Business Opportunities in Costa Rica
Costa Rica presents profitable investment opportunities for foreign nationals looking to establish a company there, making it an attractive business destination in the heart of Central America.
The country’s strategic location close to the United States facilitates U.S. exports, with the Caribbean and Pacific coast ports enabling seamless product shipping. In addition, the Latin American nation boasts a well-educated and bilingual workforce, a favorable business climate, and excellent infrastructure, making it a prime destination for foreign investors looking to establish a presence in Central America.
Costa Rica’s diverse economy primarily comprises agriculture, manufacturing, and service sectors. However, the tourism industry contributes most significantly to the country’s economy.
Expats looking to start a business in Costa Rica can also explore other sectors such as pharmaceuticals, education, hotel and restaurant equipment, auto parts, building and construction equipment, renewable energy, and technology for investment opportunities.
Almost 40% of all imports and about half of foreign direct investments in Costa Rica are of U.S. origin, making the United States its most prominent trade and investment partner. It is worthwhile pointing out that Costa Rica imposes no restrictions on capital flows in and out of the country. Although companies in Costa Rica are subject to local taxes, there are no restrictions on portfolio investments in public companies.
Benefits of Starting a Business in Costa Rica
Setting up a company in Costa Rica must adhere to the country’s rules and regulations to reap the benefits of its liberal business environment. Here are the key advantages of doing business in Costa Rica:
- A straightforward and quick company incorporation process
- A strategic location with access to the U.S. and South American markets
- A favorable business climate that supports foreign investment
- Free Trade Agreements with countries like the U.S., Canada, Chile, and Mexico eliminate or reduce tariffs while facilitating the cross-border flow of goods and services
- Reasonable taxation rates
- Company shareholders get complete privacy and anonymity
- Membership of the World Trade Organization (WTO) and incentives to promote business and trade within the country
Requirements for Starting a Business in Costa Rica
The pro-business environment of Costa Rica is ideal for expats to establish and operate their businesses. However, those looking to start a business in Costa Rica must fulfill legal and regulatory requirements.
Here are the essential requirements to do business in Costa Rica:
Choose the company structure
Business structures in Costa Rica are of several types, such as sole proprietorships, partnerships, corporations, and limited liability companies (LLCs). Thus, one of the first requirements to start a business in Costa Rica is to select the most appropriate business structure that suits the specific business needs.
Obtain a Digital Signature Certificate
A Digital Signature Certificate (Firma Digital) is mandatory to set up an offshore company in Costa Rica. The Digital Signature Certificate lets business owners and investors digitally sign and authenticate legal documents (such as business registration forms and contracts).
Reserve the legal company name
One of the crucial steps to incorporate a company in Costa Rica is reserving the legal name of the company with the National Registry (Registro Nacional). The company name must comply with Costa Rica’s legal requirements. In addition, the name must be unique and not infringe on any existing company name or trademark.
Register the company with the National Registry
After obtaining the Digital Signature Certificate and reserving the legal company name, the next step is registering the company with the National Registry of Costa Rica. The legal company registration process includes submitting articles of incorporation for the business entity, including the company bylaws and shareholder agreement. The process is complete after payment of the registration fee.
Get necessary permits and licenses
Business owners may need additional permits and licenses before starting their operations. However, this depends on the nature of the business. For instance, businesses with a physical presence in Costa Rica must obtain a business license from the local municipality and an occupancy permit from the health department.
Register as a taxpayer
Another crucial step when setting up a company in Costa Rica is registering as a taxpayer with the Costa Rican Tax Administration. Business owners must register for the appropriate taxes, including income tax, value-added tax, and corporate tax.
The registration process is done through the physical identification number for domestic natural persons, DIMEX (“Immigration Identification Document for Foreigners”) for foreign nationals, and the corporate identification number for legal entities.
File the Ultimate Beneficial Owner (UBO) Declaration
It is mandatory for all legal entities in Costa Rica to file an Ultimate Beneficial Owner (UBO) Declaration, effective since Costa Rica became an official member of the Organisation for Economic Co-operation and Development (OECD) on May 25, 2021. The declaration discloses the personal information (contact information, identity number, passports, types and the number of shares, capital) of shareholders and ultimate beneficiaries with 15%-25% ownership of the share capital.
Register with the social security agency
After the business has been incorporated, owners must register as an employer with the Costa Rican social security agency.
Types of Business Structures in Costa Rica
Business entities in Costa Rica can take on different structures, and owners must choose a business structure before registering their company.
The most common types of legal structures available for company registration in Costa Rica are:
- Corporations: The most common type of business entity in Costa Rica, corporations are characterized by limited liability for their shareholders. At least two shareholders are required to form a corporation, and their liability is limited to the investment amount.
- Limited Liability Companies: A limited liability company (LLC) in Costa Rica is a hybrid between a corporation and a partnership. The members of an LLC are not personally liable for the company’s debts and obligations beyond their initial investment. Limited liability companies in Costa Rica are governed by single or multiple managers, depending on the company setup.
- Sole Proprietorship: Sole proprietorships do not provide limited liability protection to their owners. Thus, the owner of a sole proprietorship is personally responsible for all debts and obligations.
Company Registration Process
The company registration process in Costa Rica involves pre-registration, registration, and post-registration steps.
- Choosing the company structure
- Obtaining a Digital Signature Certificate
- Preparing powers of attorney (POAs) and articles of incorporation
- Submitting the articles of incorporation to the National Registry of Costa Rica
- Paying the company registration fee
- Register as a taxpayer with the Costa Rican Tax Administration
- Getting necessary permits and licenses
- Naming a registered agent (for companies domiciled outside Costa Rica)
- Filing the UBO declaration with the Central Bank of Costa Rica (BCCR)
- Registering with the Costa Rican social security agency
- Applying for insurance
- Paying taxes
- Ensuring compliance with other legal requirements
How Much Does it Cost to Incorporate a Company in Costa Rica?
The cost of incorporating a company in Costa Rica depends on multiple factors and requirements, including the following:
- The type of business
- The volume of business activities
- The fees of service providers
Business owners must pay a one-time company incorporation fee and other annual fees depending on the type and structure of the business. The approximate cost of incorporating a business entity in Costa Rica can range from US$9,985 to US$18,400, depending on the type of entity and other factors mentioned above. However, there is no specific cost mentioned for the process.
Are Foreigners in Costa Rica on Certain Passes Allowed to Start a Business in Costa Rica?
The primary condition for foreign nationals to start a business in Costa Rica is registering their company with the Costa Rican National Registry and Tax Authority. However, foreigners in Costa Rica need not have any residency status to own a business.
Government Assistance for Foreign-owned Businesses
The Government of Costa Rica actively promotes and encourages foreign investment, with the United States as the largest source of FDI in Costa Rica. In addition, foreign-owned businesses can benefit from a range of investment incentives, such as import duty and tax exemptions.
How Multiplier Can Help?
A vibrant economy, highly-educated workforce, strategic location in Central America, and support for foreign direct investments make Costa Rica a promising business destination for expats. Setting up a company in Costa Rica is straightforward but requires strict adherence to local laws and industry regulations.
Multiplier can assist you by offering a robust, reliable, and secure infrastructure to set up a business in Costa Rica.
Our integrated SaaS-based platform can help you attract talent across borders and communicate with your cross-border teams, minus the hassle of incorporating a new entity. Streamline payroll management, ESOPs for startups, employment contract generation, and contingent workforce management at affordable costs with experts at Multiplier.