15 Common Costa Rica Investing Mistakes Foreign Investors Make in Costa Rica (and How to Avoid Them)

15 Common Costa Rica Investing Mistakes — and How to Avoid Them (2025 Legal Playbook)

As corporate and real estate counsel at AG Legal, we routinely identify Costa Rica investing mistakes and rectify preventable errors that cost foreign investors time and money. This guide outlines the top 15 pitfalls we encounter when forming entities, purchasing property, or launching projects in Costa Rica, along with a step-by-step plan to ensure success the first time.

Author: AG Legal • Reviewed by: Corporate, Real Estate & Tax Team • Updated: Sept 29, 2025

The 15 most common mistakes (and how we fix them)

1. Buying first, due-dilencing later. Always verify title chain, liens/encumbrances, cadastral match, and condominium bylaws at the National Registry before committing funds.
2. Skipping municipal “Uso de Suelo”. A municipal land-use certificate confirms permitted uses, setbacks, height, coverage, and other restrictions. Don’t close without it.
3. No water, no permit. For buildable land, you usually need a water availability certificate (AyA/ASADA) or equivalent to advance permits.
4. Ignoring environmental screening. Depending on project type and location, SETENA may require environmental assessment (e.g., D1). Build this timeline into your critical path.
5. Overlooking coastal concession rules (ZMT). The first 200m from the shore are subject to special concession rules and eligibility limits; structure ownership accordingly.
6. Using outdated entity models. Choose between an S.R.L. (member-managed) or S.A. (board/share structure) based on control and banking needs; register digitally and keep corporate books tidy for lenders and buyers.
7. Forgetting UBO/RTBF filings. Companies must report beneficial owners (RTBF) and update changes to avoid fines.
8. VAT assumptions from home country. Standard VAT (IVA) is generally 13%; model this into pricing and budgeting.
9. Underestimating closing taxes & stamps. Transfers of real estate carry a 1.5% transfer tax (plus stamps/fees). Budget early.
10. Ignoring annual property tax. Municipal property tax is generally 0.25% of the registered value (plus potential luxury-home surcharges).
11. Improper legal representation for banking. Banks apply AML/KYC rules; draft bylaws and powers so signatories clear compliance smoothly.
12. Hiring before registering as an employer. Register the company with CCSS (social security) and secure mandatory INS Workers’ Compensation coverage.
13. Mixing personal and corporate use of property. Keep minutes, service agreements, and fair-market rents to avoid tax and governance headaches at exit.
14. Poor escrow discipline. Use supervised trust/escrow and split closing: sign SPA with conditions precedent → fund escrow → record transfer → release funds on registry confirmation.
15. No compliance calendar. Missed filings (RTBF, municipal licenses, tax returns) lead to fines and blocked transactions. We built a single, centralized calendar for all deadlines. This is one of the biggest Costa Rica investing mistakes.

Company formation: best-practice checklist

• Choose the right vehicle: S.R.L. (membership quotas) vs. S.A. (shares & board). Think control, investor entry, and bank preferences. Incorporate digitally, then open corporate bank accounts.
• Governance that works: Appoint reliable local legal reps; define signing powers, profit distributions, and transfer restrictions in bylaws.
• Transparency: Prepare to disclose Ultimate Beneficial Owners (RTBF), keep a compliance binder (charter, bylaws, UBO confirmations, ID/KYC, tax IDs).
• Licenses & notices: Depending on activity, register with the municipality (patent), tax authority, and sector regulators as applicable.

Real-estate due diligence (zoning, water, environmental)

Land is “bankable” when its legal feasibility is clear. For buildable parcels, we verify title & plans at the National Registry, request the Uso de Suelo certificate, obtain a water availability letter (AyA/ASADA), and analyze whether the project must obtain SETENA environmental viability (D1, etc.).

Special case: coastal & concession properties (ZMT)

The first 200 meters from the shore form the Maritime Terrestrial Zone, split into a 50m public zone and a 150m restricted zone. Only municipalities grant concessions in the restricted zone, and eligibility limitations apply (e.g., specific foreign-ownership/residency rules). Structure ownership with care before you commit capital.

Taxes & transparency essentials

• VAT (IVA): Standard rate is 13% on most goods and services. Model cash-flow and pricing accordingly.
• Real-estate transfer: 1.5% transfer tax plus stamps/fees on property transfers—budget at LOI stage.
• Annual property tax: Generally 0.25% of registered value (municipal). High-value homes may face additional “luxury” tax.
• RTBF (UBO) filing: Required under transparency rules; we coordinate filings and updates.

Labor, social security & workplace insurance

Before hiring, register as an employer with the CCSS (social security) and obtain mandatory INS Workers’ Compensation (Riesgos del Trabajo). Both are standard compliance steps for employees on payroll.

How to invest in Costa Rica the right way (step by step)

1. Choose the vehicle: S.R.L. vs. S.A.; draft bylaws for banking/AML; appoint legal reps with clear powers.
2. Open compliance files: Tax ID, municipal license (if applicable), RTBF/UBO preparation and calendar.
3. Property pre-screen: Registry/cadastral review, Uso de Suelo, water availability letter, environmental trigger check (SETENA).
4. Deal mechanics with escrow: SPA with conditions precedent → fund escrow → record transfer → release on registry confirmation.
5. Budget taxes and fees: VAT (13%) on services, transfer tax (1.5%) on property, municipal property tax (~0.25%/year).
6. People & payroll: CCSS employer registration and INS workers’ comp before first hire.
7. Operational cadence: Compliance calendar (RTBF, tax, municipal), quarterly legal health checks, board minutes, and vendor contracts.

Frequently asked questions

Can foreigners own property outright in Costa Rica?

Yes, outside the Maritime Terrestrial Zone (ZMT) restrictions. Inside ZMT (first 200m), you deal with concessions and special eligibility rules.

What due diligence is essential before buying?

Title/encumbrances & plan match at the National Registry, municipal Uso de Suelo, water availability letter, and, if applicable, SETENA environmental screening.

What are the headline taxes?

VAT 13% on most services; 1.5% transfer tax on property conveyance; approximately 0.25% annual municipal property tax.

Do we need to report Ultimate Beneficial Owners?

Yes—RTBF, filed via the Central Bank platform, with penalties for non-compliance.

When can we hire staff?

After registering as an employer with CCSS and activating the mandatory INS Workers’ Compensation policy.

Talk to our lawyers

Planning to form an entity, purchase property, or launch a project in Costa Rica? We’ll structure, diligence, and permit your investment end-to-end to avoid Costa Rica investing mistakes.

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