How to Do Business In Costa Rica?

Doing business in Costa Rica involves navigating a structured legal process, understanding key cultural nuances, and fulfilling specific legal and tax obligations. Foreigners are generally permitted to own and operate a business.

Here is a comprehensive guide on how to approach doing business in Costa Rica:

1. Establishing Your Business (Legal & Registration)

The first step is to establish a legal entity and register it with the relevant Costa Rican authorities. It is highly recommended to consult with a local attorney and accountant to navigate the process accurately.

A. Choose a Business Structure

The most common legal structures for foreign investors are:

B. Core Registration Steps

1. Incorporation & Name Reservation:
   • Work with a local Notary Public to draft and register the Articles of Incorporation/Operating Agreement (Pacto Social).
   • Register your legal company name with the National Registry (Registro Nacional). You can also operate under the company’s registration number.
2. Obtain Corporate ID (Cédula Jurídica):
   • Once the incorporation documents are filed, the National Registry issues a corporate identification number, which is essential for all business activities.
3. Register with the Tax Authority (Hacienda):
   • Register your business with the Costa Rican Tax Administration (Dirección General de Tributación or Ministerio de Hacienda) to obtain a taxpayer identification number (TIN) and comply with income tax and VAT (IVA) obligations.
4. Obtain Permits and Licenses (Patente Comercial):
   • Secure a municipal business license (Patente Comercial) from the local Municipality (Municipalidad) where your business will operate. This process and the specific requirements vary by municipality and business type.
   • Depending on the business (e.g., restaurants, hotels, medical facilities), additional permits such as a Sanitary Permit (Permiso Sanitario de Funcionamiento) from the Ministry of Health may be required.
5. Open a Business Bank Account:
   • Opening a local corporate bank account is mandatory. You will need the company’s registration documents and tax ID.
6. Social Security Registration (If Hiring Employees):
   • If you plan to hire staff, you must register as an employer with the Costa Rican Social Security Fund (Caja Costarricense de Seguro Social – CCSS). You must make mandatory contributions for all employees.

2. Key Considerations for Foreign Investors

Residency and Work Status

• Owning & Managing vs. Working: Foreigners can own and manage a Costa Rican corporation without residency. However, if you are not a citizen or legal resident with the right to work, you are prohibited from performing any physical labor or front-line duties in the business. You must hire locals for those roles.
• Residency: If you intend to actively work in the business, you must obtain the appropriate residency status (e.g., permanent residency or an investment-based visa).

Taxation

• Corporate Tax: The standard corporate income tax rate is 30%.
• Value Added Tax (VAT): Known as IVA (Impuesto sobre el Valor Agregado), this is a 13% tax on most goods and services. Businesses are responsible for collecting and remitting this monthly.
• Annual Corporation Fee: Active corporations are subject to an annual corporation fee.
• Territorial Taxation: Costa Rica uses a territorial tax system, meaning in principle, income and profits received from activities conducted outside the country are often not taxed in Costa Rica.

Hiring Employees

• Mandatory Social Security: If you have employees, you must register them with the CCSS and contribute to their government healthcare and pension costs (employer and employee portions).
• Minimum Employee: In many business structures, it is mandatory to hire at least one full-time employee and register them with the CCSS.

3. Business Culture and Etiquette

Succeeding in business in Costa Rica often relies heavily on building strong personal relationships, guided by the local philosophy of “Pura Vida” (pure life).