Are you a business manager looking to expand your operations to Costa Rica?
Costa Rica is a great place to do business. It has a stable economy, a skilled workforce, and a favorable tax environment. The World Bank ranked Costa Rica as the 19th most accessible country in the world to do business in 2023.
In addition to excellent tourism and customer service, companies investing in Costa Rica expand businesses in outsourcing, back office, real estate development, sales representatives, and medical devices.
Business in Costa Rica: A Strategic Move
The companies that decide to make new investments in the country have already made a cross-study, have completed business negotiations, and at the end, according to the value of the new corporate values, they value situations such as the economy of Costa Rica, that Costa Ricans are friendly throughout the country, they receive the ratification that it is one of the happiest country in the world under its “pura vida” lifestyle and that in a certain way there is help from the Costa Rican government to companies that want to invest, in addition to the peace and tranquility of the people and businesses in the country.
Costa Rica is a popular destination for B.P.O., call centers, and I.T. services permanent establishment. Companies and business people who come to this country manage to fall in love with the particular circumstances and general customs and recognize a series of benefits that other countries do not provide:
- Stable Economy and Politics
- Globalized freedom and culture
- Skilled workforce
- Favorable tax environment
- Free trade Licensee
- Attractive location
- English is widely spoken
- A lot of foreign direct investment and franchise
- O.E.C.D. membership
Business Vehicle Options
When considering doing business in this new country, one of the first decisions you must make is selecting the appropriate business vehicle for your operations. Costa Rican legislation offers various options, including corporations (S.A.), L.T.D.A. companies, also named S.R.L., and branches of foreign companies. Each has its advantages and implications for taxation and liability. The first thing to do is find a trustworthy law firm; the law firm can incorporate your company through a Notary Public who will immediately register your company in the National Registry, which takes 1 to 3 working days. Most of the professionals speak English and Spanish. Please click here to learn more about the different types of Companies in Costa Rica.
Corporate income Tax and others.
Understanding the taxation system in Costa Rica is crucial for successful business operations. Here are some key points to consider:
- Income Tax: The income tax in Costa Rica goes from 10% up to 30% on national income. However, knowing about tax treaties that may affect your tax obligations is essential.
- Importance of Tax Treaties: Costa Rica has entered into various tax treaties with countries like Germany and Spain, which can impact the taxation of your profits and investments.
- Local Taxes: Besides income tax, municipal taxes are based on your company’s capital income, which must be paid annually.
- Sales Tax: Costa Rica imposes a value-added tax (V.A.T.). Generally, the tax rate is 13%.
- Transfer Pricing: If your business involves cross-border transactions, it’s essential to comply with transfer pricing regulations to avoid disputes with the tax authorities.
Legal Framework and Agreements
Costa Rica is committed to facilitating international business and has signed numerous agreements and treaties to promote investment. Some of these include:
- Free Trade Agreements: Costa Rica is part of a network of free trade agreements in the Central American region and has an English-speaking workforce, making it an attractive location for U.S. companies seeking to expand with incentives and benefits granted.
- Tax Reforms: Recent tax reforms have been ratified, affecting how certain taxes are paid and foreign companies’ obligations in the country.
- Investment Promotion: The Costa Rican government is dedicated to attracting new investments, offering various incentives and benefits to companies willing to invest in the country.
Free Trade Zones:
Free Trade Zones (F.T.Z.s) in Costa Rica are designated areas created to attract foreign investment and promote economic growth. These zones offer a host of benefits, making them an enticing option for companies looking to expand their operations:
One of the most attractive features of Costa Rican F.T.Z.s is the significant tax exemption they offer. Companies operating within F.T.Z.s enjoy a 10-year income tax exemption and are exempt from import duties on raw materials, machinery, and equipment. This substantial tax advantage can significantly boost your bottom line.
Navigating the complexities of international business can be daunting. However, F.T.Z.s in Costa Rica offer a streamlined regulatory environment, simplifying administrative procedures and reducing red tape. This enables you to focus on your core business activities.
Costa Rica’s strategic location in Central America provides easy access to key markets in North America and the Emirates, making it an ideal hub for regional and international trade., Also, Costa Rica has signed a U.S., China, and Central American free trade agreement, and many others.
Regulatory and Procedural Considerations
Navigating the regulatory landscape when starting a business in Costa Rica involves several steps, including company registration, obtaining necessary permits, and adhering to local laws like social security contributions. It’s worth noting that Costa Ricans are known for their friendliness and willingness to assist foreign investors.
|Incorporating a Company before a Notary||3 days
To 5 days
|It will take 3 days maximum for your official registration in the National Registry; You can name a Resident Agent (your Lawyer) or grant a P.O.A. to represent your local company for administrative obligations.|
|Registration before the Tax Authority||3 days||The legal representative must sign the process or a power of attorney granted for such purpose.|
|Registration before the Costa Rican Social Security Fund (Caja Costarricense del Seguro Social- C.C.S.S.)||13 business days||The company must be in the C.C.S.S. The legal representative must sign the documents; there must be at least one employee for registration; this social security entity will send an inspector to the workplace to verify the information provided by the company.|
|Registration before the National Insurance Company (I.N.S.).||1 day||The legal representative must sign the process immediately using a form with at least one employee.|
|Obtaining the sanitary operating permit.||22 business days||The legal representative must sign the form and must include specific requirements regarding the type of activity to be carried out.|
|Obtaining a Commercial License – Patent.||30 business days||The legal representative must sign the procedure using a form after obtaining the sanitary operating permit to fill out before the municipality.|
|Opening of Bank Accounts for the local company.||30 business days||The form must be signed by the person who will be the signatory in the bank account, and a cash flow projection issued by a Costa Rican Certified Public Accountant must be provided.|
The Path Forward
As you embark on your journey to expand your business in Costa Rica, remember that A.G. Legal will guide you every step of the way. We have the expertise and experience to help you navigate the complexities of Costa Rican business regulations, ensuring a smooth and successful transition into this thriving market and taking advantage of the benefits granted by the Costa Rican conditions.
Don’t miss out on the opportunity to be part of Costa Rica’s growing economy and business-friendly environment. Let’s work together to turn your vision into reality. Contact AG Legal Costa Rica now: firstname.lastname@example.org.