Often criticized for its complexity and poor execution, the impuesto solidario, or the tax on luxury homes, is now in effect for its second year. The tax was created to help the government pay for low-income housing by raising money from those who own homes considered “luxury,” valued at more than ₡106 million ($212,000).
With poor dissemination of information and a lack of user-friendliness, the tax has gone unpaid by an embarrassing majority. Nearly 6,000 luxury-home owners failed to pay the tax on time last year (TT, March 26, 2010). Tax officials estimate there are some 10,000 luxury homes in the country.
Those who fail to pay the tax were originally subject to a fine of five to 10 times the original tax; but according to a recent statement from the Finance Ministry, the fine for delinquency is now 1 percent of the tax per month.
Tax officials originally hoped to collect ₡12.5 billion (almost $25 million) a year from the tax. During the tax’s first year in effect, the Tax Administration collected a mere ₡2 billion (about $4 million) (TT, Jan. 29, 2010).
Under political and financial pressure to reduce tax evasion – with President Laura Chinchilla recently introducing a new tax reform (TT, Jan. 17) – the Finance Ministry chased down 1,047 of the 1,401 who paid the tax in 2009 but failed to pay in 2010. In recent weeks, thanks to a redoubled effort, the Finance Ministry boosted 2010 collection to over ₡2.3 billion from ₡2 billion.
To help readers better navigate the tax, The Tico Times has compiled the following Q-and-A guide:
What is the impuesto solidario?
The impuesto solidario, or solidarity tax, was created to generate funds for housing projects by taxing luxury homes. The tax was approved by the Legislative Assembly in November 2008 and has now entered its second year. The impuesto solidario is collected by the Finance Ministry and is not related to existing property taxes.
To whom does the tax apply?
The tax applies to anyone with homes valued at more than ₡106 million. This includes villas that are part of hotels and condominium complexes in which the shared areas plus the individual unit have a value of more than ₡106 million.
How do I know if my home is worth more than ₡106 million?
The Finance Ministry has created a software program that helps owners self-assess their homes. The software program can be accessed online at dgt.hacienda.go.cr/impuestosolidario. Be prepared to enter data such as square meters of the home, road frontage, condition of building, etc. In the original assessment of the property, only manmade installations should be included in the evaluation; that is, you should not consider land when determining whether your property is subject to the tax.
How much is the tax?
The tax depends on property value; see the Luxury Home Tax table above.
How do I pay the tax?
A single form for registering for and paying the luxury home tax has been created and will soon be made available on the Finance Ministry’s website, Tax Administration head Francisco Villalobos recently announced. Until this time, the procedure has been as follows:
Register for the tax by filling out the D-144 form, which can be found online at www.hacienda.go.cr/tributaciondigital. A day after filling out the form, you are directed back to the Finance Ministry website, where you may create a username and password. For this procedure, you must have a government identification at hand. The next step is to fill out the D-179 and accompanying forms (which is the declaration of the tax) and to register a bank account to facilitate payment. The online system walks you through this step (in Spanish only). If this is your second year paying the tax, you need to submit only the D-110 form and make the payment.
The tax must be paid within the first 15 days of each year. Property values must be re-evaluated every three years. If any changes are made to the integrity of the structure, a new assessment should be made within a month of the construction or renovation.
Is help available if I need guidance or don’t speak Spanish?
Yes. Several law firms offer assistance in paying the tax, including Deloitte (2256-8192) and Nassar Abogados (2257-2929). You can also check out the “The Complete Guide to Property Taxes and the New Luxury Home Tax in Costa Rica” at www.costaricalaw.com.
What is the fine if I don’t pay the tax?
Those who fail to pay the tax are responsible for a fine of up to 1 percent of the original tax for every month they don’t pay, according to a statement from the Finance Ministry. The ministry has also begun publishing a list of luxury-home-tax delinquents on its blog at blog.hacienda.go.cr/default.aspx.
Luxury Home Tax
Value of Home Tax
Between ¢106 million and ¢265 million 0.25 percent of property value
More than ¢265 million up to ¢531 million 0.30 percent
More than ¢531 million up to ¢796 million 0.35 percent
More than ¢796 million up to ¢1.06 billion 0.40 percent
More than ¢1.06 billion up to ¢1.33 billion 0.45 percent
More than ¢1.33 billion up to ¢1.6 billion 0.50 percent
More than ¢1.6 billion 0.55 percent
New rates published in the official government newspaper La Gaceta on Jan. 25, 2011.