Taxes on “luxury” homes skyrocket up to 10x after readjustment of property values
January 14th, 2013 (InsideCostaRica.com) A readjustment to construction values, made by the Ministry of Hacienda (Tax department), caused the taxes on “luxury homes,” (homes valued at about $234,000 USD and above) to increase between 57%-160% for this year, depending on the type of home.
The costs for 2013 received a 6-year update, which in turn caused the taxes due to skyrocket. Since 2010, the luxury tax has been based on 2007 values.
In calculating the construction values, all construction, fit and finish, as well as electrical and plumbings systems are included. If the construction value exceeds 117 million colones, the home is considered to be a ‘luxury home,’ and must pay an annual tax on luxury homes, known locally as the “solidarity tax.” After the construction cost is calculated, the value of the land is added, and the tax is finally calculated at a rate of 0.25% to 0.55% of the total estimated value, based on a sliding scale.
With the adjustment, many homes that were exempt from paying the tax now fall under the “luxury” category, and the owners will have to begin paying the tax.
The lowest increase was to apartments, whose value increased 82%. Other types of properties have had their values increased up to 167%.
The government uses the tax proceeds to building housing for those in extreme poverty.
Many homeowners were caught by surprise with the new values, which were published by Tributacion on December 21st. Many were expecting to pay a similar amount to past years, while finding themselves having to pay up to 10 times the amount.
The Director of Tributacion, Carlos Vargas, stated that each case is different, and must be examined separately. He also stated that the new values are for recently built houses, as in older houses, a formula to subtract the depreciation years must be applied.
The luxury tax is due tomorrow. Those who do not meet the deadline will be fined 185,000 colones.
Editor’s note: A correction was made to this article at 9:41am. The original article stated that Tributacion had published the new values on December 1st, which was a typo. Tributacion published the new values on December 21st. We regret the error.