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Costa Rica

How to Establish a Sole Proprietorship in Costa Rica: Step-by-Step Guide

A country located in Central America, Costa Rica is known for its natural beauty. It has the Pacific Ocean to the west and the Caribbean Sea to the east. Many mountain slopes, beaches, and volcanoes are also active and extinct. The country’s economy relies mainly on tourism. 

Costa Rica is a democratic country and has also not had a standing army since 1948. The nation’s political and economic stability is noteworthy. This accounts for the favorable condition in the country, making it ideal for establishing a business. 

Several factors make Costa Rica a favorable investment destination. Costa Rica has a vast workforce who are highly skilled and educated. According to 2015 data, Costa Rica has a literacy rate of 97.65%. Ranked 74 out of 190 economies by the World Bank for ease of business, Costa Rica is a great place to explore opportunities for a sole proprietorship. 

If you are intent on setting up a sole proprietorship in Costa Rica, this article will help you gain a deeper insight. 

Who Can Be a Sole Proprietor in Costa Rica?

In Costa Rica, anyone 18 older with a valid ID or residency permit can be a sole proprietor. This includes Costa Rican citizens, foreigners with residency status, and non-residents who operate a business in Costa Rica. It is also possible for a legal entity, such as a corporation, to operate as a sole proprietor. However, it’s important to note that non-residents may need additional permits and follow specific regulations to establish a business in Costa Rica.

Benefits of Sole Proprietorship in Costa Rica

Plenty of benefits come with establishing a sole proprietorship in Costa Rica. Some are mentioned below:

  • The strategic location of Costa Rica makes it an ideal location for establishing a business. The country also has good connectivity established through well-developed railways, roads, and ports. The country’s stable economy and low crime levels are added advantages.
  • There are fewer formalities associated with opening a sole proprietorship. The registration process requires fewer documents, and the paperwork is kept minimal.
  • Setting up a sole proprietorship in Costa Rica is inexpensive. 

However, the generic benefits of owning a sole proprietorship should be considered. In a sole proprietorship, you do not have to count on a partner for consultation before making any decision. You are your own master.

Since a sole proprietorship differs from a legal entity, filing a separate business income tax is unnecessary. The sole proprietorship taxes in Costa Rica are nothing but the tax that a proprietor has to pay at his level based on his gross annual income. Therefore, the sole proprietorship Costa Rican tax is very low.

Documents Required for Registering Your Business in Costa Rica

If you are wondering how to register a sole proprietorship in Costa Rica, you must undergo some legal examinations. Listed below are the documents that are required for a registered self-employed Costa Rican business:

  • Proof of Social Security payment (CCSS). This ranges between 10.5% and 18.5% for self-employed individuals.
  • Proof of registering with CAHA
  • Proof of registration with the Tax Administration of Costa Rica
  • Registration certificate’s copy as issued by the Ministry of Finance, Costa Rica

Other Criteria for Registering a Sole Proprietorship in Costa Rica

One should have a local bank account for a sole proprietorship in Costa Rica. If you are an ex-pat, it is entirely at the bank’s discretion if you will be allowed to open a bank account without a Costa Rican residency status. 

However, you can always fall back on Banco de Costa Rica, the state-owned bank of Costa Rica, for opening your bank account. They will ask for your passport, residency proof, and phone number. If you are exploring self-employment opportunities, your accountant will have an important role to play. 

To acquire a sole proprietorship in Costa Rica registration, you also need to verify the availability of your business name. This is an essential step as the business will be identified with that name throughout. You can also register your business by a number, so you will not have to verify the name. 

Knowledge of the local language can serve as an added advantage. As long as you abide by the sole proprietorship Costa Rican laws, you can start your business without hindrance.

How to Register a Sole Proprietorship Company in Costa Rica

To register a sole proprietorship company in Costa Rica, you need to follow these steps:

Registering Your Business With the Authorities 

Any business in Costa Rica, whether a sole proprietorship or a corporation, should be registered with the Public Registry (Registro Nacional). You will also have to issue specific licenses and permits based on the nature of the business that you are trying to start. Seek the assistance of an experienced business attorney. 

Make a declaration of the business, state that you are the owner, and submit this to the Central Bank. You will also need to get a digital signature, which will help ensure your business firm’s integrity. This way, you will be able to sign documents digitally and authenticate them. 

After you have submitted all the documents, you will be issued a registration form by CCSS, after which the sole proprietorship in Costa Rica becomes ready to operate. The sole proprietorship in Costa Rica cost depends on the nature of the business that you wish to execute.

Acquiring a Sanitary Permit

If setting up a sole proprietorship in Costa Rica comes at the cost of environmental degradation, proprietors will need a sanitary permit. For this, individuals need to make an application to the Health Department. Based on the intensity of the risk, proprietors will have to pay a certain amount. 

Getting Registered as a Taxpayer

A sole proprietorship is not a legal entity. However, anyone running a profitable activity within the territories of Costa Rica has to register their business with the Tax Administration of Costa Rica. This is no exemption for ex-pats. The registration can be done electronically. 

Self-employed individuals running their proprietorship must pay a tax rate of 5-30% for different income slabs. The Costa Rican Tax Administration also levies a Value Added Tax of 13% for the sales of goods and services. 

Conclusion 

Setting up a sole proprietorship in Costa Rica is not a daunting task. It can be completed in a few steps. The stable democracy, favorable geographical conditions, abundant natural resources, and simplified tax structure make Costa Rica a great place to start a sole proprietorship. The high literacy rate also makes employing a skilled and bilingual workforce easy. 

Multiplier is a platform that streamlines the global exploration of business and employment opportunities. This EOR partner is a one-stop destination for all concerns related to hiring employees overseas, screening their backgrounds, payroll of employees, and so on.

Frequently Asked Questions

Costa Rica has different business structures based on the complexity involved, the number of people engaged, etc. The two most common business structures in Costa Rica are SA, equivalent to a corporation, and SRL, equivalent to a limited liability company.

Yes, according to the Code of Commerce of Costa Rica, foreigners can also own a business in Costa Rica.

Yes, Costa Rica has a highly favorable environment for conducting business. It has a wide range of benefits, like low tariffs and low tax rates. Apart from that, the country’s political stability is an added advantage.

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