Closing costs in Costa Rica: How Much You’ll Pay and what to expect

Purchasing a home, especially overseas, is one of the most significant and exhilarating decisions you will ever make in your life. Therefore, you are conducting thorough research, completing your preliminary due diligence, and now, you have reached the stage where you are running the numbers. This led you to ask, "How are Costa Rica closing costs calculated? What is included, and what is not? And, who is responsible for paying?"

Closing costs in Costa Rica are generally more expensive than those in the United States or Canada due to various reasons, including how the country collects taxes. Property transfer taxes are higher because annual property taxes are considerably low (0.25% to approximately 0.55%, depending on the declared value). Nevertheless, the calculations are clear, and every component of Costa Rica closing costs is a percentage of the property's value.

Let's delve into Costa Rica's closing costs, how they are calculated, their overall expense, and who is responsible for paying. Throughout this post, we will use a $300,000 property purchase as our reference for practical purposes.

Costa Rica closing costs will run you approximately 3.5% of your purchase price or registered property value (whichever is higher).

Costa Rica Closing Costs: How They’re Calculated

In Costa Rica, the closing costs are determined by a total of four sub-categories:

1. Transfer Taxes

2. National Registry & Documentary Stamps

3. Legal Fees

4. VAT/IVA

These categories are primarily calculated as a percentage of your total property value. Therefore, although there is no fixed price for closing costs, they are relatively simple to calculate.

It's worth noting that to address the transfer tax evasion issue, Costa Rica has begun basing these percentages on the higher of two possible values: either the contracted sales price or the registered fiscal value. You will understand better what this means in the next section.

1. Transfer Taxes (1.5%)

In Costa Rica, transfer taxes are computed at a fixed percentage rate of 1.5%, based on the higher value between the property's fiscal value or the contract price.

To clarify, if the property's registered fiscal value is worth $300,000, but the contract price is only $200,000, transfer taxes will still be calculated at 1.5% of the $300,000 value. Conversely, if the registered fiscal value is worth $200,000, but the contract price is $300,000, the transfer taxes will still be calculated at 1.5% of the $300,000 value.

Therefore, using our $300,000 example, the total transfer taxes would be $4,500.

2. National Registry + Documentary Stamp

Living in Costa Rica will teach you that official stamps are an essential requirement for almost all legal matters, especially when it comes to purchasing a property.

This sub-category of Costa Rica's closing costs is based on six elements:

1. National Registry Stamps (0.5%)

2. Agrarian Fees (0.15%)

3. Fiscal Stamps (under $2)

4. National Archive Fees (under $1)

5. Costa Rican Bar Association Fees (under $100)

6. Municipal Fees (0.2%)

Some of these fees are insignificant, such as National Archive fees, which cost less than 5¢ (yes, less than a U.S. nickel). However, others like Municipal fees and National Registry stamps, are computed as a percentage of the total sale and can be significant.

Total Based on our $300K Example: $2,410, calculated as: $1,500 (National Registry) + ¢190,500 (Agrarian) + ¢625 (Fiscal Stamps) + ¢20 (National Archives) + ¢5,000 (Bar Association) + ¢381,000 (Municipal Fees)

3. Legal Fees

Costa Rican law employs a sliding scale of fees, and only lawyers can become public notaries, who are held in higher regard than lawyers. To become a public notary, a lawyer must first practice for two years and then apply for an advanced legal degree in notary and registry law. A notary public is the only professional legally authorized to transfer property such as a home purchase in Costa Rica. It's recommended to choose a law firm that has at least one notary public to make legal life easier in Costa Rica.

The cost of a notary public's services for a property transfer is calculated based on a pre-established sliding fee scale, which is non-negotiable. The scale is as follows: 2.0% for up to 10,000,000 Colones, 1.50% for 10,000,001 to 15,000,000, 1.25% for 15,000,001 to 30,000,000, and 1.00% for 30,000,001 or more. In other words, the first ¢30M will incur a tax of approximately $725, with an additional 1% of any amount over ¢30M.

Total Based on our $300K Example: Approximately $3,300, calculated as: ¢200,000 (first ¢10M) + ¢75,000 (¢10M-¢15M) + ¢187,500 (¢15M-¢30M) + ¢1,600,000 (¢30M to about ¢190.5M, the equivalent to $300,000).

4. VAT/IVA (13% Value-Added Tax)

Just to clarify, the total VAT based on the $300K example given would be 13% of the legal fees and escrow services, which add up to $3,300, not 13% of the property cost. Therefore, the total VAT would be $429 (13% of $3,300).

Costa Rica Closing Costs: Who Pays What?

In Costa Rica, the buyer typically pays for closing costs. The upside: The seller traditionally covers real estate commissions.

That said, it’s becoming more common for buyers and sellers to come to a mutual agreement to share closing cost fees. Rule of thumb: If it’s a buyer’s market (or if you’re considering a property that’s been on the market for a while), you’ll have greater negotiating power regarding closing costs.

Want to run numbers? This closing cost calculator is incredibly helpful!