Simply viewed, a business form is a fictitious being independent of its shareholders, legally empowered to conduct business in its own name. This note will provide a general overview of the different forms of business organizations in Costa Rica. Additionally, it will aim to describe the incorporation procedure and explain the issues that must be comprised in their articles of incorporation.
Forms of business organization
Costa Rican law recognizes the following forms of business organization:
- Corporations (Sociedad Anónima)
- Limited Liability Companies (Sociedad de Responsabilidad Limitada)
- Limited Partnerships (Sociedad en Comandita Simple)
- General Partnerships (Sociedad en Nombre Colectivo)
In Costa Rica, corporations are the most common entity given their structural flexibility. Since local laves define a corporation as a bilateral agreement, they must be formed by at least two parties. However, im¬mediately after its incorporation, a single party may legally own 100% of the shares of stock, without altering the legal status of the original corporation. Founding parties (and any shareholders thereafter) may be individuals and/or any type of registered legal entity, regardless of citizenship and domicile. |
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Currency and Payments
( 2 items )
The official currency Costa Rica is the colon (¢) (Bills of 10,000, 5,000, 2,000, 1,000, and 500 colones are issued, as well as coins of 100, 50, 25, 20, 10, and 5 colones) but US dollars are accepted in most hotels, restaurants and shops. US dollars and traveler's checks can be changed in banks and hotels.
There is an ample selection of state and private banks in San Jose, and at least one major bank in every large town. For European visitors, it is advisable to change Euros and Sterling Pounds to US Dollars before departing to Costa Rica. By July, 2007, exchange rate for US$1 was ¢500.00 increasing about ¢0.02 cents daily.
Foreign currency exchange
It can be done in banks (that open from 09.00 to 15.00 or 17.00 hours) or at exchange offices. We recommend visiting Costa Rica with US dollars, since the exchange rate used a reference is that of the Costa Rican colon with regard to the United States dollar, and Costa Rica’s commercial banks only exchange United States dollars. Exchanging other currencies, such as euros is normally complicated and the person must go to the Central Bank of Costa Rica.
International credit cards
Major credit cards are widely accepted, and cash advances can be obtained in most cities. The use of cards such as MasterCard, Visa, and Diners Club is common and does not present problems in Costa Rica. Most of the cities have ATMs.
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Taxes
( 3 items )
When organizing a business in Costa Rica, entrepreneurs should be able to identify and capitalize on business opportunities. In doing so, tax opportunities, risks and formal obligations must be analyzed together with other factors that may have an impact in the business as may be the country: economy, security, environment, government stability, among others.
Specifically, in relation to tax issues, Costa Rica offers a variety of opportunities. Many tax opportunities could be obtained from a timely and comprehensive organization of the business when beginning activities in Costa Rica. Just the fact that Costa Rican tax system is based on the territoriality principle may provide soma tax benefits under specific circumstances (e.g. cross-border activities). However, this is not a general rule and each situation must be assessed on a case-by-case basis.
Resident taxpayers may enjoy other tax benefits concerning deferral of taxes (e.g. developers' tax benefit) or may enjoy non-taxable capital gains (when obtained from non-depreciable assets and non-habitual activities). As regards to non-residence, they are allowed to enjoy a tax waive when remitting income abroad, also, under specific conditions. Therefore, the possibility to enjoy the tax opportunities provided by our Tax system depends on entrepreneurs' possibility to have access to proper and timely information from a tax adviser.
We would like to offer in these lines an opportunity to have a brief overview of the main tax obligations that arise when doing business in Costa Rica. To that effect, we would like to focus on the main taxes applicable to local and foreign business doing business in Costa Rica. These would be: Income Tax applicable to resident and non-resident taxpayers; Value Added Tax (VAT) and Municipal business license tax.
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