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Attention: to ALL Beneficiaries of Costa Rican Companies

Digital Signature Mandatory for ALL final beneficiaries of Costa Rica companies

If you are a legal representative of a Costa Rican company, it is important that you are informed that Law # 9416 to Improve the fight against Tax Fraud established the obligation to disclose the ownership structure and the identification of the final beneficiaries.

The following individuals are now obligated by law to obtain a Digital Signature Certificate during the 1st Quarter of 2019 to interact with the newly created Registry of Shareholders: 
  • Presidents of Sociedades Anónimas (S.A.s)
  • Managers and Sub Managers of Sociedades de Responsabilidad Limitada (S.R.L.s)

Sanctions for not complying:

  • 2% of the declared gross income according the last tax return of previous fiscal year.
  • A minimum of 3 base salaries and up to US$66,000.00 approx.

For assistance or questions about the registration process please contact Estefanía Brenes to estefania@glcabogados.com or calling (506)2524-3176

3 Steps to Setup a Business in Costa Rica (published in The Costa Rica News)

businessThe Costa Rica News (TCRN) – Costa Rica offers business opportunities only available in a developing country yet with certain guarantees proper of a developed nation. In our optic Costa Rica is a unique scenario for international investors and entrepreneurs who slowly discover the benefits of doing business in the only Latin American democracy included in the list of the 22 oldest democracies in the world.

That political and economic stability offers an ideal business environment to use Costa Rica as a global business hub for many different industries, having said that we have to warn potential investors that an organized effort will be necessary to be successful.

Below you will find a very simple description of the steps necessary to launch any business enterprise in Costa Rica:

Step 1:  Incorporate your company:  The entrepreneur has to hire the services of a local attorney acting authorized as a public notary prepares a public deed adjusted to article 18 of the Costa Rican Commerce Code and requests the National Registry to issue a corporate identification number.

The newly formed company will enable a local business operation protecting the personal assets of the beneficiaries via its limited liability.

Estimated Duration: 24 hours (Perhaps one of the most significant tangible efforts made by the government to reduce the time of launching a business in Costa Rica as it was reduced from normally two weeks to just hours, available only via attorneys with digital signature capability)

Step 2: Apply for Licenses & Permits:  Depending on the type of business activity, the entrepreneur will have to apply for different permits that will lead to a final business license. In general every company will have to be registered as an Employer before the Social Security (CCSS), obtain Work Risk Insurance from the Insurance Agency (INS) and be registered as a Tax Payer before the local Tax Authority.

Parallel to such applications it is necessary to request a Zoning Permit regulated by the local government of where the business will be located. After the Zoning Permit is approved the company has to meet all the criteria to obtain a Health Permit from the Ministry of Health.

After all the previously described permits are approved the company is finally ready to request the specific business license for the desired activity.

Estimated Duration: 30-45 business days

Step 3: Employ People: After the company has been properly registered as an Employer before the Social Security it will be necessary to elaborate individual Work Contracts for the employees. Each employee has to be reported to the Social Security and both Employer and Employee must contribute to the national pension regime and to the public health system. The Employer will pay a combined sum of approximately 26% of the salary of each Employee to the Social Security and each Employee’s salary will be deducted by 9% as a contribution to the regime.

Additional steps are required for companies that conduct the following business activities:

Tourism:  Companies in this industry could be eligible for Tourism Incentives which are granted by the Costa Rican Tourism Board (ICT). If construction is required a pre design survey will be necessary to comply with all existing planning regulations and in order to obtain approval of plans and construction permit.

Depending on certain variables the project might also be subject to environmental evaluation before the SETENA. Exporting: As Costa Rica’s economy is outward oriented it offers several options for exporting companies. The company could be eligible to become part of a Special Export System or gain access to a Free Trade Zone in all cases it is necessary to be a part of the Exporter’s Registry at PROCOMER.

It is also important to register trademarks of the company at the Industrial Property Registry which can be done under the guidance of a specialized Intellectual Property attorney.

The initial efforts to set up a business in Costa Rica will be rewarded later once you understand the local cultural and business practices and all the related issues of doing business in Costa Rica.

Augusto Arce has a JD from the Universidad de Costa Rica and a Global Masters in Business Administration from Thunderbird School of Global Management and the Tec de Monterrey. Mr. Arce has more than 15 years of experience in foreign advisory and currently is the Managing Partner of GLC Abogados.

The Costa Rica News (TCRN) San Jose Costa Rica

 

PROS and CONS of Incorporating in Costa Rica (Published in The Costa Rica News)

corporate

The Costa Rica News (TCRN) – Why do most expats form an S.A. or an S.R.L. in Costa Rica? Is it just because attorneys want to make extra legal fees?

The truth is that a large percentage of the assets and bank accounts controlled by foreigners are owned by their local corporations that mostly act as holding companies, but is it really necessary? Let’s first look at the PROS that would justify creating a company in Costa Rica:

To do business: article 8 of the Costa Rican Commerce Code establishes that foreigners will be allowed to conduct business only if they become permanent residents, so corporations are used to circumvent this limitation and be used to purchase assets and to provide professional services to local businesses.

Limited Liability: both types of entities the S.A. (Sociedad Anónima) and the S.R.L. (Sociedad de Responsabilidad Limitada) are granted limited liability so they respond only with their equity and not with that of their shareholders. This characteristic was created by governments to promote entrepreneurship and commercial ventures.

Asset Planning: Based on that same limited liability it is highly recommended to minimize exposure to possible litigation by forming separate legal entities to hold assets individually, thus protecting the hard earned assets of individuals. This has to be observed as available regulatory advantages and not as strategies to evade taxes.

Corporate Banking: Currently financial institutions around the world strictly supervise the opening of bank accounts by nonresidents at foreign jurisdictions and Costa Rica is not the exception. Banks are supervised by the local governing entity which requires specific Know Your Client information and the vital aspect is that the corporation is seen as a first intention to settle in Costa Rica and will normally be enough for them to open the account.

Now let’s look at the CONS of incorporating in Costa Rica:

Payment of the Yearly Corporations Tax: As of April of 2012 the Costa Rican government passed a Law #9024 that mandates that all existing legal entities are obligated to pay a yearly flat tax. If the companies are active they have to pay every January the equivalent of approximately US$350.00 or approximately US$175.00 for inactive ones.

Corporate Maintenance: Because corporations normally own valuables it is important to maintain them properly and that requires certain organization. Corporations have to celebrate a mandatory yearly shareholders meeting, have to maintain a Resident Agent, have to keep the legal books in custody and have to declare and pay corporate income tax if they have commercial activity.

Despite the newly created tax corporations are still a synonym for doing business in Costa Rica and it’s up to the individual to evaluate the Pros and Cons and to decide if in his specific case forming a corporation is worth the extra effort.

The limited liability of corporations has saved capitals but has also created unnecessary disputes and difficult situations due to lack of attention to detail. Whatever your decision is please take the formation of your company very seriously and ask for a detailed explanation of its rights and obligations to a specialized attorney.

Augusto Arce has a JD from the Universidad de Costa Rica and a Global Masters in Business Administration from Thunderbird School of Global Management and the Tec de Monterrey. Mr. Arce has more than 15 years of experience in foreign advisory and currently is the Managing Partner of GLC Abogados.

For more information you can visit GLC Abogados

The Costa Rica News (TCRN) San Jose Costa Rica