Stable Government and Currency
Costa Rica is a democratic republic with three branches of government and has enjoyed one of the most democratic governments in Latin America. As of 1948, Costa Rica abolished its army and since 1949 has enjoyed its peaceful democratic existence, often being referred to as the “Switzerland of Central America”. The government is one of the people and one that very much sees the value of tourism. Over the past few years the government has incentivized foreigners to come and retire in Costa Rica. Stable government ensures that the money you put into your property is safe.
The stability of the government has helped to maintain a solid and stable currency. The Costa Rican colon, also denoted as CRC is the official currency of Costa Rica. (Currently $1 USD = 516.245 CRC). Colones come in notes of 1,000 up to 10,000. US Dollars are also accepted as legal tender in Costa Rica. Both are widely accepted and exchanged throughout the country with approximately 90% of the places of business in the country accepting the US Dollar.
Capital gains taxes in Costa Rica are exempt for a business if the money is derived from an activity that is not the normal course of business for the company (This exemption is established through the use of SA, or Sociedad Anonima). Property tax rates are significantly lower in Costa Rica than most places in the world. As a result people are buying in Costa Rica which increases demand and ultimately increases value.
Corporate taxes are very low in Costa Rica as well. Ninety percent of all property in Costa Rica is purchased through these S.A.’s. When a property owner purchases property through these S.A.’s they use a shareholder’s loan to fund the purchase. Rental income generated is taken out of the corporation as dividend income and deducted against the initial investment and thus no taxes are paid. As far as income taxes, only income generated in Costa Rica is subject to income tax. Costa Rica offers large amounts of income to be deductible and free from any tax.
Costa Rica has a very healthy local economy. There are no ownership restrictions in Costa Rica. Foreign Ownership is promoted in the country of Costa Rica. In many foreign countries fee simple title is only available to locals and without titled ownership your investments can be at great risk. All foreigners enjoy the same rights as Costa Ricans when it comes to real estate ownership. Titled, fee simple properties are all registered in the National Registry of Costa Rica properly protecting your ownership rights.
Costa Rica also has an excellent lending market. Prior to 2006, there was no market for lending in Costa Rica and investors bought and sold property on a cash basis. With the recent surge by worldwide and US lenders as well as the strengthening of the Costa Rican market, financing at reasonable rates is now an available option. This addition to the real estate industry has made it possible for many more investors to buy property in Costa Rica and will only increase the demand over time.