We accompany the process of opening and starting up your company
MAKING BUSINESS IN COSTA RICA
Start your business without worries
Costa Rica is recognized for its good business climate.
It has a privileged geographic location, in the center of the Americas. It shares time zones with the United States, Mexico and Canada; it also coincides with the convenient time zones of Latin America’s economic centers, such as Brazil, Chile and Colombia.
Its democracy and political stability is a global example, thanks in part to the abolition of the army more than 75 years ago.
It has a bilingual and highly educated population, which has made it a preferred destination for many technology, service and medical device companies.
Your business will find in Costa Rica the cultural mix, knowledge and facilities it needs for the next stage of your company. All immersed in 51,100 square kilometers of natural paradise: More than 25% of our territory is made up of protected areas and national parks.
Before you start: what you should know
about investing in Costa Rica
Before investing in Costa Rica there are several issues to consider and, of course, at Grupo Camacho International we can help you understand them,
Grupo Camacho International can help you understand them.
What you should know about investing in Costa Rica
Doing business in Costa Rica means locating in a country accustomed to receiving foreigners, working with them and achieving the goals you set for yourself. In the process you will find a human team willing to adopt your project and make it grow in the country.
Even so, the most advisable thing to do, before starting, is to have an integral immersion on business in Costa Rica. This way you will take each step firmly, minimizing your risk and ensuring the future of your company.
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Cultural Affairs
- Costa Rica is a highly literate country, thanks to compulsory and free public primary and secondary education.
- Without losing the Latin American essence, our history, culture and location make our work culture very close to American or European work cultures. In the private sector, Costa Ricans are accustomed to fulfill their obligations in time, form and quality.
- Opening a business in Costa Rica will be as expeditious as the governmental procedures. These vary from case to case depending on the characteristics of the business, its line of business and capital structure. Dealing with the different institutions and banking entities can become tedious. At Grupo Camacho Internacional we will do what is necessary to make your landing in the country as efficient as possible.
Legal Matters
- There are several types of legal entities to incorporate a company in Costa Rica. Among the most common are:
- the Corporation, the preferred one when it is a business relationship between two or more partners; or,
- the Limited Liability Company, more appropriate when the business has a single shareholder, whether an individual or a legal entity.
As well as when in the investors’ jurisdictions the concept of fiscal transparency is required.
Tax matters
- There are two tax regimes you can opt for when starting operations in Costa Rica. The choice between one or the other depends on the characteristics of your business and the level of investment to be made.
- General Regime: Where most companies are located, regardless of their size. In the general regime your business is subject to income tax at an annual rate of 30%. More economical graduated rates are exceptions for small and medium-sized companies, as well as for businesses in their first stage of incorporation. In addition, it is subject to Value Added Tax, a monthly liquidation tax with a typical rate of 13% that must be applied to all sales of products or services.
- Free Zone Regime: A special regime, created with the intention of providing conditions for investors in the country, whether local or foreign. As long as the investment minimums are met (at least $150,000 USD in three years), the company has access to exemptions on income tax, VAT and non-resident withholdings, as well as other special benefits.
Labor matters
- La legislación laboral en Costa Rica es muy estricta respecto a cuándo una relación se considera una dinámica de patrono – empleado. Eso hace que, para casi todos los casos, la opción de la figura de “contractor” o profesional independiente tan utilizada en otras latitudes no sea aplicable en el país.
- En Costa Rica, el ser una entidad empleadora implica:
- Estar inscrito ante la seguridad social (Caja Costarricense del Seguro Social), realizar declaraciones y pagos mensuales.
- Contar con el seguro obligatorio de trabajo (Instituto Nacional de Seguros), realizar las declaraciones y pagos mensuales.
- Retener los impuestos sobre los salarios que excedan el monto mínimo exento y pagarlo mensualmente a la Administración Tributaria.
- Costa Rican labor legislation is very strict regarding when a relationship is considered an employer-employee dynamic. This means that, for almost all cases, the option of the “contractor” or independent professional, as used in other latitudes, is not applicable in the country.
- In Costa Rica, being an employing entity implies:
- Being registered with the Costa Rican Social Security (Caja Costarricense del Seguro Social), making monthly declarations and payments.
- To have the mandatory labor insurance (Instituto Nacional de Seguros), to make monthly declarations and payments.
- Withhold taxes on salaries exceeding the minimum exempt amount and pay them monthly to the Tax Administration.
Other matters and permits
- Depending on the type of business and its location, it will be necessary to obtain permits and operating licenses, as well as to comply with regulations specific to your sector.
First steps in Costa Rica:
The one, two, three of businesses in the country
Decided to work in Costa Rica? Great news!
Doing business in Costa Rica involves a series of formalities that must be executed so that each chapter of your company in the country is under the right conditions. At Grupo Camacho International we can support you in the opening and establishment of your company in the country.
Tax regime
It seems strange, but one of the first issues to assess in your plan of insertion in Costa Rica is in which tax regime your company will operate more appropriately.
In our service of accompaniment in the opening of operations in the country we will support you in that definition. We will be able to analyze together the pros and cons of one or the other option.
In brief, one or the other regime:
- No minimum investment
- Most of the companies in the country.
- Subject to income tax (30% per year). Reduced rates for micro, small and medium-sized companies.
- Subject to Value Added Tax (must charge and pay 13% tax on all transactions of goods or services).
- Minimum investment in fixed assets according to the type of company.
- Must apply to the regime to be accepted.
- Income Tax exemption for up to 12 years.
- Value Added Tax exemption on purchases and sales.
- Exemption, reduced rates and simplification of other procedures and obligations.
This is just a brief description of the two main regimes in the country. With our assistance you will be able to define which one is the most adequate for your business.
Why is the decision on the tax regime so relevant?
The free zone regime is only available for new business lines in strategic sectors established by the Government, that is why this early decision is so relevant. That is to say, if your company starts in the general regime, it will be complex to move to the special regime.
Type of entity
To start your business operations in Costa Rica, once you have chosen the tax regime, another decision and process you will have to define is the type of legal entity and its respective incorporation.
The most common legal entities to locate in Costa Rica are:
- The most appropriate entity when two or more partners participate in your business; although it is also used by unitary shareholders.
- It requires at least two partners to open. Once opened, 100% of the shares can be transferred to a single partner.
- It must have a board of directors composed of at least 3 members (partners or not) and a prosecutor.
- Legal representation is usually in the hands of the Board of Directors.
- The most appropriate entity when it is a single quotaholder.
- The entity is managed by a General Manager, who may or may not be the quotaholder.
- Legal representation is usually in the hands of the General Manager.
- Under US IRS criteria it is considered a fiscally transparent entity so it enters as part of the taxpayer’s global income, without separation.
With our legal entity incorporation service in the country, you will receive a recommendation on the most appropriate entity for your project. Once you have made your choice, we will work on your incorporation.
Registration with government institutions
Once your legal entity is incorporated in Costa Rica, the next step is to register with the different governmental institutions in order to be able to operate. Although the obligations depend on each case, there are at least three registrations that every company must comply with:
Registration with the Costa Rican
tax administration
When a company is created, by default it is registered with the Tax Administration, but this does not mean that the company is ready to do business. The default registration is a registration as a legally constituted entity, but without active economic activity.
When the company is ready to operate, it must be updated with the respective economic activity before the Tax Administration, but for this it is necessary to perform a couple of previous steps in which Grupo Camacho International can assist you.
If the company has a legal representative resident in Costa Rica, it must go to the Ministry of Finance (in person or virtually) so that the entity is included in its user of the Virtual Tax Administration portal. If the person does not yet have a user for the virtual platform, he/she must request it.
In the case of a non-domiciled legal representative, we will support him/her in the process to be assigned a NITE (Special Tax Identification Number), this identification number is the first step to request access to the Virtual Tax Administration platform.
Once you have access, we will proceed with the update of the form D 140 – Registro Único Tributario (Single Tax Registry) in which the economic activity of the company will be included.
Social security registration in Costa Rica
Any entity or individual wishing to employ people in Costa Rica must register with the Caja Costarricense del Seguro Social, the autonomous institution and network of clinics and hospitals that provides public health care in the country.
The Caja, as it is known to Costa Ricans, is an institution that is financed by contributions from the Central Government, employers and employees.
For each employee, the employer must pay 26.7% of the employee’s salary to cover different concepts; in turn, the employee contributes 10.67% of his or her monthly salary. The employee’s contribution must be withheld and paid by the employer on a monthly basis.
On a monthly basis, the employer must also report its payroll – and any new developments – to the Fund.
Although the monthly process is expeditious thanks to the institution’s virtual platform, the registration with the Costa Rican Social Security Fund takes time since a series of documents must be completed.
At Grupo Camacho International we support you throughout the process, or we take care of it using a special power of attorney for the process.
Keep in mind that, as part of the registration process, a social security inspector will visit your workplace and interview some of your employees. If your company is 100% teleworking, do not worry, we can arrange for this visit to be made at our facilities.
Occupational risk insurance in Costa Rica
Labor risk insurance is a complementary obligation, not an alternative, for every employer in Costa Rica. Both must be complied with.
It is an insurance that covers any accident or eventuality suffered by your employees during their working day.
The amount to be paid depends on the type of activity performed by your company. The insurance is contracted with the Instituto Nacional de Seguros, the insurance company of the Costa Rican State, and one of the largest insurance companies in Central America.
Although a little simpler than social security, the registration process for occupational risk insurance involves completing multiple forms and documents. At Grupo Camacho International we can guide you or take care of the entire process.
On a monthly basis, you must submit the payroll of your company, with the variations that occurred during the month. The payment can be made on a monthly, quarterly, semi-annual or annual basis.
Contracts and other matters to be considered
Formal documentation is the evidentiary basis for any conflict in the country, therefore it is important that your company has from the beginning the necessary contracts and documents according to the nature of your business.
Labor contracts must adhere to the labor legislation in force in Costa Rica. As a best practice, the company must also prepare a series of documents and protocols related to labor matters that must be deposited with the Ministry of Labor.
Other very relevant contracts, if your business in Costa Rica is focused on selling products or services to your parent company or other related parties, are the contracts between related parties.
At Grupo Camacho International we support you in the elaboration of contracts, as well as in the analysis and elaboration of transfer pricing studies to define the transactional conditions between related parties, which comply with the applicable rules in each jurisdiction.
Opening of bank accounts
Opening bank accounts in Costa Rica can be one of the most cumbersome processes when starting a business, even if your company has been operating in other jurisdictions for many years.
Costa Rica is a country with a fairly open economy, in which colones (local currency) and dollars are traded without restriction; however, in recent years, banks have implemented more robust processes for opening bank accounts.
The time required to open bank accounts varies in each situation, depending on various business complexity triggers, including the company’s capital structure.
As standard, the bank will request, in addition to the usual forms, information about the legal representative of the company and the ultimate beneficiary of the business. Be prepared to provide information on the shareholding composition until you reach the natural person who enjoys the benefits.
We have cases of opening bank accounts that are as fast as a couple of weeks, as well as others in which the process takes months.
At Grupo Camacho International we support you in the bank account opening process. Our goal will always be to achieve the opening in at least one of the banking entities – public or private – and, once with movements in the Costa Rican entity, choose to expand its network of banks in the national territory.
Other formalities and registrations
Depending on the nature of your business, in the opening process you will have to complete other procedures or registrations with municipal, environmental and health authorities. Let’s talk to identify which actions will be necessary for your company.
From birth to maturity:
Doing business in Costa Rica
Once all registrations are complete and your bank account is open, your company is ready to operate in Costa Rica. At Grupo Camacho International we support you in the beginning of your operation, to ensure compliance from day one.
Accounting and compliance
corporate and tax
Every company in Costa Rica is obliged to keep its accounting up to date, based on the International Financial Reporting Standards. We know that the first months of a business are complex, so our accounting team is at your disposal to take care of your accounting until such time as the maturity of your company leads you to have an internal accounting-financial team in the country.
In parallel with the accounting registration, your Costa Rican company must comply with a series of tax returns and other obligations:
In addition to the specific taxes that may exist for your line of business. At Grupo Camacho International we support you in the whole process of tax and corporate compliance, either by clarifying your doubts through our consulting plans, or by taking care of preparing and presenting each obligation.
Your company’s obligations
Monthly obligations:
- Declaration and payment of Value Added Tax.
- Declaration and payment of withholdings.
- Filing and payment of social security returns.
- Filing and payment of the mandatory labor insurance form.
- If you applied and were accepted in the Free Trade Zones regime, payment of the monthly operation fee.
- Other tax returns according to your line of business.
Quarterly obligations:
- Payment of rent advances.
- Payment of municipal taxes.
Annual obligations:
- Declaration and payment of income tax (or in the absence thereof, declaration of inactive companies).
- Declaration before the Registry of Transparency and Beneficial Owners.
- Payment of the Education and Culture Stamp.
- Payment of the Tax on Legal Entities.
- Declaration and payment of solidarity tax on luxury homes (if applicable).
- If you applied and were accepted in the Free Trade Zones regime, presentation of the Annual Operations Report.
Transfer pricing and
the benefit in your tax planning
If your company in Costa Rica is a link within your economic group, it is worth analyzing how you can optimize your local and international tax compliance. Through a transfer pricing analysis and tax planning process, our consultants will identify optimization opportunities in your business structure to comply with the tax legislation of each jurisdiction in which you operate, but in the optimal way possible.
Please note that complying with the arm’s length principle and transfer pricing is an obligation in Costa Rica. You must ensure, through a transfer pricing study, that transactions between your related parties are at arm’s length, as they would have been transacted with unrelated companies.
In all tax planning that we execute at Grupo Camacho International, an interdisciplinary work team is involved, which allows the proposed alternatives to respond to the reality of your business and your future plans from a business perspective, rather than just the tax vision.
Business consulting:
Finance, processes, strategy
Entering a new country is always a challenge for the entrepreneur. Beyond the typical obligations of disbursement of money for the opening and initial operation, you face a new culture, ways of working and customs of employees and public officials. Our business consulting allows you in that first stage of your business in Costa Rica, to have a local perspective to advise you in the best way.
Outsourced financial management
With the figure of outsourced financial management you will be able to optimize your business from day one, considering the particular conditions of the country and your industry. Our financial services always consider, in addition to your company’s internal numbers, market comparisons with companies in your business sector.
Tax consulting
Your team is getting to know the country and our legal regulations are complex and changing. Beyond the laws and regulations, which in some cases contradict each other, the tax administration constantly publishes resolutions, institutional criteria and answers to taxpayers’ queries that shed light on how they could treat their transactions in an eventual audit.
The same happens with other regulatory institutions; this complicates the business management system and specialized support becomes necessary.
Whether it is to answer a specific question, or through a recurring consulting plan, we can support you so that your business complies correctly.
Process consulting
The work processes that your company executes in other countries must be adjusted to fit the Costa Rican reality. It is also necessary that you have a complete understanding of the new processes you will need to implement to ensure proper compliance in the country.
Our process consultants will support you, either by establishing the process flow from scratch or by adapting the existing one to fit your Costa Rican operation.
Strategy consulting
Entering a new country implies the tropicalization of your strategy to ensure that the development of the new location is as expected. With our strategy consulting we accompany you in the analysis of your global strategy and the landing of this global strategy, together with your local team, to the reality of Costa Rica.
Our strategy consulting allows you to identify which elements are appropriate for the country, which should be adjusted and, above all, how the local operation is aligned with your global plans; all this with an agile methodology that allows a prompt and effective implementation.
Whether with a couple of orientation sessions or through a complete strategic definition process, we can support you so that the implementation of your business in Costa Rica flows in the best possible way.
Fill out the form and let’s start doing business in Costa Rica.
We have more than 35 years of experience in multiple business, tax, transfer pricing and technology issues.
Let us be your strategic partner.
In Grupo Camacho International we help you manage your business efficiently, through our interdisciplinary team of professionals from different areas. If you have any questions, do not hesitate to contact us.