Costa Rica, also arguably Central America’s most captivating tourist destination, is one of its regions strongest economic performers, boasting average GDP growth of 3.3% over the last 5 years since 2013, and having tripled its total GDP since 1960. Actually, one of its most appealing business traits among investors is the sustained level of economic growth and stability – at times, a trait unique for its region. With a large service sector accounting for around 75% of its growing GDP, Costa Rica is growing in both investment and living potential. The Bi-coastal Central American nation also celebrates debatably the region’s most educated workforce who benefit from highly-accessible, high-quality public and private healthcare.
Also growing in strength – in no small part down to having both a Caribbean and Pacific Coast – is Costa Rican export diversity. This might be demonstrated best by the fact that the nation’s two largest exports in 2016 were Medical Instruments and Bananas (USD$2.4B and $1.42B respectively) – a clear show of how diverse industries come together to form Costa Rica’s strong, single export industry. Furthermore, no single export destination (excluding the USA) accounts for more than 5% of total exports, also showing Costa Rica’s external business not to be dependent on any single buyer(s).
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Incorporate in Costa Rica – Company Structures: Costa Rican S.A. and S.R.L.
Depending on your intended company operations, you may form either an S.A. legal entity (anonymous society or “Sociedad Anónima”), which is similar to a corporation, or an S.R.L. (society of limited responsibility or “Sociedad de Responsabilidad Limitada”), similar to an Limited Liability Corporation, both allowing two or more shareholders (individuals or legal entities) who are liable according to the amount of capital they have invested in the company.
Despite the fact that only a few kinds of business activities may indeed be executed, different kinds may be recorded when forming these types of company.
Continue reading for answers to FAQs about forming an S.A in Costa Rica.
Costa Rican Company Formation (S.A & S.R.L) Fact Sheet
Is foreign ownership allowed?
– Yes, foreign ownership up to 100% is permitted
Can the company sponsor foreign employees?
– Yes
Are there capital controls?
– No
Is there a minimum share capital?
– No
What is the minimum amount of shareholders?
– There must be a minimum of (2) shareholders
Are a fiscal address and legal representation required?
– Yes, both are required
How long does the process take (including the opening of a corporate bank account)?
– Between 3 and 5 weeks, once all the required documentation has been submitted.
Costa Rica Company Incorporation Steps
- Draft a sign a Power of Attorney (POA)
- Create and sign the company bylaws
- Register the company with the relevant government authorities
- Obtaining a local company tax ID number
- Open a corporate bank account
- Deposit of the required minimum capital to activate the corporate bank account
Company Share Capital?
During the company formation process, the company share capital is the amount of capital that shareholders choose to subscribe – essentially their investment in the company. The share capital is important for a number of reasons, including when a company wishes to apply for a loan from a Costa Rican financial institute or when working in certain business structures such as a joint venture. The share capital of a local Costa Rican business can affect the company’s ability to be granted loans; those companies with larger share capital will have a greater chance of being granted loans as opposed to a company with a low share capital. At any given time, the share capital may be altered – either increasing or decreasing – but should always be a relatively sensible number that reflects the size of the company in addition to its commercial activities.
An important note is that there is no official minimum share capital for an S.A. or an S.R.L. in Costa Rica. However, in most cases, companies begin with a share capital of up to USD$2,000.
Legal Compliance in Costa Rica
Legal Representative
The individual appointed as the Legal Representative acts as the company’s ‘legal face’ in the face of the authorities of the given constituency – this makes them the signatory for all operational activities. As the signatory, they have the legal responsibility to ensure the good operation and standing of the company. In doing so, a number of personal legal liabilities are assumed and hence it is not a position to be taken without prior, in-depth consideration. This person must be either a Costa Rican national or a foreigner who legally resides in Costa Rica (i.e someone with a valid Costa Rica visa).
In the circumstance that the company legal representative is not domiciled in Costa Rica, a resident agent must be appointed to assume the role; this individual must be a Costa Rican lawyer domiciled in Costa Rica whose sole purpose is receiving legal and administrative notifications.
Fiscal/Legal address – ‘Domicilio Fiscal’
Possession and provision of a fiscal address in Costa Rica is a minimum statutory requirement for all legal entities operating in Costa Rica and must be registered with the Costa Rican tax authorities. The fiscal address is the registered address of the company and, therefore, will be used for mailing and tax purposes along with all other official communications.
Monthly Tax Declarations – Legal Compliance
Foreign companies often opt to work with a local partner who can assist with tax declarations, which can be somewhat difficult without a sound understanding of the local fiscal framework.
Corporate Bank account
As part of the company incorporation process, companies will be required to open a corporate bank account. Most banks wil require a deposit in order to activate this account. Choosing a bank will be based on your particular business needs ands requirements.
Next Steps
If you have any questions regarding the company incorporation process in Costa Rica, please do not hesitate to get in touch with our team of experts today.
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