Company formation in Costa Rica

The Happy Planet Index (HPI), also known as the International Happiness Index, ranks Costa Rica as one of the happiest and greenest countries in the world. Key indicators of well-being include citizens’ life expectancy, their subjective sense of well-being, quality of life, and the government’s commitment to environmental protection.

Costa Rica is also a politically and economically stable country with a territorial taxation system. For this reason, entrepreneurs from around the world choose Costa Rica company registration to structure their international businesses and potentially benefit from exemptions on income generated outside the country. Although Costa Rica cannot be classified as a traditional offshore jurisdiction, it offers numerous advantages for individuals and businesses looking to start a company in Costa Rica on favorable terms.

In this guide, we explain how to register a company in Costa Rica, the main advantages and disadvantages of the jurisdiction, which legal business structures are available, and how Costa Rica’s corporate tax system works.

Benefits of Opening a Company in Costa Rica

Costa Rica is a relatively small Central American country located between Nicaragua and Panama, on the isthmus connecting North and South America. The country has a population of approximately 5.094 million people and covers an area of 51,100 square kilometers. Its capital is San José, and Spanish is the official language.

The advantages of doing business in Costa Rica are determined not only by its favorable geographical location but also by a number of economic, political, and social factors.

Unlike some less stable countries in the region, Costa Rica has consistently developed its economy and holds a leading position in Latin America in terms of GDP. Its strong economic position and high social standards are widely recognized internationally.

Global economic crises have comparatively limited effects on the country's overall stability. Costa Rica offers accessible healthcare and a relatively high life expectancy, averaging approximately 77 years for men and 80 years for women.

The country's main economic sectors include agriculture, tourism and hospitality, financial services, electronics manufacturing, and the production of medical equipment and microprocessors. Costa Rica is also a major producer of coffee, bananas, corn, and sugarcane and has a developed cattle-farming industry.

Other advantages of incorporating a company in Costa Rica include:

• Political and legal stability. Costa Rica has a long history of political stability and has avoided military coups, major wars, and revolutions. The country provides strong legal protection for property rights and emphasizes the rule of law for both residents and non-residents.
• Strong foreign investment environment. Costa Rica has one of the highest levels of foreign direct investment in Latin America. The government actively promotes international investment and seeks to attract foreign capital to the local economy.
• Territorial taxation. Foreign companies conducting business outside Costa Rica generally do not pay Costa Rican corporate income tax on income generated outside the country's territory, subject to applicable legislation and tax rules. A company can also be established entirely by non-resident shareholders, as Costa Rican law does not generally require local founders to participate in the ownership structure.
• International reputation. Costa Rica works to comply with international standards aimed at preventing money laundering and improving corporate transparency. The country has also introduced reporting requirements concerning beneficial ownership. While this reduces corporate anonymity, it increases transparency and regulatory compliance.

There are generally no special restrictions preventing non-resident companies from conducting lawful business in Costa Rica. Subject to compliance with applicable regulations, foreign companies can minimize unnecessary government involvement in their commercial activities.

The general tax framework applies to companies registered in Costa Rica, whether owned by local residents or foreign investors. International businesses, insurance companies, and other financial institutions may also choose Costa Rica as a location for subsidiaries and regional operations.

One of the disadvantages of the jurisdiction is that maintaining a Costa Rican company can be more expensive than maintaining a traditional offshore company. In addition, beneficial ownership reporting requirements mean that Costa Rica is not suitable for entrepreneurs seeking complete corporate anonymity.

Legal Forms for Companies in Costa Rica

Several legal business structures are available for company incorporation in Costa Rica.

Sociedad de Responsabilidad Limitada (SRL)

A Sociedad de Responsabilidad Limitada (SRL) is broadly comparable to a Limited Liability Company (LLC). It is one of the most popular options for incorporating a business in Costa Rica.

The founders' liability for the company's debts and financial obligations is generally limited to the amount of their participation in the company's capital. There are statutory requirements concerning the number and structure of owners.

Sociedad Anónima (SA)

A Sociedad Anónima (SA) is comparable to a corporation or joint-stock company.

Shareholders contribute to the company's capital and are generally liable for corporate obligations only up to the amount of their investment. Specific rules apply to the number of shareholders and the transfer and trading of shares.

Sociedad Anónima Abierta (SAA)

A Sociedad Anónima Abierta (SAA) is a public corporation. There are no comparable limits on the number of shareholders, and the structure is designed to facilitate transactions involving company shares on international financial markets.

General Partnership

A Sociedad en Nombre Colectivo, or general partnership, consists of at least two partners who conduct business jointly for profit.

The rights and obligations of each partner are established by the partnership agreement. Partners have unlimited liability for the debts and other obligations of the business.

Limited Partnership

A Sociedad Comandita is comparable to a Limited Partnership.

It includes general partners who are personally liable for the organization's obligations and limited partners whose liability is generally restricted to the amount of their contribution.

Which company structure is best for foreigners?

For many foreign entrepreneurs, a Sociedad Limitada (SRL) is one of the most practical and popular structures for doing business in Costa Rica. Its advantages include a relatively straightforward incorporation process when all requirements are properly met and comparatively manageable operating costs.

Taxes in Costa Rica

The Costa Rica tax system is governed by relevant tax legislation, with the territorial source of income being one of the key principles used to determine taxation.

Under the territorial taxation principle, the source and place where income is generated are important when determining whether it is subject to Costa Rican taxation. Consequently, income generated outside Costa Rica may generally fall outside the scope of Costa Rican income tax, subject to the specific circumstances and applicable legislation.

The main taxes relevant to companies include:

• Corporate income tax. The applicable corporate income tax rate may range from 10% to 30%, depending on the company and its taxable income. Costa Rican companies conducting commercial activities in the country are generally subject to Costa Rican taxation. Income generated outside Costa Rica may be treated differently under the country's territorial tax system.
• Capital gains tax. A standard rate of 15% may apply to capital gains for Costa Rican companies, subject to applicable exemptions and rules.
• Value Added Tax (VAT). The standard VAT rate is 13%. Certain services may qualify for reduced rates, including specific healthcare and aviation-related services. Private educational services may also be subject to a reduced rate.
• Royalties and dividends. Withholding tax rules can apply to royalties and dividends, with rates depending on the type of payment, recipient, and applicable legislation.

Although certain companies may benefit from the territorial tax regime with respect to foreign-source income, they may still have annual accounting, reporting, and beneficial ownership obligations.

The reporting period for accounting documentation runs from October 1 to September 30 of the following year. Required documents generally must be filed within the applicable statutory deadline following the end of the reporting period. Late filing can result in administrative penalties and fines.

Requirements for Registering a Company in Costa Rica

The Costa Rica company incorporation process begins with determining which legal structure best suits the proposed business.

Requirements for an SRL

The main requirements for establishing a Sociedad de Responsabilidad Limitada (SRL) include:

• At least one director and two shareholders, who may be Costa Rican citizens or non-residents;
• A minimum share value equivalent to approximately USD 1;
• Costa Rican legislation does not prescribe a specific minimum amount of share capital, although in practice an amount of at least USD 100 or its equivalent in another currency may be used. Approximately 25% of the capital is generally deposited into the company's bank account;
• A registered office in Costa Rica where accounting records are maintained, generally in Spanish;
• If there is no Costa Rican resident on the board, the company may appoint a registered agent in Costa Rica, which can be an individual or legal entity;
• A company secretary is required, although nominee services may be available where legally permissible.

Since 2019, companies registered in Costa Rica have been required to submit annual information concerning their beneficial owners and shareholders to the relevant government authorities.

Requirements for an SA

The main requirements for establishing a Sociedad Anónima (SA) include:

• At least three directors, who must be individuals;
• At least two shareholders, who may be foreigners or Costa Rican citizens;
• Minimum stated share capital of approximately USD 1, although a higher amount, such as USD 100, may be more practical;
• A local representative is required, preferably a licensed attorney. The representative may not simultaneously serve as a director of the company;
• The company must appoint a president, secretary, treasurer, and controller;
• A registered office must be maintained in Costa Rica.

Company Registration Process in Costa Rica

The Costa Rica company registration process should be completed sequentially and in accordance with the applicable legal requirements.

The incorporation process generally includes the following steps:

1. Rent or arrange a registered office in Costa Rica.
2. Choose a company name and, where required, provide the appropriate Spanish version.
3. Prepare the beneficial ownership documentation, including founders' passports and shareholder information.
4. Prepare the company's articles of incorporation and bylaws, including any required Spanish translation.
5. Pay the applicable government registration fees.
6. Receive the incorporation documents and registration confirmation.

After the application is approved, the company receives its relevant tax identification number and its corporate information is entered into the appropriate registry.

When all requirements are properly satisfied, the registration process may take approximately two to three weeks, although the actual timeframe depends on the complexity of the application, document preparation, government processing, and any additional compliance requirements.

After incorporation, at least one-quarter of the declared share capital should generally be transferred to the company's corporate bank account where applicable.

Documents Required to Register a Company in Costa Rica

Documents submitted for company incorporation in Costa Rica may need to be translated into Spanish or English and notarized, depending on their origin and the requirements of the relevant authorities.

Corporate documents submitted by a legal-entity shareholder may also need to be apostilled or otherwise legalized.

The standard documentation package may include:

• Proposed company name. Several names can be submitted in order of preference. The name should not be identical or confusingly similar to an existing company, either in spelling or pronunciation. Names and abbreviations associated with government institutions may be restricted.
• Passports of directors and shareholders. Certified, high-quality color copies may be required.
• Proof of residential address, such as utility bills or bank statements. These documents are generally expected to be recent, often issued within the previous three months.
• Corporate documents, if a shareholder or director is a legal entity. These may include the company's articles of incorporation, bylaws, and documents confirming the appointment of its director or authorized representative.

Documents must generally be prepared for each shareholder. Depending on the registrar, bank, or compliance requirements, additional documentation may be requested, such as a criminal record certificate or a bank reference letter confirming the shareholder's financial standing.

Professional Assistance with Costa Rica Company Registration by Beforis

Costa Rica's favorable attitude toward foreign investment does not eliminate the requirement for thorough compliance checks when registering a company. The incorporation process must comply with local legislation and can require a detailed understanding of corporate, tax, and regulatory requirements.

For this reason, many international entrepreneurs choose to delegate Costa Rica company registration to a professional service provider such as Beforis.

Beforis' lawyers specialize in international company formation and provide comprehensive support throughout the incorporation process. The team can assist with the entire procedure on a turnkey basis, including selecting and reserving a unique company name, preparing the required corporate documents, arranging translations, and obtaining notarization where necessary.

Beforis can also assist entrepreneurs with government fees and registration charges where applicable. The company can communicate with the relevant authorities, provide nominee services where legally permitted, arrange a registered office for one year, and assist with obtaining the permits and authorizations required to conduct commercial activities under Costa Rican law.

If you need assistance with registering a company abroad, incorporating a business in Costa Rica, or choosing an international corporate structure, contact Beforis at hi@beforis.com or complete the online contact form.

Beforis specialists will provide a free consultation and prepare an individual proposal based on your business objectives and preferred jurisdiction.