Government tightens rules on so-called ‘fiscal value’

Costa Rican lawmakers have moved to crack down on a long-running practice that has cost the country untold millions in property transfer taxes.

For years lawyers who process real estate transfers have been declaring a fake lower value of the transaction to reduce taxes and fees before a property deal is filed at the Registro Nacional.

The transfer tax is supposed to be 1.5 percent, and many lawyer-notaries have been declaring a much lower value to reduce the tax and stamp fees for their clients at the expense of the municipality, the Registro Nacional and a host of other entities that benefit from the tax.

In some cases the difference between the so-called fiscal value and the real price of the property sale has been large.

In one court dispute, a transaction’s value was listed at about $2,000, yet the owner insisted that he should be compensated for the real value, some $765,000.

Law  No. 9069 has been on the books since Sept. 28, 2012, but there does not seem to have been any high-profile cases resulting from it. A new batch of tax proposals are expected to be filed in the next three weeks, and there may be an effort to beef up even more this aspect of the law.

The measure in Artículo 92 sets penalties for omission or fraud of the government with up to five to 10 years of prison.

As the World Bank’s Doing Business
survey noted, the transfer tax and stamp duties are calculated on the basis of the highest of the stated purchase price and the property value appearing on the national property registry, and the price is updated when the property is sold or mortgaged.

A curious twist are those would-be expats who inflate deliberately the price of a property that they purchased. The goal is to show immigration officials that at least $200,000 has been invested, enough to qualify for residency as an inversionista. fraud040715

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