Properties in Costa Rica Blog

by Rod Martin

A few weeks ago, Costa Rica’s high court ruled that portions of the law introducing the tax on corporations were unconstitutional.  We continue to receive many questions from clients asking, “Do I have to pay the corporate tax for 2015?”  It’s a question that deserves a clear answer.

Investors and residents often buy property, automobiles, boats, and even businesses and put them in a Costa Rica corporation.  For those new to Costa Rica real estate, you cannot use your corporation (e.g., an LLC) from your home country.  It has to be a Costa Rican corporation.  For larger groups or multiple investors, the Sociedad Anonima (S.A.) may be a good choice as it requires two active officers, with at least one share each.  A Sociedad de Responsibilidad Limitada (S.R.L.) is an even easier option, as it only requires one shareholder although dividing shares among two officers is common.  Costa Rica also allows you to own property, as a foreigner, in your personal name.  Many people ask why bother owning anything in a corporation, and a few of the benefits are:

• Limited liability; as the S.R.L. suggests, the shareholder are only liable for their share of debt or assets within the corporation.
• Estate Planning; passing shares on to family members.
• Income; taxes are paid as corporate income instead of personal income.

Ley 9024 (the Corporate Tax Initiative) was passed in 2011.  Many investors (especially developers) with multiple corporations were forced to make changes to their portfolios.

Each corporation can either be active, which means a business entity that is registered with the Hacienda de Tributacion (National Tax Department) or or inactive, which is simply a dormant corporation with no business or income tax component.  For active corporations, shareholders are required to pay an annual tax of 200,000 colones (approx. $380) and approximately 100,000 colones ($180) for inactive corporations.

The High Court Repeals the Corporate Tax

A few weeks ago, lawyers persuaded the High Court to rule that the tax was unjust for two main reasons.  In Costa Rica, when major changes are made to a bill passed by law makers, the changes have to be advertised in the official newspaper of Costa Rica, La Gaceta.  The second reason it was repealed was that large and small corporations pay the same amount.

Since over 30% of corporation shareholders already paid the 2015 tax, the high court decided their ruling will not go into effect until 2016.  Many lawyers believe this will give the legislature time to re-announce the corporate tax bill properly in La Gaceta before the fiscal year of 2016.

The bottom line is… Yes, you have to pay your corporate tax for 2015.  The longer you wait, the more interest you will have to pay.    If you have any questions about this topic and its tax implications, please contact your lawyer in Costa Rica.

The first thing that we want to do after we decide to finally take some time off our routine and go on vacation is: the right place to stay.

So, now that you have chosen Costa Rica as your destination, where do you want to stay?

This is probably the most important decision you will have to make before going away on your so well deserved vacation. You have to make sure you make the right one because if you choose badly it can turn your dream into a nightmare.

In the last few years a new way of hospitality has developed in Costa Rica, home vacation rentals. Instead of going with the traditional option and staying in a hotel, vacationists from all over the world choose everyday to come to enjoy our beautiful country and stay in a home.

The options? enough for every budget and taste. With an inventory of approximately 4,000 vacation homes, we can offer our visitors condos, beach luxury homes, and mountain retreats.

The most popular properties are those close to the beach, of course, who doesn´t want to enjoy perfect warm weather by the pool of a luxurious home with all the amenities at the tips of its fingers?

So, choose carefully, make sure you look at many options and pick the one that you are confident with. There are many companies and people working in this business that know what they are doing. Use their knowledge and expertise to help you make the right choice. Once you have taken this step let yourself enjoy, we are waiting for you!

by Rod Martin

Costa Rica faced many new events, both inside and outside of the real estate realm in 2014. The country elected a member of the new political “party of the people”, Luis Guillermo Solís to presidential office. The entire country celebrated as the national fútbol team reached the Quarter Finals in the World Cup. And the real estate market finally showed hopeful signs of life due to foreign investment.

Then & Now

The coastal real estate ‘boom’ was just beginning in 2002. Tamarindo was still a small, sleepy beach town, and the Costal Ballena in the southern zone wasn’t even on most travelers’ radar. Manuel Antonio was as far south as most people ventured, mostly due to terrible roads and infrastructure. Even today, anyone looking for all inclusive resorts and sky-rise condos stick to the northern Pacific area of Costa Rica.

As the popularity of Costa Rica grew, home and land prices did as well. Unfortunately a downturn was just a few years away, and sellers chased the prices downward for about five years. Properties sat on the market for years – some are still there waiting for the prices to bounce back up.

Raw land prices are still off by about 50% from the peak in 2008. This is great news for buyers looking to invest in an ideal piece of paradise. There may be a slight uptick in List Price, but the main difference we’ve noticed is that most sellers aren’t taking 20%+ off their list price. Sales price averaged 13% off list price, and that number dropped to 12% in 2014. We expect it to move toward 11% in 2015 and here is why…

Clearing the Clutter

Many of the big ocean view properties have sold. This is due to two main factors including increased US investor interest and Costa Rica publicity. This small country has been featured in a number of magazines, travel channels, publications, and blogs in the last year.

This growing activity means a lot of properties have sold, but there are still plenty of great deals on the market at a variety of price points:  High Ridge Ocean View with No Restrictions for $199,000, and River Runs Through It  just reduced to $299,888… to name a few.

Houses, especially those with modern architecture and contemporary design have been the hottest commodity in Costa Rica. Many investors do not want to deal with the stress and uncertainty of building in a foreign country, and there are a number of beautiful homes that could be used for vacation or rental purposes. While expectations and timelines may have to be adjusted for construction in Costa Rica, there are plenty of talented architects, engineers, and construction managers that are available to build your dream home. As people become more uncertain about ‘first world’ living, we have seen many people from all walks of life, with a wide range of budgets, invest in raw land with the idea of building slowly and steadily in the coming years – securing a place to escape if things really turn bad up north.

Because of the factors mentioned above including foreign investment, Costa Rican publicity, and the challenges that many countries (specifically the US) have been facing, we believe the real estate market will continue to grow, albeit slow and steady. The Costa Ballena in the southern zone looks to be a sought after region, although the National Parks, lack of an international airport, and slow paced way of life should preserve the area, including waters, forests, and wildlife, for many years to come.

The Future

We are excited for whatever 2015 brings – it’s hard not to be excited when you’re living in pura vida paradise!

“Without friends no one would want to live, though possessed all other goods […]; because what good is this kind of prosperity if it is deprived of the power to do good, to be preferentially exerted and more praiseworthy manner regarding friends? ”
Aristotle, Nicomachean Ethics

Friendship makes life easier, as said by Aristotle, and also makes us happier. The data was provided by Burt years ago with his study of friendship and correlation with happiness. When a person claimed to have five or six friends to share their problems had a 60% greater chance of saying that he/she was very happy. Therefore, the art of cultivating friends is one of the skills that although is not always teach to helps us to face difficulties and savor the moments shared.

Friendships also rescue us from corrosive loneliness, and makes us live longer and better quality of life. Is estimated that a quarter of Asian people say they feel alone. This is the conclusion of a study by the Australian Flinders University. For 10 years they analyzed the social relations of 1,477 people over 70 years old and it was correlated with longevity. The conclusion is very revealing: those with more and better relationships with friends, not with family, came to have a better chance to survive. Therefore, friendship is also an elixir of youth.

But beware, friendship is an art and an experience that relies on generosity and to look at the other person with kind eyes. Friends care for us and protect us even our own criticisms. Why do we call friends when we are feeling down? Because they are the ones that can connect with the kind side of us that even we forget about ourselves. This doesn’t mean that friend won’t confront us or will always agree with us. Otherwise, it isn’t a true friend. As Josep Pla said, in life “there are friends, acquaintances, and people we say hi to”. With friends you we show our true selves with no fear of being judged, and with acquaintances we share superficial conversations, though of course sometimes necessary.

Friendship doesn’t get eroded over time. We can reconnect with an old friend after years of not having any contact. That’s the magic of friendship. It‘s woven of threads that gives meaning to our lives.

Recipes

Take the Burt test: With how many friends can you share an important problem? If they are more than six, you’re probably a happy person.

Check your calendar and think of how much time you spend with your friends. If you think it’s insufficient make plans to be closer to them.

Surprise a friend with something nice: a gift, a phone call, a visit … this will make you feel good.