Business

DOING BUSINESS IN COSTA RICA

Costa Rica offers many business opportunities for both local and foreign individuals, small businesses, branches, and multinational companies

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A COUNTRY OF OPPORTUNITIES

Business Environment

The government's positive attitude towards foreign investment, as well as the country's developed infrastructure, its easy access to North America, and its large tourist market, all make it an appealing location to establish a business. There is a business-friendly culture in Costa Rica without any restrictions for foreign business ownership. Costa Rica has an appealing business environment for foreign direct investment (FDI), and this has helped fuel the regions economic growth in recent years. Also, there are many law firms and real estate companies which can help the businessman locate ideal property for any purpose.

Additionally, there are several other factors that make Costa Rica an attractive destination. The percentage of English speakers is well above the rest of Latin America, there's little to no time change for many American investors since Costa Rica is the same as the US Central Time Zone, and there's a high academic education level in the country. Also, it is easy to start a new business in Costa Rica with local legal support. The country is quickly moving to a digital government of many of the necessary procedures and it is now possible to complete many required declarations online. Many foreigners succeed in business here because they bring a new fresh perspective, enthusiasm, experience, expertise, and imagination.

Costa Rica is a country known internationally for having one of the first and most politically stable democracies in the Americas. This provides a unique base for a solid investment environment compared to other Latin American countries. Just a short while ago many foreigners were only coming to Costa Rica to retire. Now they have come also to invest and enjoy country club lifestyle. Many North Americans are retiring earlier and perhaps with less and have realized their money can go much farther here. This surge in foreign presence has created a North American business climate. This trend has helped young capable people to do something exciting for the rest of their lives. The Costa Rican government has also taken care to educate their people, and they have provided obligatory English classes and computers for further education. These steps are to ensure that the local people can help and accommodate tourist and other visitors, as well as helping the people to have better jobs and more opportunities.

Starting a business

Think up a possible name that you would like for your corporation. A notary public then drafts and notarizes a public document of the incorporation for registration before the Mercantile Section of the Public Registry. This charter of a Constitution is called Articles of incorporation and this determines the administration, organization, bylaws, and permitted activities of the company. This is then signed by the shareholders, the participants on the board, and the resident agent or the lawyer who formed the corporation. Required registered capital is very low. The wait time for the corporation to be registered in the Public Registry normally is two to three days. The Registry then issues a federal tax number for the company, cédula de persona jurídica, which serves as the corporate tax identification number, and a registration number for the legal books of the company. Now that the corporation is registered it may open a bank account and apply for an operating permit, patente municipal.

Business structures

Depending on the type of business that you wish to set up, you'll need to decide on how to structure it. The most common type of corporation is the Sociedad de Responsabilidad Limitada (SRL), which is designed for most businesses. It has the advantage that it has limited liability for the shareholders and also has a one person board of directors, called the Manager. It is similar to an LLC, limited liability company, in the United States of America. This type of corporation means that your personal income and assets will not be at risk, and many business owners also put their assets in the name of the SRL.

The second most popular type is the Sociedad Anónima (SA) which is only liable to the amount of the capital contribution of the shareholders. It offers many of the same benefits and protections that a North American or European corporation has. It is formed by a board of directors consisting of a president, secretary and controller. The type of corporation can have more than one class of shares and is used by the larger corporations.

Bank Account

You will usually need a Costa Rican bank account in order to run your business. In Costa Rica there is a fair amount of paperwork that has to be filed but it is an easy process. There are three public banks and eleven private banks to choose from, and all the private banks are international banks, like BAC, Lafise, and Scotiabank. Many of them have English-speaking tellers, and they all have many ATM locations and mobile and internet banking,

To open an account you will need a government issued photo ID, usually your passport or residency card, proof of income or source of funds, a utility bill to show your residency, and a minimum deposit of a few hundred dollars.

Hire an accountant and an attorney

Your corporation needs to be registered in the tax department, the Dirección General de Tributación Directa. It is much easier to hire an accountant to file the required paperwork on your behalf, and to keep all of your finance records up to date. An accountant can save you money in the long run.

It is also a good idea to have a local lawyer as they are able to guide you through the legal processes and ensure that you obtain all the necessary licenses and permits for your business. They also help with the requirements for corporation records and any necessary changes. Also, they draft employment contracts, rental contracts, and business contracts.

Paying taxes

Costa Rica has an annual business tax on all corporations that has to be paid every January for the upcoming year. Also corporations pay a graduated income tax on profits as well as property taxes and usually the VAT tax. Also there are payroll taxes, withholding taxes, social security taxes, and operating permit taxes. As a general rule it is best to hire an accountant. Also there is an annual form declaring shareholders.

Employing workers

There are a large number of competent and bilingual employees to choose from in Costa Rica. There are a number of labor laws and rules that protect workers wages and benefits. These laws are fair to the worker and are not unreasonable for an employer, especially since labor costs are low. The average Costa Rican worker makes between $500 and $800 a month. As an employer you are required to make social security payments for all of your employee as well as withholding from the employee´s wages his payment to the social security system and retirement fund..The employer must also pay workman's insurance to the INS. All workers are entitled to paid holidays, a minimum of two weeks vacation per year, and a Christmas bonus payment of one month's salary.

Get a digital signature

Costa Rica´s government has pushed for the digitization of processes and documents. They call this the digital government and have implemented many official procedures by digital means on the internet. One of the requirements needed for this process is a Digital Signature. It is issued by a Certificate Authority that you can find in all of the banks and it allows for the legal identification of an individual.

Currently, the system is available to Costa Rican citizens with a valid cédula. Also it is available to foreign residents with residency and a valid DIMEX card, the residency identification card.  You cannot get a digital signature card with your passport. If you are not a resident, you will need someone who is a resident or citizen of Costa Rica to sign for you.