Setting up a business in Costa Rica is a reasonably straightforward process if you have the right local support and assistance. The business environment is full of viable commercial opportunities and the government has created policies which both encourage and support foreign investment in the region. Additionally, Costa Rica is strategically located, with easy access to large northern and southern American markets.
See below some interesting facts about Costa Rica which make the business environment that much more welcoming:
- A stable and thriving economy
- A diverse range of sectors to invest in
- An educated population, with many being bi-lingual (English/Spanish)
- Some of lowest levels of corruption in the region
- 100% foreign ownership of local business permitted
- Various and strategic treaties and bilateral investment agreements
For these reasons plus more, Costa Rica is and remains one of the great Latin America countries to invest in. Keep reading and learn about the key steps involved when setting up a local Costa Rican business and some of the key corporate compliance requirements that must be followed in order to remain in good standing with the local authorities.
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Business Setup in Costa Rica.
Taking into account that the process of registering an existing company (as a branch office) can be somewhat complicated, our professional advice, in most cases, is to register a new local company that would only require a few documents and has a shorter company incorporation timeline.
To give you a bit of background information on legal entities (companies) in Costa Rica, 100% foreign ownership is allowed in Costa Rica and the best type of legal entity is the SA or the SRL, which allow for the initial company capital to be in any foreign currency. However, the type of legal entity you wish to establish will be based on your business needs and requirements in the country.
See below some characteristics of The Corporation/Joint Stock Company (Sociedad Anónima – S.A) in Costa Rica – the most common form of legal entity in Costa Rica:
- Allows two or more shareholders.
- Can be 100% foreign owned.
- Shareholders are liable according to the amount of capital they have invested in the company.
- When forming this type of company, different kinds of business activities can be recorded in spite of the fact that only a few of them will be executed.
- Can sponsor the visa of foreign employees.
- No minimum share capital required.
- The formation of an SA takes approximately 4-6 weeks once all required documentation has been received and submitted.
- The SA can sell and trade shares on the public stock market.
Following on from this, please find below the basic steps to incorporate an SA in Costa Rica:
- Draft and Sign a Power of Attorney (POA) – this allows a local partner to incorporate the company on your behalf.
- Create and sign the company bylaws.
- Register the company with all relevant government authorities.
- Obtaining a local company tax ID number.
- Open a corporate bank account.
- Deposit of the minimal capital to activate the corporate bank account.
There are a number of different types of legal entities in Costa Rica, and the decision to chose one or the other will be based on your planned business activities
Corporate Requirements in Costa Rica.
All companies in Costa Rica must meet some minimum statutory requirements, which include the following:
- Appoint a legal representative in Costa Rica (this can be a foreigner individual).
- Register a fiscal/legal address in Costa Rica.
- File monthly tax declarations with the national tax authority.
If the company legal representative is not located within Costa Rica, a resident agent must be appointed. The resident agent must be a Costa Rican lawyer whose role to receive legal and administrative notifications. Many companies owned by foreign persons choose to hire the services of a local group who can assist with the above requirements – ensuring 100% corporate compliance when operating in Costa Rica.
Key Questions to Consider Before Setting Up a Local Business.
Some important questions that all individuals and companies need to consider before setting up a local business in Costa Rica are as follows:
- What will the specific company business activities be? This can affect the type of legal entity that you can operate under.
- Does the company plan to hire local employees?
- Does the company you plan to hire foreign employees?
- What will the company shareholder structure look like? Will the shareholders be natural or legal persons (i.e individuals or companies)?
- Will you need to hire the support of a local company to ensure corporate compliance?
Local Support in Costa Rica.
Simply put, Costa Rica is a great region to invest in. The region is full of exciting business opportunities and many foreign individuals and companies are experiencing great commercial success operating in the region. If you are thinking of expanding your business to Latin America, Costa Rica should be at the top of your list. From the agriculture sector to the exportation of medical devices, to tourism, Costa Rica has a diverse range of sectors to invest in.
While the business setup process of a local company is relatively straightforward, it is important to work with a local partner to ensure there are no hiccups and to mitigate local bureaucracy. In addition, to support with incorporating a local business, a partner in Costa Rica can provide guidance of in-country regulations, can assist with bookkeeping and even help with hiring and requirement.
Reach out to Biz Latin Hub today and see how we can support your business expansion to Costa Rica.
Setting up an offshore company is a great business structure for both asset protection and wealth management. Check out the short video below and see the advantages an offshore company could bring your business.