Confusion Around Costa Rica’s Luxury Tax

[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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