Monday 28 November 2022

Government will now boost house tax of ¢150 million onwards

For a home valued say at ¢300 million colones, the tax would double annually, from ¢750,000 to ¢1.5 million annually

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QCOSTARICA – Following the advance of the International Monetary Fund (IMF) loan of US$1778 billion dollars in the Legislative Assembly, the Executive Branch plans to speed up the discussion of the bill that would modify the tax on luxury homes.

For a home valued say at ¢300 million colones, the tax would double annually, from ¢750,000 to ¢1.5 million annually.  Photo for illustrative purposes

The Minister of Finance, Elian Villegas, indicated that is the next step of the Government in pushing the legislative agenda negotiated with the IMF, shortly before legislators approved the loan in the first debate last Thursday.

“We consider that this is a bill that could advance with relative ease, because it provides us with a just tax and helps us in the effort we are making on the issue of collection,” said the minister.

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The adjustment would imply an annual charge of 0.5%, on the value, to all houses above ¢150 million colones (US$245,000 at the current dollar exchange).

This would replace the current model that imposes a progressive rate, which ranges between 0.25% and 0.55%, on houses of more than ¢133 million.

Currently, for example, houses valued between ¢133 million and ¢334 million pay an annual tax of 0.25%; Homes that exceed ¢2.01 billion, meanwhile, pay up to 0.55%.

With the reform, the Government intends to collect ¢61.2 billion annually, which would mean an increase of 1,100% over the ¢50 billion currently collected.

“This tax will be levied on all real estate, urban or rural, that contains one or more buildings and fixed and permanent installations, which constitute a housing unit, used as habitual, occasional or recreational dwelling, even if it is located on independent farms or in partially occupied buildings, for constructions destined for other uses,” reads the text.

Asked about the inclusion of the vacant land, Minister Villegas explained that the lot where the house is located is taken into account for the valuation.

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Farms, however, would not be considered, according to the Minister.

If the new collection scheme is approved, the tax on a house valued at ¢150 million colones would rise from ¢375,000 to ¢750,000.

In the case of a house valued at ¢300 million, the owner would have to pay ¢1.5 million a year instead of ¢750,000.

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The owners of a house valued at ¢760 million, who currently pay ¢1.95 million, would go on to pay ¢3.5 million. And for a property of ¢2.1 billion, the tax would rise from ¢8 million to ¢10.5 million.

The IMF loan is expected to be voted following a second debate when legislators return from vacation, on Monday, July 12.

Once that debate has been overcome, the luxury home bill would be the government’s goal, without detriment to the rest of the agenda negotiated with the IMF, the Finance Minister said.

Villegas asserted that the modification of the luxury home tax “is faster to process,” unlike the global income plan, another of the plans negotiated with the IMF, which he considered technically more complex to discuss.

“It is a bill that is easier to approve,” he insisted.

The rest of the government’s agenda would also be given a boost, said Villegas, especially since a first review of the IMF on compliance with the agreements is coming up, probably by the end of August.

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