DOING BUSINESS IN COSTA RICA IN 2018
Since 2003, Healy Consultants Group PLC has assisted our Clients with starting their business in Costa Rica. Our services include i) Costa Rica business registration ii) registration of the company in Costa Rica free zones iii) corporate bank account opening iv) employee recruitment strategies and v) office rental solutions.
| Summary | Tax resident LLC | Offshore company | Free Zone company | Representative office | Trust |
|---|---|---|---|---|---|
| Also known as | SRL | non resident SA | SA | Oficina de representacion | Fideicomisos |
| Best use of company? | All products and services | Global trading/holding | Manufacturing and export trading | Marketing & research | Tax planning |
| How soon can you invoice Clients/sign sales contracts? | 2 weeks | 2 weeks | 3 weeks | Cannot | Cannot |
| How soon can you hire staff? | 2 weeks | 2 weeks | 3 weeks | 2 weeks | Cannot |
| How soon can you sign a lease agreement? | 1 week | 1 week | 1 week | 1 week | 1 week |
| How long to supply corporate bank account numbers? | 6 weeks | 6 weeks | 7 weeks | 6 weeks | 6 weeks |
| How long to supply company registration/tax numbers? | 2 weeks | 2 weeks | 3 weeks | 2 weeks | 2 weeks |
| Standard corporate tax rate on annual net profits? | 30% | 0% | 30% | 0% | 0% |
| Can be legally tax exempt if properly structured? | No | Yes | Yes | Yes | Yes |
| Resident director/partner/manager/legal representative required? | No | No | No | No | No |
| Minimum /recommended paid up share capital? | US$1 | US$1 | US$100,000 | None | None |
| Can bid for Government contracts? | Yes | Yes | Yes | No | No |
| Corporate bank account location? | Citibank | Banco BCR | Banco Cathay | Scotiabank | Bank of Costa Rica |
| VAT payable on sales to local customers? | 13% | 0% | 13% | Cannot trade | Cannot trade |
| Average total business set up engagement costs? | US$10,985 | US$12,235 | US$16,335 | US$11,835 | US$18,400 |
| Average total engagement period? | 7 weeks | 7 weeks | 8 weeks | 7 weeks | 7 weeks |
| Accounting and tax considerations | Tax resident LLC | Offshore company | Free Zone company | Representative office | Trust |
|---|---|---|---|---|---|
| Statutory corporate tax payable? | 30% | 0% | 30% | 0% | 0% |
| Legally tax exempt if properly structured? | No | Yes | Yes | Yes | Yes |
| Must file an annual tax return? | Yes | Yes | Yes | Yes | No |
| Must file annual financial statements? | Yes | Yes | Yes | Yes | No |
| Monthly VAT reporting to the Government? | Yes | No | Yes | Yes | No |
| Must appoint an auditor? | No | No | No | No | No |
| Access to double taxation treaties? | Yes | Yes | Yes | No | No |
| Withholding tax on payments to foreign shareholders? | 15% | 0% | 15% | None | None |
| Company Registration | Tax resident LLC | Offshore company | Free Zone company | Representative office | Trust |
| Resident director/partner/manager/legal representative required? | No | No | No | Yes | No |
| Minimum number of shareholders/partners? | 2 | 2 | 2 | Parent company | 1 |
| Maximum shareholding for foreigners? | 100% | 100% | 100% | 100% | 100% |
| Minimum number of directors/managers? | 1 | 1 | 1 | 1 | 1 |
| Minimum / recommended statutory paid up share capital? | US$1 | US$1 | US$100,000 | None | None |
| Shelf companies available? | Yes | Yes | No | No | No |
| Time to incorporate a new entity? | 2 weeks | 2 weeks | 3 weeks | 2 weeks | 2 weeks |
| Must sign an office lease agreement during incorporation? | No | No | Yes | No | No |
| Can easily convert to a PLC? | Yes | Yes | Yes | No | No |
| Can have preference shareholders/partners? | Yes | Yes | Yes | No | Yes |
| Business Considerations | Tax resident LLC | Offshore company | Free Zone company | Representative office | Trust |
| Can secure residence visa for business owner? | Yes | Yes | Yes | Yes | No |
| Good entity for trademark registration? | Yes | Yes | Yes | No | No |
| Can secure an import and export license? | Yes | Yes | Yes | No | No |
| Limited liability entity? | Yes | Yes | Yes | No | Yes |
| Public register of shareholders and directors? | Yes |
| Sponsorship by a local citizen required? | No |
| Our Client needs to travel to Costa Rica for business set up? | No |
| Temporary physical office solutions available? | Yes |
| You need a local resident as bank signatory? | No |
| Can be wholly foreign owned? | Yes |
| The entity will likely be regulated by? | National Registry |
| Shareholders & directors documents to be attested/translated? | Yes |
| Each foreign director needs a personal income tax number? | No |
| Foreign non resident director needs a residence visa? | No |
| Maximum number of staff allowed? | No maximum number for any entity |
| Expatriate to local staff ratio? | None |
| Other useful information | |
| What will be included in my customer sales invoice? | Click link |
| This country has signed free trade agreements? | Yes |
| This country is a member of WIPO/TRIPS? | Yes |
| This country is a member of the ICSID? | Yes |
| Average custom duties suffered? | 2.66% |
| Government foreign investment approval required? | No |
| Average monthly office rental? (US$ per sq m) | US$20 |
| Minimum statutory monthly salary? | US$434 |
| Average monthly US$ salary for local skilled employees? | US$800 |
| US$ deposit interest rate? (1 year average) | 4.50% |
| Overseas remittance currency controls? | None |
| Banking considerations | |
| Multi-currency bank accounts available? | Yes |
| Corporate visa debit cards available? | Yes |
| Quality of e-banking platform? | Good |
| Crowd funding available in this country? | Yes |
| Group HQ tax incentives? | No |
| Security deposit to be kept with Government? | No |
| Can secure trade finance? | Yes |
| Government grants available? | Yes |
| Government approval required for foreign owners? | No |
Press the link headings below to read detailed, relevant, up to date information.
Advantages and disadvantages
Advantages of Costa Rica company registration
- Our Clients can register a limited liability company in Costa Rica with a minimum of i) two shareholders and ii) one director of any nationality. The minimum paid-up capital required for establishment of the Costa Rican company is US$1. The incorporation procedures can be completed within 4 weeks and do not require our Client to travel;
- Our Clients also find it convenient to establish a holding company in Costa Rica because:
- The earnings of a Costa Rica company are subject to tax only if they have been sourced from Costa Rica. Consequently, dividends and interest distributed by foreign subsidiaries are exempt from tax;
- Foreign entrepreneurs investing in Costa Rica face low political risk, thanks to the country’s history of democratic stability. Its institutions are notably ranked as the 3rd best in Central and South America after Uruguay and Chile by the World Economic Forum.
Disadvantages of Costa Rica company registration
- Costa Rica has signed only one double tax avoidance treaty with Spain;
- Outside of Costa Rica free trade zones, taxation can represent significant amounts because:
- Standard corporate tax rate is 30% and dividends paid to non-residents are subject to withholding tax levied at 15%;
- Registration for sales tax is mandatory for all companies, which must charge such tax at 13% on their invoices;
- Employers must pay social security contributions representing 26% of their employees’ gross salaries. They must also withdraw personal income tax from their employees’ wages at rates of up to 15%;
- For all reasons listed above, the total amount of taxes paid by a business registered in Costa Rica represented on average 58% of its earnings in 2014, ten points higher than the Latin American and Caribbean’s average.
- The Costa Rica Colon (CRC) is no longer pegged to the USD since January 2014, creating (limited) currency exchange risk for foreign investors.
Best uses for a Costa Rica company
- Costa Rica is an attractive location for running manufacturing operations, because:
- Our Clients can register their company in one of the Costa Rica exporting processing zones, where their business will benefit from reduced corporate tax rates of up to 6%. Their operations will also benefit from other tax incentives, including i) no import duties ii) no value added tax and iii) no dividends withholding tax;
- Costa Rica being a member of the Central American Free Trade Agreement, products manufactured locally can be sold free of custom duties to consumers in the United States, as well as other Central American markets including: i) El Salvador ii) Guatemala iii) Honduras iv) Nicaragua and v) the Dominican Republic;
- Costa Rica’s strategic location in the middle of the American continent makes it an ideal business gateway to the Americas. With ports on both the Pacific and Atlantic oceans, it serves as an operations base for world markets. Costa Rica is only a five hour flight from New York and an hour flight from other markets like Panama and Ecuador;
- Labor regulations are quite flexible. Minimum salaries are set by industries: read more about current minimum salary levels. It is also easy to dismiss employees, who are only entitled to i) one month of advance notice and ii) up to 20 days of severance pay, even after several years of employment by our Clients;
- Costa Rica’s has an educated workforce with one of the highest literacy rates in Latin America at 97%. Most of the population speak English, so communicating with employees will not be challenging for our Client.
- Costa Rica is an attractive location for running manufacturing operations, because:
