ever seen.  With the new road from Dominical to Quepos, I think that we’re really in for it here.  I understand that the status of tourism is currently anybody’s guess.  Around here it feels like we are in a growth mode. Granted, I haven’t read a lot of media recently and I don’t have a TV, so as a news source I’m limited to what I see and feel.

Over the holidays Uvita was caught by surprise.  The grocery shelves were bare and we spoke with people everyday looking for a place to stay.  I think that everyone found a bed and it felt like one big party around here. I think that it is notable that the beer supply seemed to hold despite what appeared to be a gargantuan demand.

Although the crowds have left, the festive feel continues with a good strong tourist presence.  So, without reading an article to the contrary, I’d say that tourism is alive and well in Uvita and Dominical Costa Rica, and that the prospects for the future are bright, especially with the two new segments of road making the drive from San Jose to Dominical a 2 hour and 40 minute affair now, instead of the former 4+ hours and some of that on teeth loosening dirt roads.

I have not seen an article written from your blog or website in February on your website so I want to know if you are still in business down there?

Well, I thank you for getting me off of my butt to get this article posted.  I sure don’t want to give the impression that we’re out of business.  Our lack of posting is a testament to our being busy.  Rod and I have been doing quite a bit of real estate business.  We’ve done some deals, and more are coming our way.  All of the agencies are reporting the same, some with best ever numbers – (I heard this last part through a third party, but I hope to confirm it shortly.)

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Confusion Around Costa Rica’s Luxury Tax

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[singlepic id=10 w=320 h=240 float=right]So, I get this great e-mail from some super in-the-know real estate guys the other day that answers a number of my questions regarding the new Luxury Tax law. After this “clarification” I post to my Facebook page and Tweet the news where I stated “I have determined that the new Luxury Tax in Costa Rica is for construction only and does not include the value of the dirt under the house.”. This is wrong.

Today I wake up to find out that I had posted incorrectly and in the process cost thousands of people their homes and livelihood – OK, well it wasn’t quite that dire, but still…

I read an article in AM Costa Rica that says:

The biggest issue appears to be if land should be included in the valuation to determine the amount on which tax is to be assessed. Some say yes and some say no.

Well, the law says yes, but that appears to be a late change by the legislative staff without the knowledge of some of the key legislative players.

Consequently the title: “Tico and expat confusion reigns on new luxury tax” In it the author explains how the law is poorly written, and the “Hacienda de Tributacion” (Costa Rica IRS) has not communicated the law well through press releases (there have been none to date) nor through their website where it is mentioned in a cryptic and hard to find form.  So, even for those well meaning, law abiding tax payers who want to comply, they aren’t really sure what to comply with.

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Costa Rica Corporation Clarity

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I think that in every real estate transaction that I have been involved in here in Costa Rica, the buyer has opted to use a Costa Rica corporation to purchase the property. I have explained the pros and cons various ways when asked, but I don’t think that I have ever put it as well as an e-mail that I was just copied on from one of the San Buenas Golf Resort partners. I include it here for the benefit of readers of this blog.

The bottom line is you should always conduct business in CR via a corporation. There are definite tax and liability implications. Canadian residents are lucky…any income earned outside of Canada is not taxed by Canada. The US is different, all income, regardless of where it is earned, is taxed. CR and the US do not have a tax treaty, so you will pay the CR government 30% and the US government 35% if the shares are in your name.

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