In 2018 Costa Rica was ranked the fifth best economy to do business in Latin America. In the last year, Costa Rica has had two reforms which made it easier for foreign investors to do business in the country, and there are laws in place protecting their investment. The time it takes to start a company in Costa Rica is significantly less than in past years. In this article, we will explain the five essential aspects you should know when forming a company / legal entity.
1. Banking in Costa Rica
Opening bank accounts in Costa Rica is relatively easy. Companies are able to open bank accounts using the national currency, US dollars or even Euros. However, a new anti-money laundering law means that there are new requirements that must be met before approval is granted.
If your company is going to make transactions of over USD$1500, you´ll need to provide the bank with documental proof of the nature and purpose of the transactions. It is useful and encouraged that you provide certificates of income from accountants, business licenses and permits. For accounts with transactions of less than this amount, the bank requires no special documentation.
Before opening a corporate bank account in Costa Rica, it is best to have a good understanding of the Costa Rican banking system.
2. Costa Rica´s Corporate Tax Policy
Companies in Costa Rica pay an established annual fee from the moment of incorporation, whether they do commercial business or not. The company must be incorporated as an active agent of commerce and present monthly and annual reports. One big advantage of doing business in Costa Rica is that the Law does not require payment of taxes from activities done outside the country.
3. Types of Companies Structures in Costa Rica
There are many types of companies to do business in Costa Rica. The type of companies created will vary depending on what you need and what business plan you have, with the most common being the ¨Sociedad Anónima¨ and the ¨Sociedad de Responsabilidad Limitada¨
There are many types of company structures that foreign investors in Costa Rica can choose from. It is important to carefully consider which model will best suit your business plan. The most common two choices are the “Sociedad Anonima” and the “Sociedad de Responsabilidad Limitada”.
¨Sociedad Anonima¨ / Corporation
The advantages of establishing a Sociedad Anonima (S.A) are numerous. They are very easily created, you do not require any type of shareholder’s registry and the shareholder´s bookkeeping is kept private. In order to establish the S.A, there must be two shareholders, however, all shares can be held by one person after incorporating the company.
An annual fee must be paid whether it is a commercially active company or not. Four board members are required.
“Sociedad de Responsabilidad Limitada” (SRL) / Limited Liability Company
An SRL has a very similar structure to an S.A. It can also be easily created, it also does not require a shareholders registry and the bookkeeping again is private. Shares also must be held by only one person after incorporation. The administration is carried out by a manager, however, more managers or sub-managers can be appointed. An annual fee must be paid irrespective of whether it is a commercially active company or not.
4. Legal Representation
All companies must have at least one legal representative residing in the country, if not, a lawyer must be appointed as a Resident Agent (‘agente residente‘).
5. Outline Company’s Bylaws
Company’s activities must be carefully outlined to portray any activities done by the company, be it commercial or administrative. The only restrictions in Costa Rica are for companies managing third-party capital as they require special authorization. Changing the bylaws requires many expenses like a Public Notary, publication on a national paper and registration fees, so a basic guideline is strongly recommended beforehand.
¿Thinking of Doing Business in Costa Rica?
Doing business in Costa Rica is easy and fast, accessible private and public banks offer a wide array of account currency compared to other countries in Latin America, however, it can turn challenging if the right preparatory steps are not made. Our group of local experts and professionals can help you navigate Costa Rican legislation and assist in setting up your business with tailored legal and accounting services. Contact our country manager in Costa Rica here for more information.
Watch the following video to learn more!