Administration to soften real estate transfer tax plan

Casa Presidencial has agreed to keep the current 1.5 percent property transfer tax for transactions involving homes selling for 78 million colons or less.

That was a deal reached Friday with the Cámara Costarricense de Construcción, which complained about the impact of the proposed fiscal package on its industry. The threshold is a bit more than $150,000.

The construction chamber complained about the proposal to double the property transfer tax from the existing 1.5 percent to 3 percent.

The adjustment in the bill was one of many as Casa Presidencial played “Let’s Make a Deal” with various economic sectors. Central government officials also cut a special deal for farmers. A preferential 2 percent tax, instead of a 14 percent value-added tax, was proposed for material and goods required to grow products that are in the basic basket of foods.

The Friday night accord, which already has received the blessing of some lawmakers, sets up a 2 percent tax for sowing, harvesting, gathering, fumigating, fertilizing and transporting agricultural products. Also exempt are wheat, soybeans, palm oil and derivatives used in animal feed. And there will be what appears to be a tax rebate on exported agricultural products.
Meanwhile at the legislature, members of a special committee considering the proposal agreed to tax-free purchases of ambulances by fire fighters, the Cruz Roja and the Caja Costarricense de Seguro Social.

They also move to exempt from the 14 percent value-added tax purchases by state high education institutions. The committee also moved to exempt from taxes, the national lottery and other games of chance run by public agencies.

The agreement Friday with the construction chamber would phase in the value-added tax at 4 percent the first year, 3 percent the second year and 1 percent each year after that until the total of 14 percent was reached.

The taxes mainly affect services of engineers, architects, surveyors and other professionals.

Operators of construction projects that have approved plans or will have approval within three months after the passage of the tax law will not pay the value-added tax. Builders had argued that some estimates and contracts were signed without consideration of the new tax.

Still the construction chamber estimated that the new tax would add from 8 to 12 percent to the cost of a home or other building because professional services would become subject to the value-added tax.

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