Buying Property in Costa Rica as an American: The Complete Guide for 2025
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Contents
- Why Americans Are Buying Property in Costa Rica
- Can Americans Legally Own Property in Costa Rica?
- How to Own Property in Costa Rica: Your Options
- The Property Buying Process in Costa Rica
- 1. Do Your Homework First
- 2. Use an Escrow Agent
- 3. The Buying Steps
- 4. Extra Costs to Budget For
- Common Problems and How to Avoid Them
- Tax Facts You Need to Know
- Avoid the Estate Planning Nightmare
- Costa Rican Taxes
- How to Protect Your Heirs
- Practical Matters: Managing Your Slice of Paradise
- Property Management Reality Check
- Banking and Financial Practicalities
- Residency: Not Required, But Worth Considering
- The Bottom Line
Clients often ask us about buying property in Costa Rica. Is it legal? Is it safe? What about taxes? And how should they structure ownership to protect themselves?
The truth is, Costa Rica has become one of the most popular destinations for Americans looking to own a slice of paradise abroad. With its pristine beaches, lush rainforests, and stable democracy, it’s easy to see why so many are drawn to this Central American gem.
But here’s the thing – while buying property in Costa Rica is absolutely doable for Americans, there are complexities you need to understand before taking the plunge. Choose the wrong ownership structure, skip proper due diligence, or misunderstand the tax implications, and you could face unnecessary headaches down the road.
In this article, we’ll walk you through everything you need to know about purchasing property in Costa Rica as an American citizen, based on our expertise and experience actually helping clients do this. We’ll cover the legal frameworks, ownership structures, potential pitfalls, and practical considerations to help you make an informed decision about your tropical investment.
Why Americans Are Buying Property in Costa Rica
Why are so many Americans buying property in Costa Rica? Here’s what makes it so attractive:
- Political Stability: Costa Rica has no army and enjoys peaceful democracy. It’s one of the most stable countries in Latin America.
- Natural Beauty: With beaches on two coasts, rainforests, and mountains, Costa Rica’s natural beauty is hard to beat.
- Great Climate: You can choose between warm beach towns or cooler mountain areas. There’s a climate for everyone.
- The “Pura Vida” Lifestyle: Costa Ricans are among the happiest people in the world. Their relaxed “pure life” approach is a welcome change from the American rat race.
- Equal Property Rights: Americans can own property with the same rights as locals (with a few exceptions we’ll cover later).
- Good Investment: Property in developing areas can grow in value, especially in popular tourist spots.
- Rental Income: If you’re not living there full-time, you can rent your property to tourists and earn good money.
Can Americans Legally Own Property in Costa Rica?
Yes, Americans can legally own property in Costa Rica. In fact, foreigners enjoy the same property rights as Costa Rican citizens with just one major exception: beachfront concession properties.
The Maritime Zone Exception
The primary limitation concerns properties in the Maritime Zone (Zona Marítima Terrestre), which extends 200 meters inland from the high-tide line along both coasts:
- The first 50 meters from the high-tide line is public land that cannot be owned by anyone.
- The next 150 meters may be leased through concessions, but with restrictions for foreigners who have less than 5 years of residency.
For most properties away from this coastal strip, Americans face no ownership restrictions.
How to Own Property in Costa Rica: Your Options
How you own your Costa Rican property matters a lot. It affects your taxes, your liability, and what happens when you die.
Here are your main options:
1. Direct Personal Ownership
This means buying the property in your own name.
Pros: Simple and straightforward.
Cons: No protection from lawsuits and your heirs will face Costa Rican probate when you die.
2. Costa Rican Corporation (S.A.)
This is like a traditional US corporation with a board of directors.
What you need to know:
- Needs 2 people to start the company.
- Requires at least 3 board members plus a Comptroller.
- Ownership can be transferred to one person later.
Why it’s not great for Americans:
- The IRS treats it as a Controlled Foreign Corporation (CFC), creating tax headaches.
- You can’t make it a pass-through entity for US taxes.
- Finding trustworthy board members can be difficult.
3. Costa Rican LLC (S.R.L. or "Limitada")
Costa Rica’s S.R.L. is similar to a US LLC, offering limited liability and a flexible structure. It’s widely used by Americans for tax and estate planning when holding assets in Costa Rica.
The basics:
- Starts with 2 people but can change to just one owner.
- Uses managers instead of a formal board.
Why Americans like this option:
- Can be treated as a pass-through entity for US taxes
- Simpler structure with fewer required positions.
- Helps avoid probate issues.
- Better for estate planning.
Most American buyers find the S.R.L. to be the best overall option.
Note: Both S.A.s and S.R.L.s may be considered CFCs under US tax law, but only S.R.L.s can often be classified as a “disregarded entity” or partnership through proper IRS elections.
4. Trust (Fideicomiso)
Works like a US trust for asset protection and estate planning.
Key points:
- Requires hiring a government-regulated Trustee Agency.
- Great for estate planning.
- Strong asset protection.
- More expensive than other options.
Think of the trust as premium protection that costs more but offers special benefits.
Navigating Costa Rica Property Ownership Laws as a US Citizen
Learn how US citizens can navigate Costa Rica’s property laws, avoid common pitfalls, and protect their tropical real estate investments. More here: Costa Rica property ownership laws.
The Property Buying Process in Costa Rica
1. Do Your Homework First
Many buyers skip thorough research because they’re excited. Don’t make this mistake. Before buying:
Check the Title
- Have an attorney search for any liens, claims, or ownership disputes. It’s not uncommon to have multiple claims on the same plot of land, especially in more rural areas.
Get a Property Survey
- Property lines in Costa Rica can be unclear. A professional survey (plano catastrado) is essential.
Research Zoning Rules
- Make sure you can build what you want. Each area has different rules, and environmental laws can be strict.
Check Utilities
- Don’t assume you’ll have reliable water, electricity, internet, or road access. Verify everything.
Look for Tax Issues
- Check for unpaid property taxes and understand what you’ll owe.
Inspect Existing Buildings
- For properties with structures, get professional inspections.
2. Use an Escrow Agent
Always use escrow for your purchase. This:
- Keeps your money safe until all conditions are met.
- Protects against fraud.
- Creates a clear closing process.
- Provides security for international deals.
Costa Rican escrow accounts are regulated by the government banking authority.
3. The Buying Steps
Here’s what happens in a typical purchase:
Sign a Purchase Agreement
- This sets the price, timeline, and any conditions.
Pay a Deposit
- Put down earnest money in escrow to show you’re serious.
Complete Due Diligence
- Take about 45 days to investigate everything.
Accept the Property
- After checking everything, formally accept the property.
Close the Deal
- Sign documents and release funds from escrow.
Transfer the Title
- The title transfers through a notary public.
Note: In Costa Rica, notaries are licensed attorneys with special authority to execute legal documents — unlike the limited function of notaries in the U.S.
Register the Property
- Record the transfer with the National Registry.
4. Extra Costs to Budget For
Besides the purchase price, prepare for:
- Transfer tax
- Registry stamps
- Notary fees
- Legal fees
- Escrow fees
Common Problems and How to Avoid Them
Buying property in Costa Rica comes with risks. Here are the biggest problems and their solutions:
1. Title Problems
- The Problem: You buy property only to find someone else has a legal claim to it.
- The Solution: Hire a reputable firm to do a complete title search at the National Registry.
2. Boundary Issues
- The Problem: Your property is smaller than you thought, or boundaries are different from what was shown.
- The Solution: Get a professional survey and walk the property lines with your attorney before buying.
3. Utility Problems
- The Problem: Your property doesn’t have reliable water or electricity.
- The Solution: Check all utilities in person and get written proof from utility companies.
4. Zoning Surprises
- The Problem: After purchase, you learn you can’t build what you wanted.
- The Solution: Check municipal regulations beforehand and get written confirmation.
5. Tax Issues
- The Problem: The IRS penalizes you for not reporting your foreign property correctly. If your US accountant mishandles foreign income reporting or fails to apply foreign tax credits, you could end up being taxed twice on rental income.
- The Solution: Work with tax professionals who know both US and Costa Rican tax laws.
6. Double Taxation
- The Problem: Your accountant in the US doesn’t know how to properly account for offshore property and you end up taxed twice on rental income from your Costa Rican property.
- The Solution: Work with tax professionals who know both US and Costa Rican tax laws.
7. Inheritance Complications
- The Problem: Your heirs face years in Costa Rican courts to inherit your property.
- The Solution: Set up the right ownership structure (S.R.L. or trust) from the beginning.
Helping you through the entire process is a service we offer. If you’re thinking about property in Costa Rica, feel free to get in touch to see if we’re the right fit to guide you through from start to finish.
Tax Facts You Need to Know
Buying property in another country doesn’t free you from US taxes. Instead, you’ll have two tax systems to deal with.
Costa Rican Taxes
The good news is that Costa Rica’s property taxes are low:
- Property Tax: Much lower than US rates
- Luxury Home Tax: Only for higher-value properties
- Capital Gains: You’ll pay taxes when you sell at a profit
- Rental Income: You have two options:
- Capital gains approach: Lower rate on most of your net income
- Ordinary income approach: Higher rates but more deductions allowed
US Tax Obligations
The IRS still wants its share:
- FBAR Filing: Required for Costa Rican bank accounts over certain amounts.
- FATCA Reporting: You must report certain foreign assets over certain thresholds.
- US Income Tax: All worldwide income gets reported, including rental income.
- Capital Gains Tax: When you sell, the IRS expects its cut.
The US-Costa Rica tax treaty helps prevent double taxation, but you’ll still need professional help. Don’t try to handle this yourself.
Getting the Structure Right
How you own your property directly impacts your taxes. An S.R.L. with the right IRS elections is often the most tax-friendly choice for Americans.
Remember: Costa Rica only taxes income earned inside the country, but the US taxes citizens on worldwide income no matter where it comes from.
Avoid the Estate Planning Nightmare
Here’s a situation you don’t want: You enjoy your Costa Rican property for years, then pass away, leaving your family with a multi-year legal battle in a foreign country just to inherit it.
This happens to many Americans who don’t plan ahead.
Costa Rican Taxes
There are two types of probate in Costa Rica:
Judicial Probate (The Worst-Case)
- Needed if anyone contests the will or if minors are involved
- Can take up to 10 years
- Very expensive in legal fees and taxes
Notary Probate (The Better Option)
- Administrative process through a notary
- Still takes several months
- Requires an executor to transfer assets
- Still costs a lot of money
For even a modest property, your heirs could face substantial legal fees plus transfer taxes. During this time, they may not be able to use or sell the property.
How to Protect Your Heirs
Here’s how to avoid this mess:
- Choose the Right Ownership Structure: An S.R.L. or trust makes things easier.
- Share Ownership: With an S.R.L., give at least a small percentage to family members instead of owning 100% yourself.
- Consider a Trust: Though more expensive, a Costa Rican trust offers the smoothest transfer.
- Have a Clear Will: Make sure your will specifically mentions your Costa Rican assets.
Spending money on proper planning now will save your family a lot more money and stress later.
Practical Matters: Managing Your Slice of Paradise
Property Management Reality Check
If you won’t be living in Costa Rica year-round (and most Americans don’t), you’ll need a plan:
Professional Management Is Worth Every Penny
The tropical climate can wreak havoc on unattended properties. Mold, insects, and deterioration happen at warp speed compared to most US climates. A good property manager will:
- Conduct regular inspections
- Handle preventative maintenance
- Oversee security
- Manage rentals if desired
- Deal with unexpected emergencies
The Rental Opportunity
Many owners offset costs by renting their properties when not in use. This can range from occasional rentals to a full-time income strategy. If this interests you, look for properties in high-demand tourist areas and be realistic about occupancy rates and costs.
Security Considerations
While Costa Rica is generally safe, unoccupied properties can be targets. Consider:
- Security systems with remote monitoring
- Regular property checks
- Community or building security where available
- Proper insurance coverage
Banking and Financial Practicalities
The Banking Challenge
Thanks to increasingly stringent anti-money laundering regulations, opening a Costa Rican bank account as a non-resident has become more difficult. Options include:
- Working with banks that specialize in serving foreign clients.
- Using a limited Power of Attorney for a local representative.
- Establishing residency to simplify banking.
- Using US-based accounts that offer favorable international terms.
Currency Considerations
While many transactions in tourist areas happen in US dollars, property taxes and utilities are typically paid in Costa Rican colones. Plan for potential currency fluctuations in your budget.
Residency: Not Required, But Worth Considering
You don’t need residency to own property, but it can make life easier. Popular programs include:
Pensionado (Retiree) Program: For those with reliable pension or retirement income.
Rentista Program: For those who can demonstrate a steady, passive income from investments, rental properties, or other non-salaried sources.
The Bottom Line
Buying property in Costa Rica can be one of your best decisions – if you do it right. The key is good planning and going in with eyes wide open.
Most problems happen when buyers rush through research, pick the wrong ownership structure, or ignore tax and estate planning. With professional help, these problems are avoidable.
Your tropical paradise needs more than just a purchase – it needs protection. Working with experts who understand both US and Costa Rican systems will cost money upfront but save you much more in the long run.
We’ve helped Americans protect their wealth for decades. Our experience shows that with the right setup, Costa Rican property can provide years of enjoyment, income potential, and portfolio diversification. Whether you’re new to the market or you already have an existing property and want to make sure it’s properly protected, feel free to get in touch and put our expertise to work for you.
About The Author
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We have 40+ years experience helping Americans move, live and invest internationally…
Need Help?
We have 40+ years experience helping Americans move, live and invest internationally…
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