Owning Property Under Your Name or Corporation
Updated: Apr 21, 2022
What should I do when purchasing property in Costa Rica?
Costa Rica real property and vehicles can be purchased, either by individuals in their personal capacity or under a corporation. Foreign ownership is fully permitted; therefore, foreigners have the same rights when purchasing real property as locals. However, it is advisable to purchase real property through a corporation, which allows you to have more flexibility for estate planning, tax management, legal representation, protect your assets from personal liabilities, and opening bank accounts.
There are a few exceptions in which a foreigner can’t own property:
agricultural property that was donated to farmers by the former IDA (now INDER) cannot be sold until after the farmer has owned the property for 15 years.
There is very little untitled land left in Costa Rica, but it is possible you will find some land that is under “possession” of the people who live on it (this is different from territory invaded by squatters) who can request title after 10 years.
Any property that is located within 50 meters of the high tide line is public and protected. The 150 meters that are adjacent to this zone are called the Maritime Zone (ZMT).
A foreigner cannot own 100% of a property in a Maritime Zone.
Generally, owning the property under your name is sufficient and you’ll have fewer taxes to pay. However, you will not have the flexibility and benefits previously mentioned. If the real property is your primary residence you will not have to pay capital gain taxes when it comes time to sell.
It is difficult to open a bank account as a foreigner in Costa Rica or might have some restrictions until you obtained your residency. For example, you will not be able to perform or receive online or Sinpe transfers between banks. However, you will be able to pay bills and make transfers to other individuals within the same bank. This small hurtle may cause some friction if you prefer to pay rent online and your landlord has a different banking institution. By opening a bank account through a corporation, you will not have these limitations.
Until you have a cedula card, you may also have some restrictions in opening monthly phone plans and may have to remain with pay-as-you-go service. If these limitations are too much of a nuisance, you could open a Corporation. Having a corporation will allow you to use these services as a resident but be prepared to pay a few extra taxes.
In Costa Rica even if a company does not carry out commercial activities, it must pay annually the Corporate Tax starting at ¢67,530 colones. An additional fee for the Annual Registry of Transparency and Final Beneficiaries that started in 2019 is required, and the duty to register and declare the assets of inactive corporations using Form D-135.
Corporate entities commonly used in Costa Rica are the following:
The Sociedad Anónima ("S.A.") and the Sociedad de Responsabilidad Limitada ("S.R.L.").
In both cases, shareholders are only responsible for their contributions to the corporation's capital stock, and their personal assets are fully protected and out of reach of potential creditors that the corporation may have. Both entities offer you the same spectrum of possibilities to do and operate a business and offer protection of personal property.
In the S.A., the positions of President, Secretary, and Treasurer are legally required and must be filled by three different individuals. Therefore, there must be a Board of Directors of at least three members, and a Comptroller, who may not hold any power of representation of the corporation. On the other hand, in the S.R.L. there is no Board of Directors. Since it is a simpler form of organization than the previous one, the existence of a single manager (appointed with the administrative faculties), facilitates its administration.
Regarding the representation of the capital stock, in the S.A., this is represented by shares, which is an aliquot portion thereof, while in the S.R.L., the capital stock is represented by quotas, which cannot be transferred by endorsement as shares can be. Another difference is given in the sense that since S.R.L., are more intuito personae than S.A., there are restrictions regarding the transferability of the quotas specifically because is required a prior and express consent of the other quotas holders, who they have a preferential right for their acquisition, while in the S.A. a system of free transferability is advocated unless expressly agreed otherwise.
For help opening a corporation please contact Zurcher Odio & Raven