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Real Estate Sales Tax Costa Rica

RE/MAX is the world’s largest real estate network and it didn’t get there by compromising its ethics. In addition, it holds all its realtors to the same strict ethical standards. Here at RE/MAX Pura Vida, we are no exception which is why we wanted to be forthcoming in our attempt to educate future buyers and sellers on the Sales Tax of Costa Rica and how that applies to real estate for all parties involved. Unfortunately, this is an issue our offices are sometimes questioned about and it can be hard to know what the law is without proper resources, so RE/MAX Pura Vida has created a reference here for you to read over, and pass along if you’d like.

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We’ll start with the law in reference:

Le de Impuesto General sobre las Ventas: 6826 Articles: 1.n – 2.d – 3.c

This law translated states:

“The real estate broker is responsible for collecting the sales tax by law and must charge the owner 13% on the commission for the sale of the property.”

We understand the legal jargon can make this sound complicated, but it’s fairly simple when related to something we’re all fairly familiar with. Many nations impose sales taxes. When traveling in Costa Rica it’s easy to notice the added 13% sales tax on receipts from stores and restaurants, but this also applies to services such as utilities or work time for a mechanic. This tax is collected on the value of the item or service being exchanged and is, by law, always collected by the seller during the transaction. This is the designation seen on a receipt. On a monthly basis, the seller (business) then pays the government the accumulated value of all the 13% sales taxes collected during the month from each sale, as is common practice in most nations with a sales tax.

This tax law has actually been in place for real estate sales & realtors since 1987, however just this past month the Costa Rica Strike that has effected the whole country is in regards to the new tax reform. The new reform states that all services; such as doctors, lawyers, architects etc, will all be legally responsible to pay the IVA tax for services performed, so in short all professionals countrywide will be subject to this sales tax, not only realtors & real estate professionals.

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The law referenced above is simply specifying the above sales tax practices to real estate, and essentially stating that it works in the same way. The realtor is providing a service of finding a buyer and making the sale. The commission is payment for that service and a 13% sales tax is applied to the price of said service, paid by the buyer of the service (seller of the property), collected by the realtor and forwarded on to the government at the end of the month. For instance, if the property is sold for $100k, the commission of 6% would be equal to $6,000. A tax of 13% is then paid on that $6,000 equal to $780. That $780 is collected by the realtor and is sent on to the government at the end of the month.

Unfortunately, as is the case with many businesses, some will choose to not forward that sales tax on to the government, instead choosing to keep it for themselves. Some others will also never charge the sales tax to begin with, in an attempt to make their product or service more competitively priced. Both of the practices are objectively unlawful and therefore illegal. When small businesses do these questionable practices, it can often go unnoticed because of the insignificance of value, but when scaled up to the purchase and sale of a property, these small percentages become clearly noticeable, which is why RE/MAX Pura Vida wanted to take the time to provide this reference for you.

We at RE/MAX Pura Vida are proud that we stand by our ethical, lawful philosophies and unwavering commitment to honesty and integrity. We hope you’ll stop in to our new offices if you have any additional questions or would like a tour of any wonderful dreamlike paradise properties. Santa Teresa boasts some of the best beaches in Costa Rica with top surf breaks and the best restaurants on the west coast, so stop in and get acquainted with how a part of it could be yours!

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