Published on and written by Cyril Jarnias
Investing in Real Estate in Costa Rica is increasingly appealing to French nationals. With a relatively mild tax climate, no inheritance tax, and a clear legal framework for property transfers, the country checks many boxes on paper. But behind this “paradise-like” image, real estate taxation remains technical, especially when you remain a French tax resident and no tax treaty exists between the two countries.
Before buying, renting, or reselling a property, it is crucial to master the rules concerning local taxes, capital gains taxation, and how they interact with French law.
A Territorial System That’s Fairly Favorable to Foreign Investors
Costa Rica applies a strict territoriality principle for income tax. This means that only income sourced in Costa Rica is taxable in the country. French pensions, salaries paid from France, dividends from French or European companies, foreign investment income, or capital gains on a French stock portfolio are not taxed locally, even if the taxpayer is a Costa Rican tax resident.
All income directly related to a property located in Costa Rica, such as rents, real estate capital gains, and tourism operating income, is subject to Costa Rican taxation. This applies to both residents and non-residents, regardless of nationality—a French citizen is treated like a Costa Rican citizen for local taxes.
This territorial logic, combined with the absence of a national inheritance tax and relatively low property taxes, partly explains why Costa Rica attracts retirees, digital nomads, and European investors.
Local Real Estate Taxes: Property, Luxury, and Transfer
Before even tackling capital gains, you need to master the recurring taxes and transfer costs that come with acquiring and holding a property.
Municipal Property Tax: A Uniform Rate of 0.25%
The annual property tax, called Impuesto sobre Bienes Inmuebles, is one of Costa Rica’s major advantages for property owners. Its rate is a uniform 0.25% of the property’s cadastral value as recorded with the municipality—not necessarily its market value. This value may be based on the purchase price or a municipal estimate, updated periodically.
This tax is due by all owners, local and foreign alike, with no surcharge based on nationality. It is paid to the municipality where the property is located, typically in quarterly installments.
A table illustrates the order of magnitude of this tax:
| Approximate Cadastral Value of Property | Annual Rate | Estimated Property Tax Amount |
|---|---|---|
| $200,000 USD | 0.25% | $500 USD |
| $300,000 USD | 0.25% | $750 USD |
| $400,000 USD | 0.25% | $1,000 USD |
| $1,000,000 USD | 0.25% | $2,500 USD |
This level of taxation remains very competitive on a Latin American scale. Late payments, however, incur a penalty of about 1% per month on the outstanding balance, so it’s wise to meet deadlines scrupulously.
The “Luxury Home” Tax: Impuesto Solidario
In addition to the standard municipal tax, high-value residences may be subject to a solidarity tax, known as Impuesto Solidario para el Fortalecimiento de Programas de Vivienda. This tax only targets residences (not vacant land or purely commercial buildings) whose construction value exceeds a threshold set by the state and adjusted periodically.
The number of colonists, estimated between 121 and 145 million depending on the year and assessment methodology.
The scale is progressive, from approximately 0.25% to 0.55% applied to the taxable value of the property. A single home can thus incur 0.25% municipal tax plus up to 0.55% luxury tax on the excess portion.
You can summarize the principle, for illustrative purposes, as follows:
| Tax Component | Main Basis | Indicative Rate |
|---|---|---|
| Municipal Property Tax | Cadastral value (land + building) | 0.25% |
| Impuesto Solidario (luxury) | Construction value above threshold | 0.25% to 0.55% |
Correctly assessing the construction value is therefore a key issue for high-end villas, a preferred domain for many foreign investors.
Transfer Tax: Real Estate Transfer Tax (1.5%)
Each time a property changes hands, a transfer tax is levied on the transaction. This duty, governed by Law No. 6999 on the Tax on Transfers of Real Property, is set at 1.5% of the taxable base. That base corresponds to the higher of:
– the price declared in the deed of sale;
– the fiscal (cadastral) value recorded with the Ministry of Finance.
The principle is simple: you cannot declare a price lower than the official value. The tax is due each time a transfer is formalized by a notarial deed and applies equally to individuals and companies. In practice, the burden is almost always borne by the buyer, even though legally it encumbers the entire transaction.
The notary, who must be a Costa Rican lawyer-notary, acts as collector: he withholds the tax at the time of signing, adds stamp duties and registration fees (approximately 0.5% to 0.8%), and then remits everything to the National Registry.
Overall, combining transfer tax, stamps, and notary fees (typically 1% to 1.5% of the price), a foreign buyer can reasonably anticipate total closing costs in the range of 3% to 4%, or even 5% to 6% depending on the complexity of the transaction (use of a company, financing, trust, thorough due diligence, etc.).
A typical breakdown for a standard residential purchase:
| Cost Item at Purchase | Estimated Range as % of Price |
|---|---|
| Transfer Tax (Law 6999) | 1.5% |
| Stamp Duties and Registration Fees (National Registry) | 0.5% to 0.8% |
| Notary / Attorney Fees | 1% to 1.5% |
| Miscellaneous Costs (escrow, translations, etc., if applicable) | 0.25% to 1% |
| Total Indicative | ≈ 3% to 4.5% (or even 5–6%) |
Currently, there is no general reduction regime for first-time buyers or foreigners; the 1.5% rule applies to almost all acquisitions.
Taxation of Rents: Rental Income and Applicable Regimes
As soon as a property generates rents, the owner falls under the scope of Costa Rican income tax. Here again, treatment depends on resident vs. non-resident status, but the basic logic remains territoriality: rent from a property located in Costa Rica is always taxable locally.
Residents and Non-Residents: How Rents Are Taxed
For resident individuals, rents are included in total Costa Rican-source income and taxed according to a progressive scale. Rental profits (gross rents minus deductible expenses) are subject to brackets ranging from approximately 10% to 25%, with an exemption for the first tier. An illustrative scale based on available data, for annual net income, is:
| Annual Net Rental Income Bracket (CRC) | Income Tax Rate |
|---|---|
| Up to 3,804,000 | 0% |
| 3,804,001 – 5,706,000 | 10% |
| 5,706,001 – 9,510,000 | 15% |
| 9,510,001 – 19,020,000 | 20% |
| Over 19,020,000 | 25% |
Taxpayers under this regime can theoretically deduct various expenses (management fees, loan interest, maintenance, depreciation, etc.), which can significantly reduce the taxable base.
For non-residents, the taxation of rents follows a flat-rate regime: a 15% rate is applied to 85% of gross rents, i.e., an effective rate of approximately 12.75%, corresponding to an automatic 15% flat deduction without supporting documents.
In other words, a French non-resident owner under this regime will see a systematic 12.75% of gross rents absorbed by Costa Rican tax (excluding any VAT on tourist rentals). A more detailed regime choice is possible in some cases, provided you fully register with the Costa Rican tax administration and maintain accounting records.
Short-Term Rentals, VAT, and Platforms like Airbnb
Short-term rentals – stays of fewer than 30 days – are treated fiscally as a tourism-type activity. As such, they are subject to Costa Rican VAT (IVA) of 13%, plus, in practice, specific levies that bring the effective rate to about 12.75% of gross revenue for tourist accommodations.
Since 2019, and reinforced in 2026, platforms like Airbnb, Vrbo, or Booking.com withhold a percentage from payments to hosts to remit to the Ministry of Finance, including for foreign owners.
Rental platforms must directly withhold a percentage from payments made to hosts before any remittance to the Costa Rican tax authority.
This withholding applies to everyone without exception and is cumulative with income tax, increasing the tax burden for non-resident hosts.
To avoid nasty surprises, a French investor should:
– register with the Costa Rican tax administration (obtain a tax ID number);
– set up electronic invoicing, mandatory for economic activities;
– choose a reporting regime (flat-rate or actual) consistent with their volume of rents and expenses;
– incorporate VAT and the automatic platform withholding into their profitability model.
To optimize, favor rentals of more than 30 days (often VAT-exempt) and choose a structure (individual or company) that best balances the tax rate and deductibility of expenses.
Allowable Deductions: Interest, Management, Depreciation
The Costa Rican tax system offers interesting flexibility regarding deductible expenses, especially for resident taxpayers or companies under the actual regime. Commonly accepted expenses include:
– interest on mortgage loans taken out for the property;
– management and administration fees (agency or property management fees, often 15% to 25% of rents, fully deductible when properly documented);
– depreciation of the building (typically over 50 years for residential and 40 years for commercial premises);
– the 0.25% municipal property tax, deductible from rental income;
– routine maintenance and repair expenses (subject to supporting documents, and excluding work considered capital improvements).
The stacking of these deductions, combined with well-calculated depreciation, can significantly reduce the taxable base, or even temporarily eliminate income tax on rental income for an investor who structures their file properly.
Real Estate Capital Gains: The Costa Rican Framework and Particularities
The taxation of capital gains underwent a major overhaul effective July 1, 2019. Since that date, Costa Rica applies a true tax on gains realized from the sale of real estate, whether land, a house, an income property, or commercial premises.
The Standard Rate: 15% on Net Capital Gain
The general principle is as follows: capital gains are taxed at 15% on the net gain, i.e., the difference between the sale price and the acquisition cost (plus certain allowable costs, if any). The 15% rate applies equally to individuals and legal entities, residents and non-residents, as long as the property is located in Costa Rica.
The taxable base is therefore:
– sale price (as declared, subject to audit);
– minus the original value (purchase price);
– minus, if applicable, certain capitalizable fees or investments.
If the sale price is lower than the purchase price, no capital gain is realized, and a loss may even be carried forward against future gains.
The seller must file a specific capital gains return and pay the corresponding tax within 15 calendar days following the sale date. For a foreigner, this calculation is rarely trivial, hence the value of engaging a local accountant or tax attorney.
Tax Tip
Exemption for the Primary Residence
One of the most favorable aspects of the Costa Rican system concerns the main home. When the sold property constitutes the seller’s primary residence, the capital gain is fully exempt from tax, subject to certain conditions.
Primary residence is defined as the home used continuously as the taxpayer’s household, shelter, and domicile. In practice, the authorities often apply a presence criterion of at least 183 days per year. The property may be held directly in the individual’s name or through a Costa Rican company, as long as it actually serves as the residence for its shareholders.
A few limitations to keep in mind: physical limitations of the individual, environmental constraints, psychological obstacles, and socio-economic factors.
– secondary residences, vacation homes, seasonal rental properties do not qualify for this exemption;
– the status of non-resident “not domiciled” in Costa Rica generally means no exemption, even with frequent use of the property as a pied-à-terre.
In all other cases (rental investments, secondary residences, commercial premises), the capital gain is generally taxable.
Properties Acquired Before July 1, 2019: The 2.25% Option
For properties purchased before the reform took effect (July 1, 2019), the legislator provided a favorable transitional rule. On the first sale of such a property, the seller may choose between:
The standard regime for real estate capital gains levies 15% on the actual net gain.
This alternative is particularly attractive for properties held for a long time, whose acquisition cost is very low relative to the sale price: in that case, taxing the real gain would result in a much higher tax amount than 2.25% of the total price.
Conversely, for properties bought recently at a price close to the resale value, the 15% on the gain regime may be more advantageous, or even neutral if the capital gain is small.
The option is only available for the first sale of a property acquired before July 2019. Subsequent sales of the same property, or sales of properties purchased after that date, automatically fall back under the general 15% on the gain regime.
A summary diagram helps clarify:
| Situation of the Sold Property | Possible Capital Gains Tax Regime |
|---|---|
| Primary residence (183-day criterion met) | Full exemption of capital gain |
| Property acquired after July 1, 2019 | 15% on net gain |
| Property acquired before July 1, 2019 – 1st sale | Choice between 15% on net gain or 2.25% of price |
| Subsequent sales of a pre-2019 property | 15% on net gain |
The choice must be carefully considered, simulated in advance, and formalized in the capital gains return.
Withholding at Source: The Role of the Payer and the Notary
For non-resident sellers, the law provides a withholding mechanism. In practice, the buyer, if a registered taxpayer, must withhold a percentage of the sale price and remit it to the tax administration.
Several rules are mentioned in the texts, but the recent scheme is as follows:
– for residents, the buyer withholds 2% of the price, which is then creditable against the seller’s final tax;
– for non-residents or non-domiciled persons, the withholding is 2.5% of the price, considered as final tax or at least as a significant advance payment.
In practice, the National Registry will not finalize the registration of the property transfer until this withholding has been declared and paid. The notary is often at the center of this process, acting as a guarantor for the tax authorities.
For a French non-resident, this 2.5% withholding on the gross price may be higher or lower than the actual capital gain taxable at 15% of the net gain. The seller can then, by registering with the tax administration and filing the appropriate return, request a adjustment to pay only what is due according to the detailed calculation, crediting the withholding as a local tax credit.
Here again, the assistance of a Costa Rican accountant or attorney is essential to choose between:
– accepting the withholding as final tax if it is low relative to the actual gain;
– or filing a detailed capital gain at 15%, recovering any excess withholding if applicable.
No Tax Treaty Between France and Costa Rica: Concrete Consequences
The key point for a French investor is not just Costa Rican taxation, but the total absence of a bilateral convention to avoid double taxation between France and Costa Rica. Unlike Germany, Spain, Mexico, or the United Arab Emirates, France has not signed any such treaty with Costa Rica.
What This Means for a French Tax Resident
France taxes its tax residents on all their worldwide income. As long as a French person remains a French tax resident (within the meaning of Article 4 B of the French General Tax Code), they must declare in France:
– rents from a property located in Costa Rica;
– capital gains realized on the resale of a Costa Rican property;
– and more generally any Costa Rican-source income.
In the absence of a treaty, there is no automatic mechanism for a tax credit. To avoid double taxation, you must rely on the unilateral tax credit provided by Article 209 of the CGI and the BOFiP guidelines.
In practice, two main scenarios arise:
– either the taxpayer genuinely leaves France and becomes a Costa Rican tax resident: they are then taxed in France only on their French-source income (French rents, pensions, etc.), while their Costa Rican income is taxed solely in Costa Rica;
– or they remain a French tax resident: they must then also declare their Costa Rican-source income and capital gains in France, seeking, if conditions are met, a credit for the tax already paid in Costa Rica.
Contrary to popular belief, paying tax in Costa Rica never exempts you from filing in France if you remain a French tax resident.
French Declarations: Income, IFI, and Foreign Accounts
A French tax resident who owns property in Costa Rica is subject to multiple reporting obligations in France, even without a tax treaty. Notably, they must:
Declare rents from Costa Rica via forms 2047 and 2044/2042, with a unilateral tax credit; declare foreign real estate capital gains under the French regime (including allowances); and include the property in the IFI (French wealth tax on real estate) if net worldwide real estate assets exceed €1.3 million as of January 1st.
Regarding the IFI, the rule is clear: for a French tax resident, the wealth tax on real estate applies to all real estate assets, whether in France or abroad, subject to specific exemptions (e.g., business assets). If the Costa Rican property is a simple rental investment or a secondary residence, its market value as of January 1st is included.
Fine of €1,500 per Costa Rican bank account not declared via form 3916
A summary table helps visualize the different treatments based on tax residence:
| Situation of French Owner in Costa Rica | Costa Rican Taxes | French Taxes |
|---|---|---|
| Remains French tax resident, property rented | Local tax on rents + property tax + possible capital gains tax | French tax on rents + capital gains; possible unilateral credit; property included in IFI if > €1.3M |
| Becomes Costa Rican tax resident, retains French non-resident status | Local tax on rents, capital gains, property tax | Taxation in France only on French-source income; Costa Rican property excluded from IFI (outside non-resident regime in some cases) |
| No rental, property held as secondary residence only | Property tax 0.25%; future capital gains at 15% | In France, no rental income but property must be reported for IFI if threshold exceeded |
Managing unilateral tax credits, the potential impact on the effective rate, and coordinating returns (2042, 2044, 2047, 2042-IFI, etc.) requires at least a French tax advisor experienced with non-treaty situations.
A Limited Agreement on Exchange of Information
The only formal understanding between France and Costa Rica in the tax field concerns exchange of information. An agreement in the form of an exchange of letters, published in 2012, organizes cooperation between administrations to combat fraud and facilitate the communication of banking, corporate, and other data.
This agreement has no role in eliminating double taxation or allocating taxing rights between the two countries; it simply enhances transparency. For a French investor, this means that fund movements and asset holdings in Costa Rica can be known to the French administration in the event of an audit.
Inheritance and Transfer: A Costa Rican Paradise… Subject to French Law
Another essential aspect for a French investor: the transfer of Costa Rican real estate assets.
In Costa Rica: No Inheritance Tax, But Some Costs
Costa Rica stands out for having no national inheritance or gift tax. No tax is due solely from receiving property by inheritance, whether the heir is a resident or non-resident, Costa Rican or foreign.
This exemption covers:
– real estate;
– cash;
– bank accounts;
– securities and financial assets.
There is no exemption cap: in theory, an heir can receive a substantial real estate portfolio without paying any local inheritance tax. However, several types of costs are to be expected:
– registration fees (including the 1.5% real estate transfer tax when updating ownership at the National Registry);
– notary fees, probate costs, attorney fees;
– stamp duties and other administrative fees.
Succession is governed by Costa Rican law for any property located in Costa Rica, regardless of the deceased’s or heirs’ nationality. The local Civil Code imposes strict rules regarding inheritances, gifts, and wills.
A special point: if the property is held through a Costa Rican company, transferring the shares (rather than the property itself) can avoid the 1.5% transfer tax at the time of inheritance, limiting the formality to a change of shareholders.
In France: Worldwide Inheritance Taxation for Residents
The absence of inheritance tax in Costa Rica does not mean the transfer is fiscally neutral for a French heir. Indeed, France applies a worldwide inheritance tax regime in several situations, under Article 750 ter of the CGI.
Two main parameters are taken into account:
– the tax residence of the deceased;
– the tax residence of the heir (and the famous “rule of 6 years out of 10”).
In the absence of a France–Costa Rica succession treaty, French law applies in full. If the deceased was a French tax resident at the time of death, or if the heir has resided in France for at least 6 of the 10 years preceding the transfer, France may tax all assets, including those located in Costa Rica.
Rates are progressive and vary according to family relationship, after applying allowances:
| Beneficiary (under French law) | Allowance (order of magnitude) | Tax Rate After Allowance |
|---|---|---|
| Child | €100,000 | Progressive scale from 5% to 45% |
| Brother / Sister | €15,932 | 35% then 45% |
| Nephew, niece, relatives up to 4th degree | €7,967 | Flat rate of 55% |
| Distant or unrelated heir | €1,594 (€159,325 if disabled) | Flat rate of 60% |
| Spouse / Civil partner | Exempt from tax | — |
Real estate assets in France, but also abroad (including those in Costa Rica), are included in the tax base provided the residence conditions are met. The French heir must declare the inheritance within one year of the death, even if no tax was paid in Costa Rica.
Article 784 A of the CGI does provide for the possibility of crediting against French tax any foreign inheritance tax paid. However, since Costa Rica levies no inheritance tax, there is in practice no tax credit to claim: France taxes the full amount, without offset.
Limited Real Double Taxation Risk, But Possible French Tax Burden
On the inheritance itself, the risk of “strict” double taxation is limited because Costa Rica does not apply specific duties. Instead, this is a case of simple French taxation on assets located abroad.
Transferring a property in Costa Rica incurs local transfer costs (1.5% real estate transfer tax, stamps, notary…), while the total value of the property is also subject to French inheritance tax. This double constraint can increase the bill, especially for large estates or when heirs are distant or unrelated.
A summary diagram helps outline the situation for a French heir:
| Event | Costa Rica | France |
|---|---|---|
| Receiving real estate by inheritance | No inheritance tax; notary fees, registration, 1.5% transfer tax | Inheritance tax potentially due, depending on relationship and residence, on the value of the property |
| No bilateral treaty | No tax credit for France | Full application of Article 750 ter CGI |
For a French person considering permanently placing a significant part of their real estate assets in Costa Rica, estate planning must therefore take into account both Costa Rican law (successions governed by local law) and French law (inheritance tax, forced heirship, worldwide taxation).
Conclusion: An Attractive Real Estate Tax System, Provided You Think “Dual System”
Costa Rica offers a generally appealing real estate tax environment: a moderate 0.25% property tax, no inheritance tax, a capital gains exemption for primary residences, a 15% rate on investment capital gains, and the possibility, for older properties, to opt once for a reduced 2.25% rate on the sale price. Add to that a territoriality regime that ignores foreign-source income, and it’s easy to see why many French people are drawn to it.
If you remain a French tax resident, rental income, capital gains, and the value of a Costa Rican property must be reported in France without a double-taxation treaty, exposing you to additional taxation despite limited unilateral tax credits.
On inheritance matters, the contrast is equally stark: paradise in Costa Rica, where no tax is levied on transfers, but potentially heavy taxation in France, where the Costa Rican property is treated like any other asset for inheritance tax purposes if the residence conditions are met.
For a French person considering buying, renting, or transferring a property in Costa Rica, the key is not to choose “one system or the other,” but to understand how both overlap. This requires:
– a good grasp of local rules (capital gains, withholding, property taxes, reporting obligations);
– a precise analysis of your tax residence situation;
– anticipation of French consequences, both for income tax, the IFI, and inheritance.
In this context, guidance from a Costa Rican professional for the local side and a French advisor for the domestic and international side is not a luxury but a prerequisite for turning real estate taxation in Costa Rica into a real opportunity, rather than a long-term nasty surprise.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
