Starting a Business in Costa Rica
Many of us sit inside drab offices, dreaming of opening a small, beachside cafe in a tropical country. With a view of the endless sea and palm trees lining the beach, we imagine having an open-air cabin as an office and light, airy clothing as everyday business attire. And if you’re like us, it’s probably hard to think of more ideal sounding career than opening your beach-side business in Costa Rica!
Since the paperwork and planning that go into designing your paradise business are rarely found in these fantasies, we’re here to fill you in on some of the small details you’ll need to know to get on the road to business bliss. And we’re not going to lecture you on the statistics of how many succeed or fail because starting a new business is always a little risky, but you already know that. People like us take these small risks anyways because we are passionate and we go for our goals, no matter the odds!
With that said, here is a list of what there is to know about starting a business in Costa Rica.
Decide on Your Immigration Status
You do not need to be a resident to have full, equal rights for owning a business in Costa Rica. Acquiring Costa Rican residency is as easy as making a $200,000 in capital investment, though. There are more complicated ways, but many business owners choose to remain ‘perpetual tourists, meaning that they leave every 90 days to renew their visa. Note: The actual number of days granted on your visa depends on what country you are from (North Americans and Europeans typically get 90-day stamps).
Find an Attorney
It’s always advisable to find a local attorney in the Costa Ballena who will guide you through the legal processes of starting your business in Costa Rica. They will help you through the process of getting the paperwork filed for your new business. The costs of forming a corporation vary, but you can expect to spend between $800 and $1,000 for your lawyer to register your business in Costa Rica with the Registro Publico(Public Registry).
The basic, minimum requirements to legally establishing your new company are:
- You must have a minimum of two owners, each owning at least one share in the new company. One of these owners can be your lawyer, who will act as the business’s “resident agent.” Their address will become the company’s official place of business.
- The value of the shares must be paid for either up front, or through a documented credit statement approved by the statutes of Costa Rican commercial law.
- The new company must be inscribed and duly certified by a notary public, and its formation must be listed in the official government newspaper, La Gaceta, where all the basic tenets of the new company are described and become public knowledge.
Structure Your Business
There are a number of legal structures to choose from and the best one depends on the type of business you are looking to start. The most common business structure is called Sociedad Anonima, which offers many of the same benefits and protections that a North American or European corporation has. As the name implies, these companies are owned by various shareholders who are not necessarily named. This is the most flexible and widely used business platform in which shareholders are liable only for their share of ownership.
Another popular business structure is called Sociedad de Resposibilidad Limitada (Limited Liability Company). In these companies, the owners’ liability is limited to their original investment, unless specifically defined otherwise by law. Their name must include the words “Sociedad de Responsabilidad Limitada,” or “Limitada,” or the initials “S.R.L.”
Open a Bank Account
There are approximately 20 private banks in Costa Rica, along with a number of state-owned banking institutions. The state run banks tend to have longer lines, but better security and more favorable user agreements.
Some international banks with a strong market share include Citibank, HSBC, and Scotiabank. These banks generally have English-speaking tellers and the lines are considerably shorter than in the public banks. In the Costa Ballena region, we presently only have public banks, like Banco de Costa Rica and Banco Nacional. These banks have more ATM machines and offer state-insured deposits.
To open a bank account in Costa Rica, you will need to provide several documents, including:
- A government issued photo ID (passport)
- Proof of income
- A utility bill or rental agreement as proof of having a residence in Costa Rica
All Costa Rica banks have minimum deposit requirements; usually at least $500.
Get Business Permits
Once the business structure is formed and the bank account is opened, you will need to obtain an operator’s license, called a Patente Comercial. This license describes the nature and details of the business. It also includes a zoning request certification, called a Certificado de Uso de Suelo, or Uso de Suelo for short. This gives you the authority to run your business from the location you’ve chosen and ensures that the property is zoned for commercial use.
Depending on what kind of business you’ve chosen to run, you may need other licenses or patents. For instance, if you’re planning on opening a restaurant, spa, or salon, you’ll need a certificate from the Ministry of Health.
Find a Good Accountant
Paying taxes and keeping up with records can be complicated. For that reason, foreign business owners and locals alike will typically hire an accountant in Costa Rica to manage their files with the government. The accountant will request and file all your business paperwork and make visits to the tax administration on your behalf. A good accountant in Costa Rica, like anywhere else, will save you money in the long term, so it’s best to connect with someone up front.
Some of the taxes that you will have to pay in your Costa Rica business are:
- 17% employer Social Security tax
- 10-30% corporate income tax (assuming that you are operating a corporate entity)
- 5% property transfer tax (at the time of purchase of your property)
- 0.25% property tax on the value of your property, paid annually
*Corporate income is taxed at a 30% rate. However, the law establishes special regulations for small companies whose gross income does not exceed 106,835,000 Costa Rican colones (CRC). For this category, the following rates apply:
- 10% for companies with gross income up to CRC 53,113,000.
- 20% for companies with gross income of more than CRC 53,113,000 but not more than CRC 106,835,000.
- 30% for companies with gross income over CRC 106,835,000.
Operate Your Business
It’s important to note that even if you own a business in Costa Rica, you are not allowed to work in it, as this is seen as taking away a job from a local. Remove yourself from day-to-day operations and stick to the administrative and managerial tasks, which you are allowed to do as a foreigner. If you need a workforce, it can consist of no more than 10% of foreign employees. Those who are foreign must have legal residency and a work permit that entitles them to work in the country.
Some common opportunities for expats looking to start their own business in Costa Rica are:
- Real estate development
- Investment/rental property ownership
- Property management
- Real estate brokering
- Restaurant, bar, or cafe ownership
- Opening a store
- Creating, selling hand-made products, i.e. soaps, tinctures, jewelry, crafts, art, woodwork, etc.
- Tour company ownership
- Hotel or hostel ownership
- Financing firms
- Digital nomads (people able to perform their jobs online)