If you are planning to do business in Costa Rica or intend to domicile there, you will need to be aware of the financial compliance regulations in the country.
It is important to understand this before starting business in Costa Rica, as failure to comply with financial regulations can cause legal problems or lead to financial penalties.
Financial regulatory compliance is a crucial aspect of corporate compliance, and one of the key services offered as part of a corporate secretarial services package.
If you are considering incorporating a company in Costa Rica, the following guide will give you an overview of the regulatory requirements that your company must comply with.
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Costa Rica offers a wide array of investment opportunities
“Costa Rica is a success story in terms of development, considered an upper middle-income country. Such progress is the result of an outward-oriented growth strategy, based on openness to foreign investment, as well as gradual trade liberalization.” (World Bank, 2022)
Costa Rica has positioned itself as a leader in Latin America in terms of foreign investment, due in large part to its highly educated workforce. The country spends eight percent of the national budget on education, and boasts one of the highest levels of English proficiency in the region. This means that foreign investors who don’t speak Spanish will not be burdened by a language barrier.
In addition, Costa Rica has a stable democratic system, and no standing army, which contributes to its low-risk business environment.
Costa Rica is in 74th place in “Doing Business” of the 190 that make up this ranking, which classifies countries according to the ease of doing business there.
Types of companies in Costa Rica
Foreign investors and entrepreneurs who want to enter the Costa Rican market must decide what type of company incorporation is best for their business. Once that decision is made, all the necessary documentation must be gathered and submitted to the National Public Registry of Costa Rica.
The three main company types in Costa Rica are:
- Sociedad de Responsabilidad Limitada (SRL): This most common type of company requires only one individual (manager) for its administration, and is a good choice for investors who do not want to register the names of other people.
- Sociedad Anónima (SA): For companies with shares, the capital stock can be transferred, and the partners are not personally liable for corporate debts. A minimum of three members is required to form a Board of Directors.
- A foreign company branch: The main company regulates the rules and assumes the responsibilities of their branch office domiciled in Costa Rica.
What are the corporate compliance requirements in Costa Rica?
Corporations that enter Costa Rica must assign a legal representative to be the face of the company in the country. The legal representative must be a Costa Rican citizen with a legal residence in Costa Rica. Their primary function is to represent the foreign company and its executives to the tax authorities and the government. To operate a business in Costa Rica, the legal representative and a legal domicile must be guaranteed:
- Legal Representative: A Costa Rican national who is in charge of representing the company before third parties. They will receive and process any notification and official communication from the government.
- Legal address: A company must be registered to a legal address in Costa Rica, and be willing to submit to an inspection and receive official notifications from the government and/or third parties.
Once the company meets all requirements and is registered, the company must carry or have in its possession:
1. Legal Records: Which contain any and all general assembly meeting minutes, shareholder information, etc.
2. Annual Shareholders Meeting: The partners must hold at least one meeting per year to approve and/or learn about the inventories and balances, as well as make the necessary agreements for the smooth running of the company.
3. UBO Declaration: A declaration of the shareholder partners must be made before tax and/or legal authorities every year.
Financial compliance regulations in Costa Rica
In Costa Rica, the fiscal year runs from January 1 to December 31. To begin commercial operations, the company must have the Unique Taxpayer Registry, which can be obtained in the Virtual Tax Administration portal of the Ministry of Finance.
The main taxes that a company must declare/pay are:
|Tax||What does it consist of?|
|Tax on Legal Entities||This tax must be paid annually to keep the company active|
|Education and Culture Stamp||Companies with or without economic activity must pay this tax annually|
|Value Added Tax (VAT)||Applicable on the sale of goods and services. The tax must be declared and paid within the first 15 days of the following month.|
|Income Tax||Applies to all individuals and entities that conduct business in Costa Rica.|
|Payment of Patents (operating permit)||The tax is paid quarterly in accordance with the gross income of the company.|
|Social Security||Companies that employ Costa Ricans must register with the Social Security Fund and make monthly payments for each worker.|
Labor compliance in Costa Rica
Foreign companies or investors doing business in Costa Rica, and have Costa Rican citizens on the payroll, must comply with labor regulations. These include:
- Payment of at least the minimum wage is $350 monthly.
- Companies are required to pay 13 monthly salaries (12 salaries + December Christmas bonus, equal to one month’s salary).
- Standard working time is eight hours per day.
- Employees are entitled to 15 days of paid vacation.
Both employers and employees must pay into the Social Security Fund. Each month, the employer pays the equivalent of 26.3 percent of an employee’s salary, and an employee pays 10.66 percent of their salary in Social Security.
If you are already doing business in Costa Rica, have a presence in the country, or have questions about entering the market for the first time, contact us today to discuss how we can help support your business.
Biz Latin Hub can help with your Company Regulatory Compliance in Costa Rica
At Biz Latin Hub, we provide integrated market entry and back-office services throughout Latin America and the Caribbean. We have offices in 17 key cities around the region, making us ideal partners to support multi-jurisdiction market entries and cross-border operations.