Tax Time: What You Need to Know for your Costa Rica Short Term Rental
Let’s talk taxes for your Costa Rica Short Term Rental. Costa Rica has its own tax system, and while it’s pretty straightforward, it’s important to get it right to avoid any nasty surprises. Here’s what you need to keep in mind:
1. Income Tax
Your rental income is subject to Costa Rican income tax. You’ll need to file an annual tax return, and the rate will depend on your total income and how your rental income is categorized. Costa Rica uses a progressive tax system, so the more you earn, the higher the rate. It’s a good idea to work with a local accountant who can help you navigate these waters and ensure you’re paying what you owe without any hiccups.
2. Value Added Tax (VAT)
Yes, even in paradise, there’s VAT to consider. For short-term rentals, VAT (known locally as IVA) applies. This tax is typically 13% and should be included in the rental price you charge your guests. You’ll need to collect this tax and remit it to the government. Don’t worry, your accountant can help you with the specifics here, too.
3. Property Tax
Costa Rica has an annual property tax, which is relatively low compared to other countries. It’s based on the value of the property, and while it’s not a huge expense, it’s still something you’ll need to budget for. Make sure to stay on top of this to avoid any late fees.
Practical Tips for Success
Hire Local Experts: Navigating legal and tax issues in a foreign country can be tricky. Partnering with a local lawyer and accountant can save you time and help you avoid costly mistakes.
Stay Informed: Laws and regulations can change. Keeping up with local news and updates from the ICT can help you stay compliant.
Documentation: Keep meticulous records of all income and expenses related to your rental. This will not only make tax time easier but also help you track the financial performance of your property.
With a little preparation and the right team on your side, you’ll be well on your way to enjoying your tropical investment. We have experts on our team to help you with your Costa Rica Short Term Rental taxes. Our property management team is a one stop shop to make owning your vacation property as easy as possible. Let's Talk!
