Starting a business in Costa Rica is a popular choice among foreign investors seeking to enter Latin America, thanks to a number of factors that make it a favourable investment destination.
Those include a stable economy, low levels of crime, a sizable expat community, and an investment-friendly environment.
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For anyone looking to incorporate a company in Costa Rica, a step-by-step guide to company formation is included below, while some key requirements associated with doing business in the country are also considered.
If you would like to know how we can assist you starting a business in Costa Rica, contact us today for a free consultation or quote.
Starting a business in Costa Rica: a favourable market for investors
Costa Rica is well-known for having no standing army, instead relying on the support of the United States — its close ally and number one trade partner — to guarantee national security.
The Central American nation is able to adopt such a policy because of the long-standing political and economic stability the country has enjoyed, as well as the strong political and cultural ties it has with its regional neighbour.
That includes a large population of expats, including investors, remote workers, and retirees, attracted by low violent crime levels and one of the highest levels of English proficiency in the region.
The popularity of Costa Rica as an investment destination saw foreign direct investment (FDI) contributing 7.8% of gross domestic product (GDP) prior to the onset of the COVID-19 pandemic in 2020 — which adversely affected the economy of the country, as it did the economies of most of the world.
However, Costa Rica had previously witnessed impressive growth since the early-1980s, with both GDP and gross national income (GNI) growing exponentially to make the country one of the most prosperous in Latin America.
Recently the government has been making significant efforts to rejuvenate the economy, which the World Bank last week predicted would grow 3.8% in 2021, to almost recover the decline seen during the pandemic.
In August, starting a business in Costa Rica was made even more attractive when the government announced new measures to encourage FDI by slashing taxes and easing residency requirements for investors.
That same month, a law was also introduced to attract more foreign remote workers to the country.
The Costa Rican government has also introduced a scheme, known as the “Green Protocol,” offering more credit for environmentally-friendly businesses.
All of these factors combine to make starting a business in Costa Rica an attractive prospect for foreigners.
Starting a business in Costa Rica: steps to company formation
When starting a business in Costa Rica, you will need to go through the following company formation process:
1. Choose the company structure
There are a number of entity types in Costa Rica to choose from, and you will need to select the one that most suits your business needs. This is something that your corporate legal counsel in Costa Rica will be able to advise you on.
2. Sign-off on proper documentation
You will need to prepare powers of attorney (POAs) and articles of incorporation for the entity, and documentation will need to be notarized. Once more, your legal counsel will be able to assist you with all of this.
3. Submit the articles of incorporation to the National Registry
This step takes between 24 and 48 hours to complete in order to have the entity legally registered.
4. Register as a taxpayer in Costa Rica
When starting a business in Costa Rica, you will need to register as a taxpayer in the country, which involves filing a D-140 form, which will provide details such as the economic activity, company name, and the fiscal address.
5. File the Ultimate Beneficial Owner (UBO) Declaration
Having been accepted as a new member of the Organisation for Economic Co-operation and Development (OECD) in May, it is required for all legal entities to file a UBO, with the information kept on a registry that is not publicly available.
6. Register with Costa Rican social security agency
Once your entity has been incorporated, you will need to register yourself as an employer with the Costa Rican social security agency — Caja Costarricense de Seguro Social (CCSS).
7. Complete the process of starting a business in Costa Rica by applying for insurance
With all of the above completed, the final step to starting a business in Costa Rica is to apply for insurance, both national insurance and occupation risk insurance.
Biz Latin Hub can assist you in Costa Rica
At Biz Latin Hub, our team of corporate support professionals is available to assist you starting a business in Costa Rica.
We offer a comprehensive portfolio of back-office services including company formation, accounting & taxation, legal services, visa processing, and hiring & PEO, meaning that we can provide tailored packages of services to suit every need.
As well as supporting investors entering and doing business in Costa Rica, we also have teams in place in 15 other markets around Latin America and the Caribbean, and specialise in multi-jurisdiction market entries.
Contact us today to discuss how we can help you reach your commercial goals.
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