As of July 1, 2019 a Tax took effect and you’ll want to know the ins and outs on this one…

The ‘Tax on Capital Income and Capital Gains and Losses / Impuesto de las Rentas de Capital y Ganacias y Perdidas de Capital’ applies to income of a Costarican source derived from capital and capital gains, simply put.

Let me break this ambush down for you into three main categories:

Earnings derived from: Rentals or sub-rentals, the assignment of property rights.

Income collected by: Loans to third parties of one’s own funds, a lease or sublease.

Capital gains in sales of property or assets.

The tariff that applies to capital gains in residential real estate sales, which is the difference between the value of the purchase and the value of the sale, is 15%. (For property acquired before July 1^st 2019 the payer can chose to pay a 2.25% tariff on the total sale price) If you decide on the fifteen percent the acquisition value of the property can be updated according to the consumer price index and that investments and improvements made to the property taken into account. The cost of these investments and improvements made to the property can be deducted from the value of the sale if it was the owner that made them.

In synthesis – The 15% tax is calculated on the purchase price adjusted according to the new law, which applies inflation and improvements, minus the sale price which will give an amount which could be a earnings or losses.

You may feel as though you failed to walk across hot coals at this point, however, there is a silver lining… exemptions:

Here are just some of the exemptions to this new tax:

Capital gains from the transfer of a taxpayer’s habitual residence (natural or legal person)

Capital gains derived from the occasional sale of personal property not subject to registration in the Public Registry

Inheritances and donations

It is also important to note that in some cases capital losses can be carried over, companies may have operation losses and some assets may suffer depreciation. The assignment of losses and depreciation must be evaluated and exercised carefully in accordance to this new tax.

This is the part where we boldly ask your for your business, our experience can help you design your portfolio and navigate through these changes.