Company registration in Costa Rica

Costa Rica is the number one country in terms of happiness. But in addition to a favorable climate, it is also profitable to do business here. All conditions are created for this at the state level. The decision to incorporate a company in San Jose or any other city in the country is potentially profitable because of the following features, which are essential in commercial terms.

Why register a company in Costa Rica

The decision to incorporate or buy a business in Costa Rica has the following potential benefits:

• strategic location in the Central American region;
• stable political environment;
• high level of economic development;
• openness to foreign investment (non-residents are allowed 100% ownership of the company);
• a large number of free trade agreements with many Latin American countries.

Organizational and legal forms in Costa Rica

In Costa Rica, it is possible to open a business through one of several forms:

• Limited Liability Company (SRL, analog of LLC) is the most popular legal form in which the liability of the participants is limited solely to their investments (quotas). At least 2 participants can find this company. Each participant has a priority right to purchase the quota. The legal form is suitable for small businesses.
• Joint Stock Company (SA) – this type of company is suitable for medium and large businesses with the task of going public. Shareholders’ liability will not exceed their shares’ value under any circumstances. To establish this company, a minimum of 2 shareholders of any residency will be required. Forming a board of directors of 3 persons will also be necessary. Starting capital requirements may vary from industry to industry. Third parties can freely dispose of the shares of this company.

Registering a sole proprietorship, a branch, and a representative office in Costa Rica is also possible. If the company conducts its activities outside the country and receives income, it will not be subject to local taxes, and the company itself will be considered offshore.

How to start a company in Costa Rica

1. You can register a company in Costa Rica after going through the following steps:
2. Selection of the most acceptable organizational-legal form and formation of the list of activities in which the company plans to engage.
3. Selection and reservation of a unique business name for the new legal entity.
4. Legal registration of an official address for the new company.
5. Claiming and executing all the documents on the shareholders, ultimate beneficiaries, as well as managers of the company.
6. Drawing up and duly executing all constituent documents and application forms.
7. Submission of the formed package of registration documents, including a bank statement on payment of the registration fee, for consideration. Entering information about the new company into the Commercial Register and issuing a certificate of registration.
8. Registration of a new legal entity for mandatory tax and social payments.
9. Opening of corporate bank accounts.

Legislation and regulatory environment

Costa Rica is open to foreign capital. The local legislation is relatively stable and provides transparent procedures for starting and doing business. The country has no restrictions on investment, reinvestment, and repatriation of profits. Also, there are no strict requirements for start-up capital, but in practice, it must be consistent with the types of activities and plans of the company. Some activities will still require a license or permit.

Taxation in Costa Rica

The decision to open a company in Costa Rica should be considered in parallel with the following nuances* of taxation that apply in the jurisdiction:

• Income tax (for companies) – 30%
• Income tax (for individuals) – 25%
• VAT – 13%
• Capital Gains Tax (for non-residents) – (1) dividends – 15% (2) interest – 5.5% or 15% (3) royalties – 25%
• Capital Gains Tax – (1) for legal entities – 15% (2.5% under certain conditions), (2) for individuals – 15% (2.5% under certain conditions).

Taxation in Costa Rica is on a territorial basis. This means businesses will only be subject to the above taxes if they derive income from their activities in Costa Rica. When conducting business abroad, their activities will be fully exempt from taxation at the above rates, including income tax.

How Prifinance lawyers can assist

If you plan to start or buy a company in Costa Rica, Prifinance lawyers are ready to provide comprehensive legal support for implementing this business task. The experts have in their portfolio more than 11,000 successfully implemented projects. Provide input on the background and business challenges to launch another successful project.