The longer you’ve been an expat in Costa Rica, or the longer you have been researching about Costa Rica while seriously considering moving there, the quicker you will notice that there seem to be endless and confusing amounts of information on how to legally go about your business in the land of Pura Vida.
You want to figure out how to get utilities in your name, how to purchase a car and real estate, and perhaps even how to start or buy a business.
Perhaps the first thing you hear about is the SA (Sociedad Anónima). An SA is similar to the Corporation in the USA. To create an SA you need 2 shareholders, you need to appoint a board of at least 3 directors, a controller, and a resident agent (Costa Rican attorney). The nature of the SA is to conduct business, not really meant just for holding assets, though this is not illegal.
In order to keep the SA, you will need to, at least:
- File yearly and/or monthly income taxes (depending if it’s active or inactive with Ministerio de Hacienda).
- Pay a yearly corporate tax (starting at about $100, based on your previous income tax filing)
- File the yearly Shareholder’s Report
- Make sure you keep the corporate books with you and up to date.
There are several other types of commercial/mercantile legal entities in Costa Rica, among which can be found: Sociedad de Responsabilidad Limitada (SRL, similar to a Limited Liability Corporation), Sociedad en Comandita, and Empresa Individual de Responsabilidad Limitada (EIRL, basically a sole proprietorship).
Apart from the SA, the SRL is perhaps the most common type of commercial entity in Costa Rica. It is suited for smaller scale businesses, or also for settings where the owner/owners want to keep a tighter grip on their business or want to minimize the risk of losing part of their control in it (there is no board of directors, there is no controller, there can be as few as 1 manager and owner, and only it may have to appoint a resident agent in special circumstances). SRLs have the same requirements as SAs to stay open and running.
In the last few years another legal entity that has become popular in Costa Rica is the Sociedad Civil (literally, Civil Society). There is not much clarity and information in Costa Rican legislation nor court rulings about it. It is meant to be used for individuals who decide to work together, on a small scale, such as craft workers/artisans. It is, however, been used a lot recently as a means to hold assets, because it legally can and especially because it does not pay the yearly corporate taxes the commercial entities must pay.
The downside is that the ‘partners’ are jointly liable along with the corporation.
Last but not least, you can conduct business in Costa Rica as a self-employed individual. Immigration status is a factor here. If you are a national or a legal resident, you can register as such with the Revenue Service (Ministerio de Hacienda/Dirección de Tributación Directa) to work as self-employed. If you only have a passport you can register as such with the Revenue Service and obtain a tax identification known as NITE.
When working as self-employed there are several things you must make sure you are doing in order to be compliant with the law:
- Register with the Revenue Service
- Issue electronic invoices to clients
- Add the 13% VAT to your invoices (thus you are considered a ‘tax collector’ and must ‘hand over’ this VAT to the Revenue Service)
- File monthly and yearly income tax statements
- Register with the social security system “CCSS”, also known as ‘CAJA’. You pay a monthly payment based on your reported monthly income. Part of your payment is for healthcare services and part of it is for retirement.
- Obtain a workman’s compensation insurance policy with INS (Instituto Nacional de Seguros).
Well, in a nutshell, there are various requirements that you must comply with whilst doing business in Costa Rica, and several options to choose from, according to your specific needs. There is no magic, one-size-fits-all solution for expats. For more information, please visit our topic-specific articles at www.news.outlierlegal.com or drop us an email.