Buying or Building Real Estate in Costa Rica? What You Need to Know About Closing Costs. Part II.

 

How about closing costs in Costa Rica?

 

The closing cost is usually dictated by a general custom, where the buyer and the seller contribute equally. However, this can be tailored by the terms of an agreement and it generally depends upon the nature of a particular contract operation. Closing costs in Costa Rica, as in most other places, involve three aspects – namely, the government fees and taxes, fee for legal representatives, and mortgage expenditures if there are any.

 

1)   Government Relocation Taxes and Fees for registration

 

• Real Estate Relocation or Transfer Tax – at the time of transfer, the government demands a tax for property transference (Impuesto de Traspaso), which equals 1.5% of the registered price-value of the concerned property. The Public Registry office will not document a deed of transfer unless you have paid for the transfer taxes and the documentary stamps.

 

• Documentary Stamps – according to government dictums, you shall have to affix documentary stamps to the deeds. The set of stamps need to include the following:

                  -Municipal Stamp, or Timbre Municipal;

              -Legal Bar Association Stamp, or Timbre Del Colegio de Abogados;

              -Agricultural Stamp, or Timbre Agrario;

              -National Archives Stamp, or Timbre del Archivo Nacional;

              -Fiscal Stamp, or Especie Fiscal;

     The Public Registry Office charges a tax of its own that equals 0.05% to record documents presented to the Public Registry, which is known as Derechos de Registro.

 

2)   Notary Fees

 

The Notary that helped in the drafting of the agreement for sale and conceded on the closing of the transference of property is warrants a certain fee by statute. This statuary fee had been 1.25% of the transaction-value, for several years. However, new schedules have been set forth for Notaries and Attorneys in Costa Rica and it is mentioned in the Executive Decree No. 32493. The Executive Branch has approved the Decree in August 2005. It is called Arancel de Honorarios por Servicios Profesionales de Abogacía y Notariado.

 

The Decree directs all the Notaries and Attorneys of Costa Rica to follow the minimum fees established. The minimum scheduled fee for all acts and agreements, as approved by the Notary Public of Costa Rica bases upon the real value of any property and that of the transaction, and in accordance to the following schedule, stating the minimum:

 

         - 0 to 10 million Colones = 2%

         - 10 to 15 million Colones = 1.5%

         - 15 to 30 million Colones = 1.25%

         - 30 million and above = 1%

 

Legality also prompts that a surcharge of 50% may be levied on the above evaluation, for acts and agreements that are complicated in nature.

 

3)   Mortgage costs

 

It is mandatory for a person getting finance to have paid the costs of registering and drafting the mortgage apparatuses. A mortgage can be fashioned at the very time of a sale closure, simply by adding a mortgage clause within the transfer agreement. Alternatively, you can even draft a separate mortgage device. For a mortgage document, you need to pay registration fee of 1.00 Colone for every 1,000 Colones, or 0.1% of your property value. Documentary stamps are also paid for by the mortgage documents. For having your mortgage instrument drafted, you need to pay the Notary Public according to the statue schedule as mentioned above.

 

The buyers need to know that Real Estate transactions in Costa Rica occur in a two-layered system. Because properties in Costa Rica exhibit lower tax appraisal base in comparison to the market, it is a general trend to run property transaction through at the registered price-value. This value may actually be less than the market value.

 

However, before you engage in to this practice, ask your attorney to advise you on the probable risks and consequences of doing so. The Costa Rican government does not charge you any tax for capital gains on property transactions, unless this is your habitual business. However, this may change in the future and in case you report extremely low sales, it might be taken as a profit-making means and you may be charged certain tax, based on calculation of your capital gains.

 

4) Registration of the Transfer Deed

 

After you have paid every fee needed for the property transaction, it is then the Notary’s obligation, who had drafted the deed of transfer, to make sure that the deed gets presented (anotado) and registered (inscrito) in the Property Section, Costa Rican Public Registry.

 

Following up with the Notary is extremely important in order to have your property registered, because, even when presentation gives you priority (first come first serve), it does not necessarily guarantee registration.

 

The Public Registry will not grant the registration of your property if it is not convinced that you have cleared every necessary tax and registration fee. Make sure that you have lifted all (if any) prior instruments, like liens, mortgages and judgments, etc., impeding the property, before or at the time of registration.

 

Once your transfer deed has been accepted for registration, all the necessary documents will be returned to you along with the documentary stamps enclosed, affixed and cautiously sealed. Assuming that the contract deed has no defects, the Public Registry will do the registration within 45 or 60 days from the date of presentation.

 

Therefore, following up with the Notary for registration is important, or else you could have complications at the time you consider to resell your property and find out that it is not registered.