Paying Property Taxes in Granada

It is that time of year again to pay property taxes though it is a less painful process here in Granada. Please remember that I am not an expert financial analyst and no one here is expert at Nica taxes.

When you purchase your home or property here, at the closing you receive an unregistered deed (testimonio) and the plano (survey) of your property. In the past usually none of your documents actually showed the real purchase price so you may purchase a home for $100,000 but the documents may have showed it as $50,000.

Currently, the banks and legal community are pressing everyone to document the full purchase price because of the difficulty of showing a sales document of $50,000 but you are depositing $100,000 in your account upon a property sale. This also helps the property transfer tax to be more accurate since it is 1% of up to $50K value, 2% for a value of over $50K up to $100K and 3% over $100K. I heard they added another tier but not sure what it is, possibly 4% over $200K.

Anyway, in the weeks or months following the closing, your registered deed is being prepared and a city inspector looks at your new property to determine the catastral value which will be the basis for the annual property tax. Treat the inspector well since he or she is determining your property value base. For example, my home is valued between $200-$250K but the recorded catastral value is $30,000.

I went to city hall yesterday to pay my property taxes. Be sure to bring last year’s property tax papers. First you go to the cashier and ask for the form to pay your property taxes which costs 10 cordobas ($1=24 cordobas). Then you go next door and give them your new form and your previous year’s tax calculation papers. They must have upgraded their computer system since the gentleman returned in less than five minutes with my new tax calculations. Then the city clerk fills out your new form with the figures from the tax calculations. You sign the form then go back to the cashier and pay your taxes in dollars or cordobas. Hmmmmm, not bad.

Here are my Granada property taxes. The catastral value of my home was $30,000 and we have lived here for almost seven years. An interesting thing here is that each year they devalued my home so the tax base was lower each year but they must have realized they were losing taxes so for the first time, the home value remained the same. So the appraised value of my home in cordobas is C$729,153 which makes me feel very wealthy. In Granada we pay taxes on 80% of the catastral value so the tax base is C$583,323. Since the property tax rate is 1% then my taxes are C$5,833. But wait, if you pay for the 2012 taxes by March 31st 2013 then you get a 10% deduction. Kind of like buying clothes at Kohl’s department store back home. Everything on this rack is 40% off but today you get another 20% off unless you use the Kohl’s credit card and receive another 10% off.

So my actual taxes were C$5,250 (a little under $220). Counting the inflation rate of the cordoba, taxes keep going down unless you buy a new home with the higher valuations. Not bad! The first year we were here we paid almost $280 and now we are paying less than $220. Remember to treat the city inspector and the city clerks well because they can adjust the values anyway they wish. We have friends that are paying less each year like us and some are paying much more.

Welcome to Nicaragua!