Navigating Costa Rica Property Ownership Laws as a US Citizen
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Contents
- The Basics of Property Ownership in Costa Rica
- Watch Out for Maritime Zone Restrictions
- How the Maritime Zone Law Works in Real Life
- Understanding the Different Types of Property Ownership in Costa Rica
- Doing Your Homework Before Buying
- Why You Need a Good Lawyer
- The Step-by-Step Buying Process
- Owning Property Through a Company
- Comparing the Two Main Corporate Types
- Tax Issues for American Property Owners
- Costa Rican Taxes
- US Tax Issues
- If You Rent Your Property
- Common Problems and How to Avoid Them
- Where to Look for Property
- Getting Residency Through Property Investment
- Financing Your Costa Rican Property
- Building on Your Land
- Property Management Considerations
- Wrap-Up: Protecting Your Investment
- Securing Your Financial Future Beyond US Borders
Costa Rica’s emerald jungles and pristine beaches beckon millions in Foreign Direct Investment (FDI) each year, offering the promise of both paradise and profit. But beneath the swaying palms lies a property ownership system with critical differences from the US model.
Before committing your hard-earned dollars to that dream vacation home or retirement getaway, you need to understand these legal nuances. It will help you protect your tropical investment from expensive mistakes.
The Basics of Property Ownership in Costa Rica
Here’s some good news: Costa Rica welcomes foreign investors with open arms.
As an American, you can buy most properties with very few restrictions unless you’re looking at coastal properties (more on that later).
You don’t need to be a resident or citizen, there’s no minimum amount you have to invest, and you can buy as many properties as you want.
The country’s stable political climate makes it a safer bet than many other places in Central America. Costa Rica got rid of its military back in 1949 and instead puts that money into education, healthcare, and protecting the environment. This has created a stable place for foreigners to invest.
But remember, their legal system is different from ours. It’s based on civil law rather than our familiar common law, which means they follow written laws more than court decisions. This takes some getting used to when you’re buying property.
Watch Out for Maritime Zone Restrictions
The biggest thing you need to know about buying in Costa Rica is something called the Maritime Zone. This is a strip of land that runs 200 meters (about 656 feet) inland from the high tide line along all coastlines.
Here’s how it breaks down:
- Public Zone: The first 50 meters from the water is public land. Nobody can own it – not even Costa Ricans.
- Restricted Zone: The next 150 meters have special rules. If you’re a foreigner who hasn’t become a legal resident of Costa Rica, you can’t directly own more than 49% of a property in the Restricted Zone. Americans often use a Costa Rican corporation that’s been incorporated and domiciled in Costa Rica to hold this share, but a Costa Rican citizen or legal resident must own the other 51%.
The Costa Rica corporation gives you control, but it’s not the same as owning it outright. What you really have is called a “concession” – basically a long-term lease from the government.
How the Maritime Zone Law Works in Real Life
The Maritime Zone Law protects Costa Rica’s beautiful coastlines while still allowing some development.
Here’s what it means for you:
- You’ll need approval from the local town (municipality) to develop property in the Restricted Zone.
- These rights typically last 5-20 years but can be renewed.
- You’ll pay yearly fees (instead of traditional property taxes) of 2-5% of the property’s value.
- If you want to sell your concession rights, the government must approve the new owner.
About 5% of Costa Rica’s beaches have special rules that allow private ownership closer to the shore. These exceptions exist mainly in areas that were developed before the Maritime Zone Law was created.
Places like Jaco Beach and parts of the Gulf of Papagayo have beachfront properties that you can actually own outright.
Understanding the Different Types of Property Ownership in Costa Rica
There are two main ways to own property in Costa Rica, and they’re very different from each other.
Regular Ownership (Fee Simple)
This is what most of us think of as “normal” ownership. It’s what you’ll get with most inland properties in Costa Rica. With this type of ownership:
- You own the land and any buildings on it outright.
- You can develop it (following local rules).
- You can sell, rent, or give it away as you please.
- You can leave it to your heirs.
- You pay yearly property taxes of about 0.25% of the registered value.
Concession Property
This is what you deal with in the Maritime Zone. Here’s how it works:
- The government owns the land, but lets you use it for a set period.
- You must follow the rules in your agreement.
- You need government approval to sell your rights to someone else.
- You pay yearly fees of 2-5% of the property’s value.
- You must use the property according to your concession agreement or risk losing your rights.
Concessions need approval from several government agencies and must follow local zoning rules. The yearly fees depend on how you use the property (residential, commercial, etc.).
The Gulf of Papagayo: A Special Case
The Gulf of Papagayo Tourism Project works differently from other coastal areas. According to Costa Rican law, this government-supported development offers:
- Longer terms (typically 50 years instead of the usual 5-20).
- No restrictions on foreign ownership percentage.
- A master plan that ensures good infrastructure and environmental standards.
- Easier approval processes for tourism projects.
While you still technically don’t “own” the land here, the longer terms make it feel more like regular ownership in practice.
Doing Your Homework Before Buying
Before you put down money on any property in Costa Rica, you need to do what’s called “due diligence” – basically, checking that everything is as it should be. This step is super important.
Here’s what you need to check:
- Property Title: Make sure the seller actually owns the property and there aren’t any liens (legal claims) against it. The National Registry (Registro Nacional) keeps track of all property titles.
- Property Survey: Get a recent survey map (called a “plano catastrado“) to confirm the property’s boundaries. This is especially important for undeveloped land.
- Zoning Rules: Check local zoning laws to make sure you can use the property the way you want to (request a Certificación de Uso de Suelo from the local municipality’s engineering department).
- Environmental Regulations: Costa Rica has strict environmental laws. Find out if there are protected areas that might limit what you can do with the property.
- Utilities: Make sure you’ll have access to water, electricity, and other services. These can be limited in remote areas.
More Things to Check
We also suggest these additional checks:
- Access Rights: Make sure the property has legal access to public roads.
- Utility Connections: Verify that water, electricity, and other essential services are available.
- Building Permits: If buying developed property, check that all structures were built legally.
- Tax Status: Make sure all property taxes have been paid.
- Environmental Issues: Check if there are any environmental restrictions that might limit your use of the property.
Remember, the property market in Costa Rica isn’t regulated as strictly as in the US, so these checks are even more important to protect your investment.
Why You Need a Good Lawyer
Getting a qualified lawyer who speaks English and understands Costa Rican property law isn’t just helpful – it’s essential.
Your lawyer will:
- Review all your legal documents.
- Check the property title.
- Draft or review your purchase agreement.
- Work with the seller’s team.
- Handle the closing process.
Watch out for these warning signs in the Costa Rican legal system:
- Lawyers or notary publics who rush you through paperwork.
- Anyone who pressures you to sign documents without proper translation.
- Suggestions to skip the official registration process.
- Requests for unusual payment methods.
Finding a Good Lawyer
Choose someone who:
- Has experience with foreign buyers.
- Is registered with the Costa Rican Bar Association (Colegio de Abogados).
- Can provide references from other American clients.
- Is also a notary public or works closely with one.
In Costa Rica, notaries play a bigger role than in the US. They’re highly trained legal professionals with law degrees, and only they can register property transfers.
The Step-by-Step Buying Process
Buying property in Costa Rica follows these basic steps:
- Sign a Purchase Agreement: This spells out the terms of the sale.
- Pay a Deposit: You’ll typically put down about 10% of the purchase price as earnest money, which may be held by the real estate agent, attorneys, or a trust company.
- Due Diligence Period: You usually get 30-45 days to investigate the property’s legal status and condition.
- Closing: You sign the final documents, and the escrow agent releases the funds.
- Title Transfer: The seller transfers the title to you through a deed signed in front of a notary public.
- Pay Closing Costs: These typically run about 3% to 4.5% of the purchase price.
What You'll Pay at Closing
Budget for these closing costs:
- Transfer tax: 1.5% of the property’s registered value.
- Legal stamps and fees: About 1% of the property value.
- Notary fees: 1 to 2% of the property value, with discounts common for higher-value properties. However, registration costs and legal stamps are based on official tariffs and are not negotiable.
- Registration fees: 0.5% of the property value.
- Legal fees: Usually 1-1.5% of the property value, but can sometimes be more for commercial property.
All together, closing costs typically run between 3.5-4.5% of the property’s registered value but may be as high as 6% depending on several factors. Sometimes buyers and sellers negotiate who pays what.
Owning Property Through a Company
Many Americans choose to hold their Costa Rican property through a local company. These come in two main types:
- Sociedad Anónima (SA): Similar to a C Corporation in the US. Common for property ownership because it allows for easy transfer of shares and offers protection from personal liability. However, for Americans, we recommend extreme caution. Owning property this way can be a bit of a regulatory and tax minefield under US law. Before using this, talk with a professional who can help you figure out if this is right for you.
- Sociedad de Responsabilidad Limitada (SRL): Similar to an LLC in the US. However, unlike the SA, an SRL has a more restrictive structure when it comes to share transferability, making it more suitable for small businesses or families.
The benefits of using a company include:
- Easier property management when you’re not in Costa Rica.
- Potential tax advantages.
- Easier to transfer ownership.
- Added liability protection.
If you go this route, you’ll need to comply with Costa Rican corporate laws, including filing annual reports and tax declarations.
Comparing the Two Main Corporate Types
Sociedad Anónima (SA):
- Needs at least two shareholders.
- Run by a board of directors.
- Ownership is through transferable shares.
- More complex administrative requirements.
- Can be a tax and reporting minefield under US law.
Sociedad de Responsabilidad Limitada (SRL):
- Needs at least two members.
- Run by managers (not a formal board).
- Ownership is through quotas (harder to transfer).
- Simpler to administer.
Most professionals recommend the SRL for Americans looking to buy Costa Rican property for personal use because it’s simpler to run. However, SRLs do have stricter rules for transferring ownership interests (“quotas”) and usually require unanimous consent from members to add a new owner, which could make future changes more complicated.
Tax Issues for American Property Owners
Owning property in Costa Rica means dealing with taxes in both countries:
Costa Rican Taxes:
- Property tax: 0.25% of the registered property value each year.
- Luxury home tax: An extra 0.25-0.55% for properties worth over about $250,000 (but does not apply if you only own vacant land).
- Capital gains tax: 15% on profits when you sell (with some exceptions).
The property tax in Costa Rica is much lower than what you’re probably used to in the US. It’s based on the registered value of your property, which is often less than the actual market value. You’re responsible for declaring your property’s value every 5 years by submitting a form to your local municipality. However, in practice, many owners do not update the declared value, and enforcement by municipalities is often lax. This can result in properties being under-assessed, which lowers annual tax bills—but may lead to reassessments if the value is ever reviewed.
The luxury property tax only applies to properties valued over approximately $250,000. It’s worth noting that if you only own land without any buildings, you don’t have to pay this tax at all. But once you build on the land, you’ll pay the luxury tax on the total value of both your land and building if it exceeds the threshold.
US Tax Issues:
- You must report certain foreign financial assets under FBAR and FATCA—but real estate held in your name is generally excluded. However, if you own foreign real estate through a company or trust, you may have additional reporting obligations. You may owe US tax on rental income.
- You’ll likely owe capital gains tax when you sell.
As a US citizen, you’re required to report your worldwide income no matter where you live.
This means filling out additional forms like the Foreign Bank Account Report (FBAR) if your foreign accounts total more than $10,000 at any point during the year. You’ll also need to comply with the Foreign Account Tax Compliance Act (FATCA) if your foreign assets exceed certain thresholds.
The US tax system follows you wherever you go, which is different from most other countries that only tax residents on their local income. This creates a more complicated tax situation for Americans abroad that requires careful planning and professional guidance.
FBAR Penalties & Other Dangers of Hiding Offshore Assets
All about FBAR penalties, how the IRS finds hidden offshore accounts, and legal ways to protect your international assets: FBAR penalties.
If You Rent Your Property
If you plan to rent out your Costa Rican property:
- Costa Rica applies a flat 15% tax to 85% of all of your rental income. Short-term rentals (generally under 30 days) are subject to an added 13% Value Added Tax (VAT). Long-term rentals over 30 days are usually exempt from this extra 13%.
- As a US citizen, you must report this income to the IRS.
- You may be able to deduct some expenses on both Costa Rican and US tax returns.
- Property management companies usually handle the Costa Rican tax withholding.
Many Americans buy property in Costa Rica as an investment, renting it out to tourists or long-term tenants when they’re not using it themselves. This can provide a steady income stream and help offset the costs of ownership. Popular areas like Tamarindo and Manuel Antonio have strong rental markets, especially during the high tourist season from December to April.
For the best tax planning, talk to professionals who know both US and Costa Rican tax systems. Getting the structure right from the beginning can save you a lot of money over time and prevent headaches with either tax authority.
Common Problems and How to Avoid Them
Look out for these potential issues when buying property in Costa Rica:
- Unclear titles: Always have your lawyer do a thorough title search.
- Boundary disputes: Get a professional survey to confirm where the property lines are.
- Environmental restrictions: Make sure your development plans follow Costa Rica’s strict environmental laws.
- Maritime Zone confusion: Know whether your property falls in the Maritime Zone and what restrictions apply.
- Zoning violations: Check that your plans match what’s allowed by local zoning laws.
Where to Look for Property
Costa Rica offers diverse regions that appeal to different buyers. Some of the most popular areas for Americans include:
- Tamarindo: A popular beach town with great surfing and lots of expats.
- Manuel Antonio: Known for its national park and beautiful beaches, with land offering ocean views or jungle settings.
- Playa Hermosa: A quieter beach area with both beachfront and hillside lots.
- Jaco: A beach city with good infrastructure and year-round tourists.
- Escazu: An upscale suburb of San José, close to the capital’s amenities.
Property prices vary a lot depending on location. As of early 2025, listings for luxury single-family homes range from as low as a few hundred thousand to millions in areas like Tamarindo.
Popular beach areas like Tamarindo and Guanacaste generally cost more because they have better infrastructure and are popular with expats. More remote locations are cheaper but typically increase in value more slowly.
Getting Residency Through Property Investment
Buying property in Costa Rica doesn’t automatically make you a resident, but it can open the door. Costa Rica offers an investor residency program (known as the “inversionista” visa) that can eventually lead to permanent status and possibly citizenship.
To qualify, you need to invest at least $150,000 in Costa Rica, which can include real estate, as long as the registered value—not just the market price—meets or exceeds that amount. Improvements like buildings must also be properly registered with the Municipality and National Registry to count toward the total investment. Once you’ve bought your property, you can apply for residency under this category.
This process requires:
- Proof of your investment.
- A clean police record from your home state.
- Health insurance that covers you in Costa Rica.
All documents from outside Costa Rica need to be authenticated (apostilled).
The investor residency is temporary for the first three years. During this time, you only need to spend one day a year in Costa Rica to keep your status.
After three years, you can apply for permanent residency if you meet certain conditions. Permanent residency gives you more freedom to work and own property, and puts you on a path to possible citizenship.
Financing Your Costa Rican Property
Getting a mortgage in Costa Rica as an American is tough. Local banks rarely approve applications from foreigners, even if you have a large down payment and good credit.
Instead, you might consider:
- Using an international lender that specializes in overseas property.
- Using retirement funds to buy land through a self-directed IRA (complex).
- Seller financing (though these are usually short-term).
- Cash purchases (most common).
Financing through Costa Rican banks is rarely available to foreigners, which is why many Americans use these alternative approaches.
Building on Your Land
If you want to build on your Costa Rican property, you can save money by managing the project yourself instead of hiring a general contractor. By buying materials directly and hiring workers yourself, you could save 20-30% on construction costs.
Keep in mind that this approach means spending more time overseeing the project and developing local connections to make it work. When planning any construction, you’ll need to understand the local building rules and permit process, which vary from town to town.
Costa Rica’s environmental laws are especially strict, particularly for projects near protected areas or water sources. Before starting any construction project, you’ll need to verify zoning regulations and obtain the necessary permits from the local municipality.
The building process may differ from what you’re used to in the United States, so patience and reasonable expectations about timelines is important. Working with experienced local professionals who understand both the permitting process and construction practices in Costa Rica can help your project proceed more smoothly.
Property Management Considerations
When you own property in Costa Rica but don’t live there full-time, you’ll need to consider how to maintain and secure your investment while you’re away. Many property owners choose to work with property management companies, especially if they plan to rent their property.
These professionals can help with maintenance, security, and handling rental arrangements if you decide to use your property as an income source. This is particularly important in tropical climates where regular maintenance is necessary to prevent issues related to humidity, rainfall, and vegetation growth.
Tourism is a significant driver of Costa Rica’s economy, making rental properties in popular areas like Tamarindo, Jaco, and Manuel Antonio potentially profitable investments. If you’re considering this option, working with experienced local property managers is often recommended.
Wrap-Up: Protecting Your Investment
Buying property in Costa Rica can be a great move if you prepare properly. To protect your investment:
- Work with professionals you can trust, including a qualified lawyer and real estate agent.
- Do thorough checks on any property before buying.
- Understand the difference between regular ownership and concessions.
- Plan for property management when you’re not in Costa Rica.
- Develop a tax strategy that addresses both US and Costa Rican obligations.
By taking these precautions, you can join thousands of Americans who’ve successfully bought property in Costa Rica and are enjoying their own piece of paradise.
With its stable democracy, amazing natural beauty, and welcoming attitude toward foreign investors, Costa Rica remains one of the most attractive places for Americans looking to buy property internationally. Whether you want a vacation home, a retirement destination, or an investment opportunity, Costa Rica offers many options to match your goals and budget.
Securing Your Financial Future Beyond US Borders
Ready to explore how Costa Rican property might fit into your broader wealth protection strategy?
Talk to a Nestmann Associate about your international investment plans. Our team has decades of experience helping Americans protect their assets through international diversification.
Contact us today for a no-obligation consultation and take the first step toward securing your financial future beyond US borders.
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We have 40+ years experience helping Americans move, live and invest internationally…
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We have 40+ years experience helping Americans move, live and invest internationally…
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