by ZEWSClosing a real estate transaction in a foreign country can be a daunting task, especially when it comes to understanding the associated costs. In Costa Rica, navigating the intricacies of closing costs requires a bit of insight into the local legal framework.
Whether you’re purchasing property in the serene coastal town of Samara or elsewhere in Costa Rica, it’s essential to grasp the breakdown of expenses involved in finalizing your real estate deal.
4 factors to consider when calculating the closing of a property
In Costa Rica, closing costs are typically categorized into four main sub-categories, each contributing to the overall expenses of your property purchase:
Transfer Taxes (1.5%):
Transfer taxes in Costa Rica are calculated as a percentage of either the property’s fiscal value or the contract price, whichever is higher. This measure aims to combat tax evasion and ensure transparency in real estate transactions.
For instance, if the contracted sales price exceeds the property’s registered fiscal value, the transfer tax is based on the former. On a property valued at $300,000, the transfer tax would amount to $4,500, calculated at 1.5%.
National Registry & Documentary Stamps:
The process of closing a real estate deal in Costa Rica involves a series of official stamps and fees, encompassing various elements such as National Registry Stamps, Agrarian Fees, Fiscal Stamps, National Archive Fees, Costa Rican Bar Association Fees, and Municipal Fees.
While some fees are nominal, others are calculated as a percentage of the total sale price. Using our $300,000 example, the total National Registry & Documentary Stamps costs would approximate $3,900.00. This amount could -and most likely- change due to several factors: currency exchange rate variations between the colón and dollar, or additional registrable acts to be filed along with the transfer deed, such as cancelation of expired liens or rectification of the information in the title which is also very common.
Legal Fees (Notary Public-Attorney):
In Costa Rica, only a notary public, or public notary, is authorized to facilitate property transfers. The cost of their services typically ranges from 1.25% to 1.5% of the property’s value.
It’s advisable to engage a specialized real estate law firm – like LandCo – to streamline the legal aspects of your transaction. For a property valued at $300,000, legal fees would amount to approximately $3,750.
VAT/IVA (13% Value-Added Tax):
Adding to the closing costs is the Value-Added Tax (IVA), which stands at 13% in Costa Rica. This tax is levied on legal fees and escrow services. While it indirectly factors into the overall expenses, it’s important to note its inclusion in the final calculations.
In addition to the aforementioned costs, there may be supplementary expenses associated with your property purchase, such as escrow services, holding corporation fees, and topography studies. Though not classified as official closing costs, being mindful of these additional expenses can help you budget effectively for your real estate venture in Costa Rica.
So, navigating the intricacies of closing costs in Costa Rica requires a thorough understanding of the local legal framework and financial implications. By familiarizing yourself with the breakdown of expenses and seeking guidance from experienced legal professionals, you can navigate the real estate landscape with confidence and ensure a smooth transaction process.
At LandCo, our team of specialized real estate attorneys is dedicated to assisting clients with their property transactions in Costa Rica. Contact us today to learn more about how we can help you navigate the complexities of real estate law in Samara and beyond.