Author: Gonzalo Gutiérrez

Buy Land in Costa Rica: Your Legal Guide

Nov 22, 2024 | Real Estate Law

Buying Land in Costa Rica: Safe and Smart Investment for owning property.

If you want to buy land in Costa Rica, you’ve chosen an exciting market with unique opportunities. As lawyers specializing in real estate transactions, AG Legal is here to guide you through the entire process, helping you avoid pitfalls and ensure a secure investment in Costa Rica Property.

Can Foreigners Buy Property in Costa Rica?

In Costa Rica, foreigners have equal property rights, meaning they can legally buy property outright, whether residential, commercial, or agricultural land. The only notable restriction is with maritime zones (properties located within 200 meters of the high-tide line on beaches), which are considered public land with a particular concession.

Recommendation: If you’re interested in beachfront property, consult an attorney who can advise on concession property laws and the titled land and help you navigate these specific ownership limitations.

What is the Costa Rican Property Market Like?

The Costa Rican real estate market is diverse and can vary greatly depending on the property type and location. Areas like Guanacaste and the Central Valley are popular with locals and foreign investors, often resulting in higher demand and prices. Costa Rica’s market has grown in specific areas this year, with notable increases in beachfront property and urban developments.

For those looking to buy land in Costa Rica, it’s essential to understand that prices vary widely depending on the area. A knowledgeable real estate agent or realtor can guide you through the entire process and help you find a property that suits your needs and budget. A good agent will also show more properties, make a fairly transparent process, and write up a formal purchase option contract that is easy to understand and precisely what you need.

How Does the Property Purchase Process Work?

The property purchase process in Costa Rica is straightforward but does involve several key steps:

  1. Select Your Property – Choose the type of property you want to buy and work with a reputable real estate agent to find precisely what you need.
  2. Work with an Attorney: Legal professionals in Costa Rica are invaluable for guiding foreign investors through the local market, helping with due diligence, and ensuring a clear title.
  3. Verify Property Through the National Registry: Ensure that any property in Costa Rica is officially titled and has no outstanding legal claims. This step minimizes risks and confirms the property’s legal status.
  4. Sign a Sales Agreement—This preliminary agreement establishes the sale price and basic terms between the buyer and seller.
  5. Understand Closing Costs and Taxes: Anticipate all expenses, including closing costs, property tax, and fees associated with property transfer.
  6. Use Escrow for Security: Escrow is widely used in Costa Rica to hold funds securely until the property transfer is finalized.
  7. Notary Oversight – In Costa Rica, notaries transfer property titles and submit them to the National Registry for registration.

Following these steps with the help of a legal professional ensures that the entire process remains smooth, safe, and compliant with Costa Rican law.

What is the National Registry, and Why is it Important?

The National Registry in Costa Rica documents all property transactions and is essential in verifying property ownership.

Any property in Costa Rica must be registered with the registry to confirm ownership and validate transactions. Before completing a property transfer, an attorney will perform a title search through the public registry to verify that the property is titled in the seller’s name and free of issues.

This registry provides transparency and allows buyers to confirm the legitimacy of the property purchase. Failing to conduct a thorough registry check can result in unexpected issues, such as purchasing the wrong property or discovering undisclosed liens.

Why Due Diligence Matters for Buy Land

Due diligence is an essential part of any property purchase in Costa Rica. This step confirms that the property is titled and checks for any lien or legal restriction. Additionally, it involves verifying with the municipality that property tax payments are current and confirming that there are no zoning or land-use restrictions.

Our due diligence process at AG Legal ensures that the property you want to buy is legally transferable, saving you from future complications. Working with an experienced real estate attorney to conduct these checks protects your investment by ensuring no legal surprises down the line.

What Should You Know About Property Transfer Requirements?

In Costa Rica, the property transfer process must be conducted by a licensed notary who is also an attorney. The notary will draft the transfer deed, verify documentation, and submit the transaction to the National Registry. Once the property transfer is recorded, you are legally recognized as the owner.

Please have all necessary documents ready to proceed with this process. This includes the purchase price agreement, escrow funds, and proper identification. Additional documentation will be required if you plan to buy a property through a corporation.

How Do Property Taxes Work for Buy Land in Costa Rica?

Property tax in Costa Rica is relatively low, set at 0.25% of the property’s registered value. Taxes are paid to the municipality where the property is located. This tax is straightforward and is essential for owning property in compliance with local laws.

Additionally, closing costs often include the property transfer fee, notary fees, and registration costs. In Costa Rica, closing costs are generally split between the buyer and seller, though this arrangement can be negotiated.

How to Verify Title and Ensure Clear Ownership

A clear title is critical to a secure property purchase. A title search is essential to confirm that the property has no existing lien or legal encumbrance. A real estate attorney will conduct this check within the National Registry and confirm that the property is titled correctly and accessible for sale.

In Costa Rica, a title search ensures you purchase precisely what is promised, providing peace of mind that you’ll be the rightful owner without future claims from third parties.

The Role of a Foreigner-Friendly Attorney in the Buying Process

Hiring a Costa Rica real estate attorney is one of the most critical steps in the buying process. An attorney ensures compliance with Costa Rican law, manages the due diligence and title search, and drafts the necessary legal documents. At AG Legal, we are well-equipped to simplify the purchase process for our clients, protect their interests, and ensure a reasonably transparent process.

A real estate attorney also assists with setting up a corporation if you prefer to own the property under a corporate entity. This can provide tax and liability advantages, especially for foreign investors.

What Closing Costs to Expect to Buy Land in Costa Rica

Closing costs are an essential part of buying property in Costa Rica. These include notary fees, registration costs, escrow fees, and any additional taxes related to the transaction. Typically, closing costs are shared between the buyer and seller, although they may be negotiated in the sale agreement.

Understanding and preparing for these costs in advance ensures no surprises when the purchase is finalized. Working with a legal team, such as AG Legal, can help you navigate these fees and understand all the financial aspects of purchasing property.

Considering Corporate Ownership for Asset Protection

Many foreigners buy property in Costa Rica through a local corporation for liability and tax benefits. This approach can also simplify the ownership transfer process if multiple parties are involved or the property is part of a more extensive investment portfolio.

Recommendation: Consult with an attorney about buying property through a corporation. Setting up a corporation can offer additional flexibility, especially if you plan to rent or protect the property as part of an estate plan.

¡Let´s Buy land in Costa Rica!

It is a promising opportunity, and with the proper steps, you can make a secure and informed property purchase. For a smooth transaction, AG Legal’s team of real estate attorneys can provide trusted support throughout the entire process, ensuring that your investment is legally compliant and protected from any potential issues.

Contact us to learn how we can assist with your Costa Rican property purchase: [email protected]

Starting a Business in Costa Rica: Tips and Steps

Nov 5, 2024 | Commercial Law, General

How to Start a Business in Costa Rica by AG Legal

If you’re considering starting a business in Costa Rica, you’re making a smart move! Our country offers a favorable business environment, political stability, and unique investment opportunities. As a leading hub for foreign investment, AG Legal has helped countless entrepreneurs navigate the company registration process, and we’re here to guide you every step of the way.

Why Choose Costa Rica to Open a Business?

Costa Rica is a top destination for entrepreneurs worldwide; it’s a thriving hub for businesses expanding into Latin American markets. With a favorable business climate, robust free trade agreements, and a skilled workforce. At AG Legal, we’ve seen a surge in business ventures ranging from tech startups to eco-tourism enterprises, all seeking to tap into Costa Rica’s rich potential.

So why should you start a business in Costa Rica? The reasons are clear:

  • Strategic location: Access to North and South American markets.
  • Political stability: A long-standing democracy with a pro-business government.
  • Sustainability: A global leader in eco-friendly initiatives that appeal to businesses with a green focus.

Legal Requirements for Company Registration in Costa Rica

Understanding the legal requirements to start a business can be overwhelming, especially if you must familiarize yourself with local regulations and legal entities. We specialize in helping companies comply with Costa Rica’s legal framework, ensuring a smooth and hassle-free setup process.

Here are the essential legal steps:

  • Registering the company: Your business must be registered with the National Registry. This step also involves preparing the Articles of Incorporation, the company name, which outlines the company’s structure, shareholders, and objectives.
  • Social Security registration: All businesses must be registered with the Costa Rican Social Security Fund (CCSS), Caja Costarricense de Seguro Social. This is mandatory for employing staff and contributing to the country’s healthcare and pension systems.
  • Tax registration: You must register with the Costa Rican Tax Administration (Ministerio de Hacienda) to obtain a corporate tax ID. This ensures your business complies with tax regulations and that you pay all of them.

By working with AG Legal, you can rest assured that you’re following all the necessary steps and not missing any critical details.

Types of Business Structures in Costa Rica

One of the first decisions you’ll make when you set up a business in Costa Rica is choosing the proper business structure. This decision affects everything from taxation to personal liability, so it’s crucial to get it right. Here are the most common structures:

  • Sociedad Anónima (S.A.): This is a corporation where the shareholders have limited liability. It’s ideal for larger businesses that require flexibility.
  • Sociedad de Responsabilidad Limitada (SRL): This is a Limited Company (LTDA) with limited liability to the capital invested. Smaller businesses often prefer this due to its straightforward structure.

Each structure has its pros and cons, and at AG Legal, we can help you decide which option best suits your business needs.

Foreigners Starting a Business in Costa Rica

Are you a foreigner looking to start a business in Costa Rica? Good news! The process is open to foreigners, but there are specific requirements to be aware of. For instance, while residency is not mandatory for owning a business, it is required if you plan to work directly in your enterprise. But let’s be clear: you can consider living in Costa Rica with the risk that you may not want to return to your country.

At AG Legal, we are experts in guiding foreign investors through the business registration process. We understand the nuances of local regulations and can help you navigate immigration and legal requirements smoothly so you can focus on growing your business. Our clients have praised us for making their transition to Costa Rica seamless, and we’re here to do the same for you.

How to Obtain a Business License

Once your company is registered, you need to secure a business license (known locally as a “patent”) from the local municipality. This license allows your business to operate legally within the chosen jurisdiction. The process involves:

  • Application submission: Documents proving company registration, tax ID, and local permits.
  • Additional permits: Depending on your type of business, extra licenses are required, especially in regulated industries like food service or construction.

For example, if you plan to open a restaurant, you’ll need health and safety permits. AG Legal can help you understand exactly what your business needs to stay compliant and fully operational.

Opening a Bank Account for Your Business

A bank account for your business is essential for handling daily operations, managing payroll, and receiving payments. To open an account in Costa Rica, you must present proof of company registration, tax information, and valid identification.

AG Legal has partnerships with local banks, including Banco de Costa Rica, to simplify this process. We’ll ensure you meet all legal requirements and make the banking setup as smooth as possible.

Tax Requirements and Obligations

All companies in Costa Rica must comply with Costa Rican tax regulations. This includes paying corporate taxes, which vary based on your company’s revenue. Additionally, businesses must contribute to the Costa Rican Social Security System (CCSS), which funds healthcare and pensions for employees.

Our sister’s company, AG BPO Services, has experienced accountants who will ensure your business practices comply with local laws and help you avoid penalties and fines.

Business Environment: Opportunities and Challenges

Costa Rica’s business environment is one of the most dynamic in Latin America. The country provides excellent business opportunities with a stable economy, a strong focus on education, and a thriving tourism sector. However, like any market, it has its challenges.

The bureaucratic processes involved in company registration and obtaining licenses can be complex. Additionally, while Costa Rica’s cost of living and doing business can be higher than in some neighboring countries, the benefits of operating here—such as political stability, safety, and a well-educated workforce—often outweigh these challenges.

Register a company in Costa Rica with a good lawyer includes a good reputation in international trade. Costa Rica is part of the OECD, which gives peace of mind and, at the same time, compliance with obligations such as filing an ultimate beneficial owner, all against money laundering.

If you want to start a Costa Rica adventure with a specific business and would like expert guidance, contact us at AG Legal for your business success.

We have extensive experience helping companies of all sizes succeed in this vibrant market, and we’re ready to assist you at every step.

Feel free to contact us: [email protected]

Costa Rica Real Estate

Aug 27, 2023 | Real Estate Law

Costa Rica Real Estate Legal path for homes for sale

Are you dreaming of a new life in a tropical paradise to invest in? Welcome to Costa Rica, a beautiful country with a lot to offer expat investors.

Imagine waking up to the sound of waves crashing on the shores of a beautiful beach or enjoying your morning coffee on your ocean-view balcony. Now, wake up! let’s talk about the legal considerations in reality.

Exploring Costa Rica’s Real Estate Options

This market is a tapestry of possibilities, offering real estate listings of homes for all tastes, from a warm house for your rest to a luxurious ocean view villa for a 5-star vacation, but “not all that glitters is gold”; you should seek advice from a recognized and solid firm as AG Legal, do not rely only on a Real Estate agency that could be composed of foreigners or Costa Ricans without a license, explore the featured properties for owning a dream home in Costa Rica, but take precautions to avoid turning your dream into a nightmare.

Real Estate Investment Prospects:

Tamarindo, Liberia, Jaco, Uvita, Dominical, Matapalo, Samara, Santa Teresa, Flamingo, Arenal, and Nosara.

The Costa Rican real estate market is booming, and prices are steadily increasing. However, there are still several affordable properties available, especially in rural areas. The most popular and expensive areas for expats include San José, the capital, and the beach towns of Guanacaste, Puntarenas, and Alajuela like Tamarindo, Liberia, Jaco, Matapalo, Uvita, Dominical, Manuel Antonio, Samara, Santa Teresa, Flamingo, Arenal, and Nosara.

Doing business in Costa Rica is very possible and open to US, Canadian and European citizens; very tolerable if you have a legal team dedicated to your needs and deadlines to complete your investment project or move to Costa Rica.

Steps to buy safely and correctly.

The first mistake you should not make is to be rushed; try not to let the real estate agents put too much pressure on you to close a sale; as a foreigner, they can see you as a sales commission. Understanding the legal landscape of property in Costa Rica is essential; there are many properties for sale and investment opportunities, with conditions that must be previously reviewed, such as the complexities of the land, construction, institutional permits, complete review of property taxes, title transfers, safe ways to transfer purchase money, neighborhood where it is located, construction plans, swimming pool permits and legality of the person signing the transfer.

Some of the real estate agents in Costa Rica are unaware of everything, and they generate work for us Lawyers later.

Learn about the process from a legal practice perspective:

  1. Request your visa to enter the country; if you are a US or Canadian citizen, you do not need a visa. if you are from another country, have a look at our publication in this regard CLICK HERE
  2. Meet with your lawyer to start collecting the requirements to apply for a residence in the country. there are several types, but if you are determined to buy a property, the residence that best fits your profile is the investor residence, the government of Costa Rica has implemented a new law with benefits to attract foreigners to the country, and the ideal is that while deciding to buy your property, you also collect the official documents required to upload the residency application.
  3. Visit the property with a legal team; the experience of attorneys goes beyond the normal vision of a person who is enthusiastic about a beautiful property; therefore, due diligence is started to verify that this property is optimal and not a fraud, in Costa Rica there are many good people, but there are also those who seek to take advantage of foreigners. Your lawyer will check if the property is subject to a lease. This may be a problem, depending on the legal term the tenant has left.
  4. Make a purchase option contract drawn up by your lawyer; this is a contract of commitment to sell the property in exchange, usually for an advance of money. This contract protects the purchase against impossibilities that arise along the way to the property purchase.
  5. If, in the said period, you need to leave Costa Rica, you can grant a power of attorney to your lawyer or anybody else to take care of the purchase process; likewise, it is recommended that the money destined for the purchase be managed by a “trust” or “escrow” and once everything has been reviewed and you have the approval of your legal representative, authorize your payment to the seller, so your money will be safe. AG Legal, due to its experience, has a “Trust” company registered with the Costa Rican Regulatory Authority for these procedures, a client facility.
  6. Once the property is purchased, your residency application will be completed, and you can begin your new life in Costa Rica with peace of mind.

Costa Rica Tax Implications:

There are taxes involved in purchasing real estate which you need to know about:

Property transfer tax: This is 1.5% of the value of the transaction.

Legal fees: These are usually between 1-2% of the property’s sale value.

Government Fees: They are mandatory for the effective registration as a new owner in the National Registry of Costa Rica, it provides legal security as an owner, and these are paid at the same time as the property transfer tax, normally.

Capital gains tax: This tax is equal to 15% of the gain on the sale of the property. The first time the property is sold, you can choose between paying 2.25% of the property’s value transaction or 15% on the gain. All subsequent sales will pay 15% of the gain. This tax does not apply if you sell your primary residence.

Taxes on rentals: 13% VAT applies to rentals for more than 1.5 monthly basic salary (approx. 680,000 colones). Applies to the total amount paid monthly.

Commercial rentals: 13% VAT applies to the entire rental amount, with no exceptions. Small and medium-sized companies can have a different VAT treatment if they are registered before the MEIC.

Property transfer tax: This is 1.5% of the value of the transaction or the value registered, whatever is the higher.

Legal fees: These are usually between 1-2% of the property’s sale value.

Never miss the tax of a luxury home!

The Costa Rican government has created a tax law on luxury homes; for the year 2023, the owners of properties with a value greater than one hundred and forty-eight million colones (¢148,000,000.00) will be obliged to make the payment of this solidarity tax, which is described below:

RATE STEP  TO APPLY

Up to ¢371,000,000.00 0.25%

On the excess of ¢371,000,000.00 and up to ¢744,000,000.00 0.30%

On the excess of ¢744,000,000.00 and up to ¢1,116,000,000.00 0.35%

On the excess of ¢1,116,000,000.00 and up to ¢1,490,000,000.00 0.40%

On the excess of ¢1,490,000,000.00 and up to ¢1,859,000,000.00 0.45%

On the excess of ¢1,859,000,000.00 and up to ¢2,333,000,000.00 0.50%

On the excess of ¢2,233,000,000.00 0.55%

Almost all dream homes in Costa Rica with pools and luxury structures, especially in the capital and Guanacaste province, must pay this solidarity luxury tax.

Buying Property in Costa Rica – Customs:

The buyer of the property can choose the notary of his choice for the purchase. However, he pays 100% of the notary fees.

Even though the rule is upon agreement by both parties, usually, the buyer pays all expenses and transfers taxes.

The seller must help in the due diligence to obtain the correct information, the identification number of the property, the cadastre plan, proof of being up to date with the payment of public services, being up to date with municipal taxes, building permits in order and last information in case the property is mortgaged before a financial entity in Costa Rica. The seller assumes payment to real estate agents (realtors) in Costa Rica.

The term for the eviction of the property is agreed between the parties. ¡Be careful if there are tenants!

Questions about Costa Rica real estate

How much does it cost to get a real estate license in Costa Rica?

In Costa Rica, there is a Costa Rican Chamber of Real Estate Brokers, which offers official courses to approve your incorporation as an Associate. The Government of Costa Rica passed a law that requires all real estate agents and property managers to be registered with SUGEF. SUGEF authority oversees all banking, investment, and monetary transactions. For example, escrow agents and trust companies are registered with SUGEF. So, the cost is not that high, but it requires time and formalities before the authorities.

How much do real estate agents cost in Costa Rica?

Most listing brokers in Costa Rica charge a commission of 5% to 8% on successful sales transactions; they also charge a residential rental commission equivalent to 1 month + VAT, a commercial/industrial rental commission of 5% of the total value + VAT, vacation rental of 15-25% of the value + VAT.

Can a US citizen buy a property in Costa Rica?

Yes, a US citizen can buy property in Costa Rica. The Costa Rican constitution grants the same property rights to foreigners as it does to Costa Rican citizens; as long as you pay attention to the step-by-step that we gave you previously, any foreigner can buy properties in Costa Rica.

Is it worth buying property in Costa Rica?

Yes, it is worth the risk to invest in Costa Rica if you do it with legal advice; this is the only way to enjoy tax incentives linked to the laws applicable to foreigners, and you will not be subject to fraud or overvalued sale, if you try to buy property as a foreigner without help you are likely to acquire a problem.

For example, residency investors may qualify for credits and benefits such as reduced rental income taxes, capped capital gains taxes, and estate and transfer tax exemptions.

Where is the cheapest place to live in Costa Rica?

The cheapest places to live in Costa Rica are in the provinces of Cartago and Limón, where you will find less touristy towns and where real estate is much cheaper than in other places where foreigners usually choose to retire. Other cheap places to live and buy land are San Ramon, Grecia, Nicoya peninsula, San Isidro, and Atenas.

What is the average price of a house in Costa Rica?

The price can vary depending on the location, house size, and amenities. For example, a three-bedroom house at Hermosa in the Central Pacific region might be $190,000, a house in Cartago in the Central Valley might be $150,000, and your next beach home in Playa Flamingo might be $350,000. Though these prices are just an idea, you need to be advised by a good realtor, who can lead you to what you are looking for. you can find wonderful properties that are for sale in Costa Rica.

What is a residency for investors in Costa Rica?

You may qualify for temporary residency as an investor in Costa Rica if you or your spouse are willing to invest USD 150,000 in a business or real estate properties in Costa Rica, or USD 100,000 in a forestry project.

Under this category, the principal applicant may receive residency for a spouse and children as dependents and is valid for 2 years.

It can be renewed for another 2 years if you keep the project you invested in (business, property, etc).

After 3 years of holding temporary residency, you will become eligible for permanent residency.

Amenities and features that Costa Rica offers

Without a doubt, you can generate a great business in the world of real estate; you can sell and buy in this tropical paradise, from luxurious beachfront villas to cozy condos tucked away in gated communities throughout Costa Rica, offers a diverse range of properties that cater to every taste, you can find a from luxurious beachfront villas to cozy condos tucked away in gated communities, vacation home, apartments for sale, single family homes for sale, luxurious houses or find commercial real estate properties.

Navigating this market is made easier with Costa Rica’s diverse listings, and we at AG Legal can help you find your dream property in the best of Costa Rica.

Your Real Estate and Immigration Allies

With our assistance, you’ll unlock the full potential of Costa Rican real estate and business prospects; visit our offices located in the best part of downtown San José, Barrio Escalante. You’ll love talking about listing in Costa Rica and having lunch in one of the delicious restaurants surrounding our office.

Your Costa Rican dream starts here.

Contact us at:

[email protected]

Companies in Costa Rica

Mar 9, 2023 | Commercial Law

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If you are an investor or planning to start a business in Costa Rica, deciding what type o company you may need is a crucial question:

First of all, in Costa Rica, there are four types of companies:

  • The Stock Sorporation (Sociedad Anonima).
  • The Limited Company. (LTDA.) (Sociedad de responsablidad limitada).
  • The general partnership.
  • The limited partnership.

The trading companies most commonly used in Costa Rica are the S.A. stock corporations and L.T.D.A. limited liability companies.

Before we enter to explain the two main types of companies, there are a few decisions that must be made in any corporation:

What will be the corporate name? This can be a fictitious name. Currently, it is also possible to register companies whose name consists of the corporate identity number assigned to them by the Registry.

What will be the corporate capital and share distribution? The available amount of capital, the value of each one of the shares, and how they will be distributed among the partners. The social capital must be established in the colon currency.

What will be the corporate domicile? The place designated to receive communications.

What will be the term of the corporation? It is required to determine the number of years the corporation will exist. The duration commonly used is 99 years.

Who will represent the corporation? By law, the President is the corporation’s representative, with the full power of attorney. Still, appointing people who want to represent the corporation is also possible.

Resident Agent. When the corporate representatives have no domicile in Costa Rica, it is mandatory to appoint a Resident Agent, whose function will be to receive communications addressed to the corporation.

Sociedad Anonima (S.A.)

How Does an S.A. Work?

In Costa Rica, S.A. stands for “Sociedad Anónima,” a business entity commonly used in the country. An S.A. is similar to a corporation in the United States or a public limited company in the United Kingdom.

The main advantage of forming an S.A. is that it provides limited liability to the company’s shareholders. This means that the shareholders are only responsible for the amount of money they have invested in the company and are not personally liable for its debts and obligations.

Another advantage of forming an S.A. is that it allows for an easy transfer of ownership. Shares in the company can be bought and sold without affecting the company’s operations or requiring the company to restructure. Agencies and branches may be established inside and outside Costa Rica and can perform all sorts of business.

You may want to acquire if you want to invest or develop an activity without using your assets to secure debts.

S.A. are commonly used in Costa Rica for businesses in various industries, including tourism, agriculture, and real estate. However, consulting with a lawyer before forming an S.A. is essential to ensure that it is the best business structure for your specific needs and circumstances.

An S.A. in Costa Rica is subject to corporate income tax and must file annual tax returns. The tax rate is currently 30% of the company’s profits.

Regarding its International taxation, for this type of company and any company in Costa Rica, the territorial principle is reining the taxation; this means that the company does not need to pay any income tax as long there is no costarican source involved. The V.A.T. is payable monthly, and the income tax is payable yearly.

In summary, S.A. is a type of business entity in Costa Rica that provides limited liability to its shareholders and allows for easy transfer of ownership. It is commonly used in various industries, and careful consideration should be taken before forming an S.A. to ensure it is the proper structure for your business. Depending on the type of business, even the company can work on offshore transactions.

Management of a corporation is conducted through a Board of Directors, which must include at least a President, a Secretary, and a Treasurer. The supervisory task is carried out by appointing a Supervisory Director.

Incorporation of an S.A.

  • A minimum of two shareholders is required to form a corporation, and registering the entire corporate capital in one person’s name is not allowed at the time of incorporation. Still, assigning all shares to one shareholder after the company’s registration in the National Public Registry is possible.
    Regarding the corporation’s management, there are three legal entities in the company: The shareholders meeting, the Board of Directors, and the supervisory entity. The Shareholder Meeting is the main organ comprised of the stockholders, which could be the common stockholders or privileged shareholders. Ordinarily, the Meeting meets once a year, and extraordinarily, as the need arises.
  • It is important to note that the shareholders can be foreigners, and there is no need for a Costa Rican on the board of directors.
  • For the Board of Directors, a minimum of 3 people is required: President, Secretary, and Treasurer. Depending on the term of the appointment, the positions on the board of directors can be renewable.
  • Any company in Costa Rica must be incorporated before a notary public who will draft the articles of incorporation and then be registered before the Public Registry.

This company is suitable for carrying on international business.

Sociedad de Responsabilidad Limitada (LTDA – S.R.L.)

What is an LTDA.?

An LTDA company, also knows as Sociedad de Responsabilidad Limitada (SRL), is a limited corporation in Costa Rica. It is a popular business organization for the country’s small and medium-sized enterprises (SMEs).

The LTDA company is a legal entity independent of its owners or shareholders. It provides limited liability protection to its owners, meaning that they are not personally responsible for the company’s debts or legal obligations beyond the amount of their investment in the company.

The company’s management is carried out by one or more administrators who the shareholders appoint. The administrators can be shareholders or third parties responsible for managing the company’s affairs, making decisions, and representing the company in legal matters.

One of the main advantages of establishing an LTDA company in Costa Rica is the ease of administration and operation. It has a simplified structure compared to other types of companies, with fewer legal requirements and formalities to comply with.

Another advantage is the limited liability protection provided to the shareholders; this means their assets are protected in case of the company’s legal or financial issues.

The advantage of a limited liability company is that it has almost the same characteristics as a corporation. Regarding the independence of its assets, it works the same as a corporation. Forming a limited company requires a minimum of two quota holders (called cuotistas), and the company capital can later be transferred to one person. Its management only requires a manager, although a sub-manager may also be designated.

In conclusion, an LTDA company is a popular choice for SMEs in Costa Rica, offering limited liability protection and a simplified structure for management and operation. It is important to consult with legal and financial experts before establishing an LTDA company to ensure compliance with all legal requirements and to make informed decisions regarding the company’s administration and operation.

This company is suitable for carrying on international business.

How Does an LTDA.?

All sorts of business may be conducted. Its structure is used for businesses of a smaller dimension than that of an S.A. The L.T.D.A.’s Manager is the company’s representative with the full power of attorney, although it is possible to appoint several Sub-managers.

Incorporation of an LTDA.

To establish an LTDA company in Costa Rica, there must be at least two quota holders. These quota holders can be individuals or legal entities. The company’s capital is divided into equal parts, represented by quotas. Once the company has been duly set up, the distribution of the percentages must be issued by certificated quotas, where the name of the quota holder must be specified.

Remember that in a limited company, the social capital is represented by registered shares called quotas.

It is required to define the number of quotas making up the corporate capital and their distribution. There always exists a preemptive right towards other shareholders that must be respected when shares are going to be transferred to someone else.

Differences between an S.A. and an LTDA.

Organization and Management

A corporation called S.A. has a Board of Directors composed of at least three people: President, Secretary, and Treasurer. In an LTDA company, management is conducted by one person called the Manager or by any designated people who facilitate its organization.

Representation of Social Capital

In an S.A. corporation, the corporate capital is divided into shares. In an LTDA company, these are called quotas.
In an S.A. corporation, shares can be transferred freely using an endorsement. In an LTDA company, quota transfer is more restricted and is carried out through assignment. The general assembly must approve all the assignments to a third person of quota holders, and this must be done through the quota assignment agreement.

Differences in terms of legal books.

An S.A. corporation must keep three legal record books (Minutes of the General Meeting, Register of Shareholders, and Minutes of the Board of Directors). An LTDA company, which lacks a board of directors, must keep only two record books (Minutes of the Quota Holder Meetings and Quota Holder Registry book).

Supervision.

Supervision of an S.A. is the duty of a Supervisory Director (in Spanish: fiscal), whose position is entirely independent of the Board of Directors, whereas a limited liability company is subject to self-inspection, meaning that the Shareholders Meeting is in charge of this duty. In an LTDA company, there is a lack of supervision.

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Openning a Bank Account in Costa Rica

Feb 18, 2023 | Commercial Law, General, Inmigration Law

One of the most common questions is about opening a bank account in Costa Rica.

Discover how to open a bank account, whether you’re a foreigner or not! Get ready for all the paperwork and learn about top banks. Also, here you will know if you can open an account, which is the local bank account requirement.

The banking system in Costa Rica is well-established and offers a range of services to both individuals and businesses, from checking and savings accounts to loans and investment options.

Having a bank account is not only convenient, but it’s also essential for several practical reasons. For starters, having a bank account enables you to receive your salary or any other income directly into your account, making it easier to manage your finances and keep track of your expenses. Additionally, most bill payments, including utilities, can be created automatically from your bank account, saving you time and hassle.

Another advantage of opening an account in Costa Rica is its increased security. Instead of carrying large amounts of cash, you can keep your money in the bank, where it’s safe from theft or loss.

Requisites of Bank Account in Costa Rica

Sooner or later, the investor, or if you are playing to live in Costa Rica, will have to deal with opening an account. Costa Rican banks are authorized by law to offer said service under specific circumstances, and the primary purpose is to identify the client and to accomplish the money laundering politics.

It should be clarified that the demands vary from bank to bank since these rules are not a concrete list stipulated in the law; depending on each case, a bank can order different conditions when dealing with several new clients. Nevertheless, most banks ask for the same demands nationwide.

This article will provide the requirements that can be ordered to a natural (individual) person or a legal entity (corporations, associations, companies, etc.) by a bank to open a bank account or access their services.

Requisites for Individual:

  • Costa Rican citizens: original and valid identification card.
  • Foreigners must show a DIMEX card (residence card) for the person who is a legal resident. This requirement can be demanded or not depending on the bank, even though the law requires one to ask for it; due to the growing foreign investment in Costa Rica; the banks are more flexible regarding this requisite.
  • Non-resident foreigner citizens: Passport with the entry and visa entry stamp in the cases needed in Costa Rica.
  • Sign the Know Your Client Form (KWC) (“Conozca A Su Cliente”).
  • Proof of income.

Requisites for a Company.

  • A certificate of good standing also must indicate who the representatives are, their powers and faculties, and their appointment period.
  • Certificate of the company’s social capital according to the shareholders’ book in the case of Costa Rican corporations.
  • Associations, charitable foundations, cooperatives, and similar organizations: must request the equivalent documents of this type of entity.
  • Sign the Know Your Client Form (“Formulario Conozca A Su Cliente”).
  • Proof of the company’s income or origin of the funds that justify the transactions that will be carried out.
  • For the justification of the company’s income, the following documentation can be considered reasonable (for linking up the account and further updates).
  • Financial statements of the last fiscal period must be provided certified, audited, or duly endorsed by the accountant and the legal representative.
  • Companies that start operations can provide their projected cash flow statement, which must be updated at the end of the client’s first year of operation and then replaced by their financial statements that need to be audited, certified, or duly endorsed by an accountant or their legal representative.

Can a Foreigner Open a Bank Account in Costa Rica?

If you’re a foreigner planning to live or do business in Costa Rica, you may wonder if you can open a bank account there. The short answer is yes; foreigners can open a bank account in Costa Rica. However, specific requirements and procedures must be followed.

Firstly, it’s important to note that each bank may have specific requirements, so it’s always best to check with the bank directly for their specific guidelines. That being said, here are some general conditions that most banks in Costa Rica typically have:

  1. Identification: You must provide a valid passport or a Costa Rican residency card (“cedula”) for the person who has legal residency. Some banks may also require additional forms of identification.
  2. Proof of address: You must provide a document showing your current address, such as a utility bill or a rental agreement.
  3. Initial deposit: Some banks may require an initial deposit to open the account. This amount can vary depending on the bank and the type of account you are opening.
  4. Source of income: You may be asked to provide information about your source of income, such as employment or investments.
  5. References: Some banks may require references from other banks or financial institutions.

It’s also worth noting that if you are not a resident of Costa Rica, you may be subject to certain tax regulations. This is something you should discuss with the bank or a tax professional.

When opening a Costa Rica bank account, choosing a reputable bank that meets your specific needs is essential. Some of the most popular banks in Costa Rica include Banco Nacional, Banco de Costa Rica, and Scotiabank.

In summary, while some requirements and procedures must be followed, foreigners can generally open a bank account in Costa Rica. Doing your research and working with a trusted bank can ensure that your banking needs are met while living or doing business in the country.

As a final piece of advice, do get disappointed if you are denied opening your account, this is very common, and you only need to try in another bank.

Can I Open a Bank Account as a Non-Resident?

The short answer is yes; it is possible to open a bank account in Costa Rica as a non-resident. However, the process and requirements may vary depending on the bank and the type of account you want to open. Understanding the needs and process is essential to ensure a smooth and successful application.

One of the first things to remember is that some banks in Costa Rica require applicants to have a Costa Rican ID card, known as a cedula. However, some banks do not require a cedula and accept other forms of identification, such as a passport or a driver’s license.

 Best Bank in Costa Rica

First, you may understand that you will find two types of banks in Costa Rica: Public and Private.

Public means state-owned banks, which means the government supports public banks, guaranteeing that your money will be secure before bankruptcy.

Private is referred to as private capital; even though it is regulated and supervised by the National Superintended of Financial Institutions (SUGEF), the costa rican government will not be responsible for any bankruptcy.

From the capital point of view, Banco Nacional de Costa Rica is one the best bank in Costa Rica. It is the largest bank in the country, with over 200 branches across the country, making it accessible to most parts of the country. Banco Nacional de Costa Rica is also the oldest bank in the country, with over 100 years of experience.

Banco de Costa Rica is a very solid bank regarding the capital supporting your money.

From the perspective of an account holder, client assistant, and online banking point view, private banks are much better than Banco Nacional and Banco de Costa Rica. Banks such as BAC Credomatic, Scotiabank, and Promerica have much better online services than public ones and are more flexible for open accounts.

You may check first what the banks offer and what banks require before you submit your documents.

AML (Anti Money Laundering) Regulations

Because of the AML in Costa Rica, when you are getting involved in the process of opening a bank account or once you have one already opened, one of the most common requisites is proof of income and having an updated profile in your bank account, so here are some reasons why these requisites are important for banking purposes in Costa Rica:

  1. Compliance with regulations Banks in a cosmusty law to comply with Anti-Money Laundering (AML) regulations. One critical key requirement is to verify the source of funds, and proof of income is an essential part of this process. By providing proof of income, you demonstrate that your funds come from a legitimate source. This aspect is based on law 8204 (Law on Narcotic Drugs, Psychotropic substances, Drugs of unauthorized use, related activities, money laundering, and financing of terrorism).
  2. To update your profile as a banking system user once a year is mandatory; if you don’t perform this task once you are asked to do it, one of the consequences can be that the bank can close your account.

Summarizing, getting involved in opening a bank account in Costa Rica is not a simple task; please get in touch with us, and AG LEGAL will help you through this process.

Requisites to Apply as a Digital Nomad

Dec 30, 2022 | General, Inmigration Law, Labor Law

Welcome to our blog on becoming a digital nomad in Costa Rica! This small country, located in Central America, might be the perfect destination for you if you’re a young adult looking to escape the traditional career path and work remotely while exploring a new country. With its stunning natural beauty, friendly locals, and relatively low cost of living, Costa Rica has become a popular choice for digital nomads of all ages. In this blog, we’ll introduce you to what it’s like to be a digital nomad in Costa Rica as a young adult and provide tips and resources to help you get started. Whether you’re looking to live in Costa Rica long-term or take a short-term working vacation, this guide will help you navigate the challenges and opportunities of life as a digital nomad in this tropical paradise.

There is a New Law for Digital Nomads in Costa Rica

On Monday, July 4, 2022, the Regulation to Law 10008, named “Law to Attract Remote Workers and Providers of International Services,” was signed as the Law of Digital Nomads. With the regulation already in force, the requisites to apply as digital nomads are established. These regulations seek the economic reactivation of the country and encourage foreign workers to work in Costa Rica and to have remote work while enjoying the tourist attractions.

This new regulation allows foreign workers (digital nomads) not to face a tedious procedure before the General Direction of Migration and Immigration, the public institution in charge of processing the applications of digital nomads who want to work in our country.

Articles 2 and 4 of said Regulation are relevant because they establish a new migratory category for digital nomads, called “Worker or Remote Service Provider.” The digital nomad is the foreign person who “provides remunerated services remotely, in a subordinate manner or not, using a computer, telecommunications or similar means, in favor of a natural person or legal entity who is abroad, for which he receives a payment or remuneration from abroad for a minimum amount of three thousand US dollars per month ($3,000.00) and in case of requesting legal stay for their dependents of four thousand dollars per month ($4,000.00) (…).”

Digital nomads will have tax benefits such as exemption from payment of import taxes on personal computer equipment or total exemption from tax on utilities related to the income they receive from abroad.

Requisites for Digital Nomads Visa

Essential requirements to fulfill as a digital nomad are in articles 5, 7, and 8 of the Regulation, among them:

  • Proof of payment of one hundred dollars (USD$100) in favor of the Costa Rican government.
  • Images of the valid passport pages of the foreign person showing his/her photograph, personal data, and entry stamp to Costa Rica if the person has already entered the country.
  • Bank account statements accompanied by an affidavit stating that the financial statements were requested and obtained from the corresponding banking entity and indicating that the person has received an income from abroad for a minimum amount of three thousand dollars monthly during the last year ($3,000.00) or in case of requesting legal permanence for their dependents of four thousand dollars monthly in the previous year ($4,000.00).
  • Every foreign document that is provided must have an official translation into Spanish, made by a Notary Public or official Costa Rican translator.
  • Finally, when the migratory condition is granted, the foreign person will be able to enter Costa Rica and have three months to attend a face-to-face appointment where the photograph of the corresponding migratory document will be taken. For this appointment, the person shall provide the following:
  • Proof of payment of $90 for the issuance of the immigration document.
  • A valid passport and in good condition.
  • Medical Services Policy covers the applicant and his dependents for the entire stay in the country for at least fifty thousand dollars ($50,000.00).

Best Places to Live for a Digital Nomad in Costa Rica

Besides the practical considerations, many digital nomads choose Costa Rica because of its natural beauty and rich culture. The country is home to many national parks, reserves, beautiful beaches, and bustling cities.

Whether you are just starting as a digital nomad or are an experienced remote worker, Costa Rica is a great destination to consider. With its tax exemptions, strong internet connectivity, and natural beauty, it is no wonder that it has become such a popular choice among digital nomads. So, as a new member of the community of digital nomads in Costa Rica, the first question is where I will live and work.

Costa Rica offers beautiful places where to live; whether you want to stay in Costa Rica for the long term or for the short term,

As follow, you can find a suggestion of the best place in Costa Rica, where you can live and work

  • San Jose: As the capital and largest city in Costa Rica, San Jose offers a more urban environment and a wider range of amenities, including coworking spaces and reliable internet connectivity.
  • Manuel Antonio: Located on the Pacific coast, Manuel Antonio is a popular tourist destination known for its beautiful beaches and national park. It has a lively expat community and a variety of accommodation options.
  • Tamarindo: Another popular beach destination on the Pacific coast, Tamarindo is known for its surf culture and has a variety of cafes, restaurants, and coworking spaces.
  • Nosara: Located on the Nicoya Peninsula, Nosara is a small town known for its yoga retreats and eco-tourism. It has a laid-back vibe and a strong expat community.
  • Monteverde: Located in the mountains, Monteverde is known for its cloud forests and outdoor adventure activities. It has a small-town feel and a cooler climate.

  • Puerto Viejo. it is one of the best locations on the Caribbean coast, where you will be surrounded by exuberant nature and beautiful beaches. In this location, You will be part not only of a strong digital nomad community but also, but a strong foreign community

Do I need a Digital Nomad Visa to Enter Costa Rica?

You can enter the country with a Tourist Visa, where usually you will be allowed to stay 90 days in, and later, you then you can apply for digital nomad status for a period of 90 days in Costa Rica

Digital nomads have become a common sight in Costa Rica, with many choosing this Central American country as their destination of choice. The country’s stunning natural beauty, affordable cost of living, and strong internet connectivity make it an attractive place for those looking to work remotely.
One of the major draws for digital nomads in Costa Rica is that they are exempt from most taxes as long as they are not physically present in the country for 183 days or more per year. This means that digital nomads can take advantage of Costa Rica’s low living cost without worrying about paying taxes on their income.

Internet Providers

Those who are already in Costa Rica will find a good number of internet providers available to choose from. The Costa Rican Embassy can provide information on the different providers and help with any issues that may arise.
Internet providers in Costa Rica range from small, local companies to large international corporations, so digital nomads have a wide range of options. Some popular providers include Claro, Liberty, and ICE, all of which offer a variety of packages and speeds to suit different needs and budgets.

Do the Digital Nomads in Costa Rica Need to Pay Taxes?

After you get your digital nomad visa for Costa Rica, you can start to work. Based on the new law for digital nomads, as long as you stay in the Country, you don’t need to pay any income tax or any tax on your salary, which is a very good incentive, adding to the cost of living in Costa Rica, is lower than some other countries.

Can I Bring my Family with Me? 

Yes, you can bring your family with you. In such a case, the rest of the family members must be filed as dependent from the person who shows an income of $4.000 per month. All the members who will apply must comply with the same requisites as the main applicant.

 

 

 

6 New Reasons to be a Resident in Costa Rica

Dec 25, 2022 | Financial Law, Inmigration Law, Taxes

Costa Rica is a small Central American country known for its beautiful beaches, biodiversity, and friendly locals. It is also a popular destination for tourists and expats alike, thanks to its low cost of living and high quality of life. With the approval of Law 9996, new incentives were created, which grant exceptional Costa Rica advantages never seen before. This article gives you an idea of how to get a Costa Rica residency and provides “6 new reasons to be a resident in Costa Rica“.

As general aspects first, the cost of living is much lower compared to many other countries, especially in terms of housing, food, and transportation. This means that you’ll be able to stretch your budget further and enjoy a more affordable lifestyle. Second, it has a strong healthcare system with private and public options. The country also has one of the highest living standards, clean water, reliable electricity, and a robust infrastructure. Third, it is known for its beautiful natural landscapes and eco-tourism opportunities. There is always something new to explore and appreciate, from the stunning beaches to the lush rainforests. Finally, becoming a resident allows you to immerse yourself in the culture and way of life fully. The locals are friendly and welcoming, and many ex-pat communities can help you transition.

Two new laws were recently approved to promote incentives to obtain your residency in Costa Rica, modify the pre-existing immigration law, and get a Costa Rica residency under particular conditions. Because of the interest of many people to come to live in Costa Rica, 6 new tax incentives and reduction of requirements were created for 3 categories of residents and thus promote foreign investment.

It is good to clarify that apart from this new Law and the advantages that we will comment on, a new law called the Law to Attract Remote Workers and Providers of International Services was also enacted, which promotes the entry of digital nomads into Costa Rica, that is, people who work remotely for companies that are located outside the country.

The tax advantages of Law 9996, which was created to ease the requirements to become Costa Rica, was recently approved by the Legislative Assembly and signed by the President of the Republic on July 14, 2021, giving a series of tax advantages for 10 years for those who want to be residents. In this beautiful country. This new Law, called the Law for the Attraction of Investors, Rentiers, and Pensioners, implements changes in 3 immigration categories: 1) Investor Resident, 2) Resident Rentier or Rentista 3) Resident Retired or Pensionado.

The advantages of new law 9996 are:

  1. For the Resident Investor category, the investment in the country is reduced to US $150,000 US dollars
  2. Exoneration of all import taxes one time on household items.
  3. Exemption of all import taxes for a single time of two vehicles, land, sea, or air. The residents in these categories can import vehicles of any brand, yachts, boats, helicopters, airplanes, or any other means of transport, totally exempt from taxes.
  4. Exemption from income tax on revenues in any of these migratory categories.
  5. Exoneration of 20% of the property transfer tax you acquire while the Law is in force and under any of the above immigration categories.
  6. Exemption from import taxes for instruments or materials for professional or scientific practice carried out by the person with the migratory category of investor, retired resident, or rentier resident.

On the other hand, it is good to clarify that these new benefits also extend to people who are dependents of the person applying for residency. Another important aspect is that the person who is residents a and wants to upgrade to an investor, rentier, or pensioner can do so without any problem and apply for the benefits of this Law.

To apply for the benefits of this new Law or get this special status for foreigners, you must apply within the first 5 years of the Law. The benefits of this unique opportunity will be up to 10 years from the moment the tax benefits are granted.

If you want to know the Law in detail, click on this link so that you can read it comprehensively.

Residency Requirements.

For any category, the Costa Rica residency requirements are:

  1. Passport-size photograph.
  2. Birth Certificate.
  3. Criminal History or Lack thereof.
  4. Fingerprints obtained at the police department in Costa Rica.
  5. Register with the Embassy or Consular department of your country in Costa Rica.
  6. Photocopy of your passport that shows the last entry.
  7. Payment of government fees.
  8. If you and your couple are applying for residency, you must provide the marriage certificate and proof of income.
  9. If you are applying for the Costa Rica residency by investment, you must provide proof of your investment of USD$150,000.
  10. If you are applying as a Rentista or Rentier on a fixed income, you will need to prove your monthly revenue of USD$2,500 per month or make a deposit of USD$60,000 in a Costa Rican Bank that will cover two years of revenue. This new category of rentista has recently been improved by the new Law 9996.
  11. If you are applying as a retired or pensionado resident, you must prove an income of USD$1,000 per month.
  12. To apply for any Costa Rican residency, all the documents shall be apostilled or duly authenticated by your country’s consulate.

All applications should take place once the foreigner becomes legal in the country; in other words, that visa has not expired.

Temporary Residency and Permanent Residency

Several types of residency status for foreigners are available in Costa Rica, including temporary and permanent residency. Temporary residency allows individuals to live in the country for a specific period, while permanent residence will enable individuals to live in Costa Rica indefinitely.

Visa Requisites

  1. Nationals from the United States, UK, or Canada citizens, among many others countries, do not require an entry visa to Costa Rica. However, you must have a valid passport and a return ticket to exit Costa Rica within 90 days. The passport must be valid for one day before you enter Costa Rica.
  2. To verify all entry requirements according to your nationality, please click on this link.
  3. If your nationality is not enlisted and you cannot enter without a visa, you will need to hire immigration lawyers to help you.
  4. In some cases, the visa must be applied before the Costa Rican consulate of the country where you live.

The Pura Vida Life

Are you considering a move to a tropical paradise? Look no further than Costa Rica, a small country in Central America known for its lush forests, stunning beaches, and laid-back way of life. Here, you’ll find a culture centered around the phrase “Pura Vida,” which means “pure life” in Spanish and expresses appreciation for the simple things in life.

But the Pura Vida lifestyle isn’t just about the great outdoors. Locals or Ticos are known for their laid-back attitude and appreciation for the simple things in life. Here, you’ll find a strong sense of community and a focus on family and friends. This country is also safe and stable, with a strong democracy and a low crime rate.

Becoming a resident is an excellent opportunity to enjoy a high quality of life at an affordable price; you’ll find a range of options for housing, from apartments in the city to sprawling mansions on the beach. As was said before, the cost of living is relatively low compared to other countries in the region, and the country’s healthcare system is top-notch. Living in paradise means embracing the Pura Vida way of life. It’s about enjoying the simple things in life, spending time with loved ones, and immersing yourself in the beauty of nature. Costa Rica is the perfect place to call home with its stunning natural beauty, warm climate, and laid-back culture.

If you’re considering moving, don’t hesitate to contact AG LEGAL, as reputable immigration lawyers compound many other specialties.

At AG LEGAL, we are more than eager for you to ask us for any details you want.

Hiring a Lawyer in Costa Rica

Dec 25, 2022 | Commercial Law, Criminal Law, General, Inmigration Law, Intelectual Property

The importance of hiring a lawyer in Costa Rica cannot be overstated. The legal system in Costa Rica can be complex, and having a knowledgeable and experienced lawyer on your side can make a big difference in the outcome of your legal matter.

Whether you are involved in a court case, negotiating a contract, immigrating to this beautiful country, or need advice on a legal issue, having a lawyer who is familiar with the laws and legal processes in Costa Rica can be invaluable. A good lawyer can help you navigate the legal system, protect your rights, and achieve the best possible outcome for your case.

But how do you go about hiring a lawyer in Costa Rica? The process can initially seem intimidating, but it’s pretty straightforward once you know what to do. Here are some critical steps to follow:

  1. Determine your legal needs: Before looking for a lawyer, you must understand what kind of legal assistance you need. Do you need a lawyer to help you with a specific legal issue, such as drafting a will, negotiating a contract, or ongoing legal representation in a court case? Understanding your legal needs will help you find the right lawyer.
  2. Research and compare lawyers: Once you know what kind of legal assistance you need, it’s time to start researching and comparing lawyers. You can do this through online directories, recommendations from friends or family, or by contacting the Costa Rican Bar Association.
  3. Understand the different types of agreements on legal fees: When hiring a lawyer in Costa Rica, you will likely be asked to enter into three different types of agreements: a contingency fee agreement, a flat fee agreement, or an hourly fee agreement.
  4. Sign the agreement: Once you have agreed to the terms of the agreement, it’s time to sign the contract and formally retain the lawyer’s services or at least to have some written support.

By following these steps, you can ensure that you have a qualified and experienced lawyer to help you navigate the legal system in Costa Rica and achieve the best possible outcome for your case. Don’t underestimate the importance of hiring a good lawyer – it can make all the difference in the world.

Is it necessary for the lawyer to be in a Law Firm?

In Costa Rica, a lawyer is not necessarily required to be part of a law firm to practice law. Lawyers in Costa Rica can choose to work independently or as part of both options. Have pros and cons to both options.

Working independently can give a lawyer more flexibility and control over their practice. Still, it can also be more challenging to build a client base and handle complex legal matters without the support of a team.

On the other hand, working as part of a law firm can provide access to resources and expertise that may not be available to an independent lawyer.

What is essential is to hire a good law firm in Costa Rica and verify that the lawyer is duly accepted in the bar of attorneys; sometimes, in our law firm, we have seen cases where because of the lack of verification, the client ended up involved in a big legal mess since that person who you think is a lawyer is not a person licensed to practice law.

We will analyze the most usual areas of law where the attorneys are consulted.

When do I need a Real Estate Attorney?

There are several situations where you may need to hire a real estate attorney in Costa Rica. Some common reasons to seek the services of a real estate attorney include the following:

  • Buying real estate: If you are buying or selling real estate in Costa Rica, the real estate attorney shall check the property before the Public Registry to check the historical movements on the title of the property, review the documents, and represent you in the transaction.
  • Reviewing and negotiating contracts: If you are entering a real estate agreement, such as a lease or purchase agreement, a real estate attorney can review the terms and negotiate any changes on your behalf.
  • Resolving disputes: If you are involved in a real estate dispute, such as a boundary dispute or a dispute over the terms of a contract, a real estate attorney can represent you in court and help you resolve the dispute.
  • Obtaining financing: If you need financing to purchase real estate in Costa Rica, a real estate attorney can help you negotiate the terms of the loan and review any related documents.
  • In Costa Rica, most Real Estate attorneys are notary publics, which means that usually, in any real estate transaction where the property title is transferred, you will need a notary public.

Overall, if you are involved in any real estate transaction or dispute in Costa Rica, it’s a good idea to seek the advice of a real estate attorney to protect your interests and ensure that the transaction is handled correctly.

When do I need an Immigration Attorney?

If you are planning to move to Costa Rica or are already living in, you will need help with immigration issues; you may consider hiring an immigration attorney. Here are some everyday situations in which you might need an good legal service:

  1. Applying for a visa: If you are planning to visit, work, or study in Costa Rica, you may need to apply for a visa. An immigration attorney can help you determine which type of visa is best for your situation, help you gather the required documentation, and guide you through the application process.
  2. Plan permanent residence: Ipermanentlyo live in Costa Rica permanently, you will need permanent residence. Permanently can help you understand the requirements for obtaining permanent residency and assist you with applying.
  3. Renewing your visa or residence permit: If your visa or residence permit expires, you will need to renew it to continue living in Costa Rica. An immigration attorney can help you understand the renewal process and ensure you have all the necessary documentation.
  4. Applying for citizenship: If you are eligible and wish to become a citizen of Costa Rica, an immigration attorney can help you understand the requirements and assist you with the application process.
  5. Resolving immigration problems: If you have problems with your immigration status in Costa Rica, such as being denied a visa or facing deportation, an immigration attorney can help you understand your rights and options and represent you in the legal proceedings.
  6. Retirement plan: if you plan to retire in Costa Rica, hiring a good attorney must be your first step.

The Importance of hiring a good Corporate Lawyer.

Hiring a good corporate lawyer in Costa Rica is essential for businesses of all sizes and types. A corporate lawyer can provide valuable legal guidance, explaining to you the business law and representation for a wide range of business-related issues, including:

  1. Formation of the business: If you are starting a new business in Costa Rica, a corporate lawyer can help you choose the proper legal structure for your business, such as the type of corporation, partnership, and assist you with the formation process.
  2. Compliance with laws and regulations: A lawyer who knows corporate law can help ensure that your business complies with all relevant laws and regulations in Costa Rica, including tax laws, labor laws, and environmental regulations.
  3. Contract review and negotiation: You can review and negotiate contracts for your business, including agreements with vendors and customers.
  4. Risk management: A corporate lawyer can help identify and manage legal risks that may affect your business, such as liability risks or intellectual property issues.
  5. Investment: Also, if you are investing, you need to double-check who you are dealing with; a corporate attorney can help you to decide if it is a good or bad investment.
  6. Trademark: It is essential to register your brand or logo before starting to operate.

Overall, getting the correct legal service, and getting the right legal guide to Costa Rica, can be the difference between having a successful start in a foreign country like Costa Rica.

Embassies Attorneys list

Even though Spanish is the official language, you can find lawyers who speak English, so at least two embassies enlisted a list of law firms and attorneys who speak English that can provide legal consultation for your local or international legal issues.

Re-registration of dissolved companies

Aug 1, 2022 | Commercial Law, Taxes

On Tuesday, May 31st, 2022, through the Official newspaper, The Gazette Number 100, the Re-registration of Dissolved Companies Law was published. This recently approved bill aims to promote national economic reactivation because dissolved companies will be able to resume the lucrative activities for which they were created.

The present Law establishes that dissolved companies can re-register before the Legal Entities Registry of the National Registry to recover their legal status. Three circumstances can occur for the re-registration: 1) if the company was dissolved for not paying the Corporate Tax, 2) for the expiration of the company’s legal term (according to the Law of Corporate Tax), or 3) for the expiration of the company’s legal term as stipulated in the public deed of incorporation of the company, according to article 201 of the Costa Rican Commerce Code.

For the re-registration to proceed, Law Number 10255 indicates that a request must be made to the National Registry within a term not exceeding three years after the declaration of the company’s dissolution. The legal representatives must make this request of the dissolved company if payment of all the pending amounts is paid, the principal sum of the tax obligation, fines, sanctions, and related interest.

Another important aspect of this Law is the provisions of article 6, which adds article 7 bis to the Law of Corporate Tax. This reform establishes that if re-registration proceeds due to the payment of debts previously paid by the legal representative of the company, and it is dully re-registered in the Legal Entities Registry, the company must also comply with the Law to Improve the Fight against Tax Fraud (Law Number 9416), about submitting the Declaration of Shareholders Registry and Ultimate Beneficiaries within a legal period not exceeding two months.

Finally, according to the Transitional Provisions of this Law, it is established that the Executive Power must issue a regulation that includes the re-registration request within the next three months of the start of the full force of this Law. Also, if the companies were declared dissolved five years before the full power of this law, the legal representatives can request the re-registration if they comply with this law’s requirements. This regulation has not yet been published; therefore, this Law does not have the possibility of being applied until the respective code is issued.

This Law must not be confused with another law published in 2017, where the re-registration of dissolved companies by debts was allowed but having paid the Corporate Tax no later than December 15th, 2017, once this date ended, the possibility of re-registration given by that law was no longer available. This new law, Law Number 10255, does not count with a specific term to comply with the payment, which means that almost all dissolved companies can be re-registered before the Legal Entities Registry.

Inactive Companies Income Statement

Jan 16, 2022 | Commercial Law, Taxes

On the 20th of December 2021, the Ministry of Finance issued a statement indicating that as of the 1st of January 2022, a simplified form will be available for the declaration of the Income Tax of Inactive companies.

This procedure will be carried out virtually through the Virtual Tax Administration (ATV) platform, which can be found on the official Ministry of Finance website. The document available to make this declaration is Form D-101 (Simplified Income Tax Declaration), in which information for the fiscal periods of years 2020 and 2021 will be declared.

The legal ground for this operation is indicated by the Law for the Strengthening of Public Finances (Law No. 9635) in article 2 subsection a). This regulation obliges all legal entities to comply with the Income Tax declaration, regardless of whether they carry out lucrative activities or not.

As stated above, inactive companies will be considered as taxpayers and will be assigned the code 960113, which is intended to identify companies that do not carry out income-generating activities in Costa Rica. These non-profit companies, which will now be considered as taxpayers, must comply by presenting the Form D-101.

Inactive companies are understood as those legal entities that do not carry out generating economic activities at a national level, in other words, companies that do not produce profits or generate income. Companies that only have the purpose of owning some asset, being a vehicle, a house, shares, or other types of assets.

Before making this declaration, interested legal entities may consult the tax situation of their companies to make sure they remain in order. This consultation can be done on the Ministry of Finance official website, in the Tax Situation Consultation section.

It is worth noting the term provided by tax authorities to present this declaration. According to the statement provided by the Revenue Office, inactive companies have a two-month and fifteen-day period to comply with this obligation, which will begin to be computed from 1st of January, 2022 and expires on the 15th of March of this year (2022).

At last, it is important to take into account that to carry out this operation, the information regarding the legal representatives and the registered offices of the inactive companies must be up to date. This means that the information can be verified by the Tax Administration and must be real, thus proceeding with the filing of the Simplified Income Tax Return for the aforementioned fiscal periods of the years 2021 and 2021.

An important aspect to consider is whether the company has active assets or non-registered assets or if these are only found in its accounting books. At this time, it is highly important to be updating the value of the company’s assets. While it is true that a person can make a statement with basic accounting knowledge, it is preferable always to be assisted by a professional.

This type of declaration should not be confused with other tax obligations such as the payment of the tax on legal entities, the declaration of real estate or the solidarity tax for the strengthening of housing programs (ISO) and the municipal taxes; For example, a person who has a house registered in an inactive company would be responsible for paying the following taxes: a) land taxes. b) municipal taxes. c) taxes of legal entities and d) in case its value is included within established law terms, it would also have to pay the solidarity tax for the strengthening of housing programs (ISO).

In case of having an inactive company whether having registered assets or not, do not hesitate to contact us. Our commercial partner AG BPO SERVICES can help you make the declaration.

 

Law for the Attraction of Investors, Rentiers, and Retirees

Aug 8, 2021 | Inmigration Law, Taxes

ARTICLE 1- Object of the law

The purpose of this law is to create the regulatory framework to encourage the attraction of investors, rentiers, and retirees, thus protected by Law 8764, General Law of Migration and Foreigners, of August 19, 2009, to contribute to the Costa Rican economic reactivation in a post-Covid-19 pandemic period.

ARTICLE 2- Scope

This law will apply to all those people who are authorized to enter our country under the immigration categories of investors, retired residents, or rentier residents.

ARTICLE 3- Declaration of public interest

This law is of public interest for the development of the attraction of investors, rentiers, and retierres to the national territory. For its fulfillment, the institutions of the Public Administration may include economic contributions to support the fulfillment of its purposes through the ordinary and extraordinary budgets of the Republic.

ARTICLE 4- Rectory

The governing body of what is protected in this law in the matter of migration will be the General Directorate of Migration and Foreigners, a body attached to the Ministry of the Interior and Police. Concerning tax matters will be the Ministry of Finance.

ARTICLE 5- Incentives

The people covered by this law will enjoy the following incentives:

  1. a) Duty-free and all import taxes present only once, for the importation of household items. In the applications, they will be able to protect their dependents for immigration purposes. Household goods shall be understood as all new or used items of a reasonable nature and quantity and proportionally sufficient for the needs of the beneficiary of this law and the members of their immediate family nucleus, including, among others, home furnishings and electrical appliances. , home decor items, kitchen and bathroom utensils, bedding.

Suppose the beneficiary person transfers these assets within the validity period of the benefits granted by the provisions of the second paragraph of Article 12 of this law. In that case, they must pay the taxes from which they were exempted.

In highly qualified situations, where there is destruction or loss due to theft of household items, the beneficiary may acquire other assets for their replacement, also exempt from taxes. The regulation will develop the accreditation mechanisms of the circumstances in which these qualified exceptions proceed.

  1. b) Beneficiaries may import up to two land, air, and/or sea transportation vehicles for personal or family use, free of all import, tariff, and value-added taxes. In case of loss of the vehicle due to theft, destruction by fire, flood, collision, or accident occurring during the term of validity of the benefits granted following the provisions of the second paragraph of article 12 of this law, the owner may import another vehicle free of the indicated taxes.

The beneficiary of this law, who has imported a vehicle under the conditions indicated in the previous paragraph, may sell or transfer it to third parties, in which case the provisions of article 10 of Law 7088, Tax Adjustment and Resolution, will be applied. 18th CA Tariff and Customs Council, of November 30, 1987.

  1. c) The amounts declared as income to qualify for the benefits of this law will be exempt from income tax.

However, the income obtained in the national territory, resulting from the investments made in the country, will be taxed by income tax, according to what is provided in Law 7092, Income Tax Law, of April 21 1988.

  1. d) Twenty percent (20%) of the total transfer tax will be exonerated on real estate that they acquire within the term of this law, provided that the beneficiary is the registered owner of the asset.

If the beneficiary person transfers these assets within the term of this law, they must pay the taxes from which they were exempted.

  1. e) Exemption from import taxes for instruments or materials for professional or scientific practice, carried out by the person with the migratory category of investor, retired resident, or rentier resident. The person must demonstrate to the Ministry of Finance that what is imported corresponds to his economic activity and has criteria of proportionality and reasonableness.

ARTICLE 6- Tax residence

Foreign persons classified as investors, retired residents, or rentier residents, according to this law and who invest in Costa Rica, will not be automatically considered tax residents under Law 7092, Income Tax Law, of April 21, 1988, and its regulations, being subject to due diligence processes for the exchange of information with other jurisdictions under an international agreement, following article 106 quarter of the Code of Tax Standards and Procedures. The status of tax resident will be obtained only when the requirements of the final paragraph of Article 2 of Article 7092, Income Tax Law, of April 21, 1988, and Article 5 of the Income Tax Regulations are met.

ARTICLE 7- On the resignation or cancellation of the condition of investor, rentier resident, or retired resident

If the beneficiary person renounces his condition of “investor,” “pensioner resident,” or “rentier resident,” or if the General Directorate of Migration and Foreigners cancels his immigration status for having incurred In any of the cases contemplated in article 129 of Law 8764, General Law of Migration and Foreigners, of August 19, 2009, within the term of this law, you must pay the taxes from which it was exempted.

ARTICLE 8 Investors

For the category of investors, for the term established by this law, a new investment range is established, with a capital of not less than one hundred and fifty thousand US dollars (US $ 150,000.00), according to the official sale exchange rate. determined by the Central Bank of Costa Rica, whether in real estate, registrable assets, shares, securities, and productive projects or projects of national interest. In those cases where special laws regulate the investment, it will be analyzed individually.

In addition, beneficiary investors for this law may be considered those who invest in venture capital funds or sustainable tourism infrastructure projects.

ARTICLE 9- Processing

The Ministry of the Interior and Police, through the General Directorate of Migration and Immigration, in attention to the criteria for simplifying procedures, will have a specialized service window for the categories provided in the second article of this law, regulated in Law 8220, Protection of Citizens from Excess Requirements and Administrative Procedures, of March 4, 2002.

In addition to the requests dealt with directly at the window in question, the Ministry of Appointment may open a window under the same conditions of service at its different locations or dependencies.

ARTICLE 10- Falsification of documents

Whoever alters or falsifies documents to obtain any of the benefits provided in this law will be sanctioned with a fine equivalent to ten percent (10%) of the taxes that were exonerated. Additionally, you must proceed with the immediate payment of the full amount of the taxes that were exonerated. The foregoing is without prejudice to other administrative and criminal penalties that may apply.

The respective sanctioning procedure will be carried out by the General Directorate of Migration and Immigration, by the provisions of article 189 of Law 8764, General Law of Immigration and Immigration, of August 19, 2009. For its part, according to the provisions of this law, the Ministry of Finance will supervise and sanction following the corresponding legal framework.

ARTICLE 11- Regulations

The Executive Power will regulate this law within the sixty days following the date of its entry into force.

ARTICLE 12- Validity of the law

Investors, rentiers, or pensioners who opt for the benefits granted in Article 5 of this law may do so only during the first five years from its entry into force.

Investors, rentiers, or beneficiary pensioners who opted for said benefits during the first five years of the law’s validity will keep them for ten years from the date they were granted.

Governs from its publication.

Legal and Tax Implications for Inactive Companies In Costa Rica

Jan 19, 2021 | Commercial Law, Taxes

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In past years it was very common to use inactive companies as a legal structure to protect assets. The foregoing, because it was a corporate figure that was exempt from certain tax requirements, unlike those that develop a commercial activity.

Because of the entry into force of the Law on Strengthening Public Finances (Ley de Fortalecimiento de las Finanzas Públicas) in 2018, the benefits of using an inactive company as a corporate vehicle for the protection of assets, undergoes a significant shift. The above, because it converts this type of companies into taxpayers and it forces them to comply with 5 tax requirements, which are the detailed as follows:

FILING OF D-140 FORM: Once an inactive company is dully incorporated before the Costa Rican National Registry, it must file before the Tax Authority an update of the information regarding its legal representative or representatives and its tax address. Additionally, the company must be registered under the economic activity of “Legal persons incorporated in the country that does not carry out economic activity of a Costa Rican source”, which is governed by code 960113. It is important to consider that in the event of non-compliance with this first post-incorporation requirement, the company is exposed to a sanction. Lastly, this requirement must be complied within the period of 10 business days from the incorporation of the company.

 

CORPORATE TAX: This is a tax must be paid annually, during the month of January of each year. The amount to be paid varies from year to year and can be paid from any digital platform of the banks registered in the national financial system. The amount to be paid varies depending on whether it is an inactive company or an active company.

EDUCATION AND CULTURE STAMP: This tax It is included with the legal expenses at the incorporation of the company. Subsequently, this tax must be paid annually between the months of February and March of each year. The net capital reported in the Income Tax return of the immediate prior fiscal year, is used as the basis for calculating such tax.

ULTIMATE BENEFICIARY OWNERSHIP DECLARATION (UBO): This declaration is filed annually during the month of April before the Central Bank of Costa Rica. The purpose of this declaration is to indicate who is the final beneficiary (physical person) who is owns company. The omission this requirement carries out several sanctions to the company, such as a pecuniary fine, the non-issuance of good standing certifications and the non-registration at the Costa Rican National Registry of documents in relation to the company.

INCOME TAX RETURN (FORM D-101): One of the most important modifications that are introduced with the aforementioned law, is the filing of the Income Tax Return, in which the capital stock, assets and liabilities of the inactive company must be stated. This declaration will be taken as the basis for the calculation of the Corporate Tax, Education and Culture Stamp and other future tax liabilities. The failure to submit this declaration form entails financial penalties and in the face of an audit by the Tax Authority, the company would be exposed to an additional penalty for the increase of the corporate assets without justification. This requirement must be submitted annually and expires on March 15.

In conclusion, with the introduction of these new tax requirements that all inactive companies must fulfill, this promotes to maintain the corporate information updated. The above, because these companies stopped being simple holders of assets and from now on, they are subjected to a meticulous tax inspection. Therefore, the only way to avoid this type of sanctions is to keep everything in order and in compliance as if the said company, would be developing a commercial activity like any company called “active”.

TAX OBLIGATIONS

INACTIVE COMPANIES

               DUE DATE

FILING OF D-140 FORM

10 business days from the incorporation of the company before the CR National Registry,

CORPORATE TAX

January 31st

EDUCATION AND CULTURE STAMP

From February to March
UBO

April 30th

INCOME TAX RETURN (FORM D-101)

March 15th

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