Corporation Basics: Benefits and Obligations

Ivan Granados - JUN 28, 2019

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Corporation Basics: Benefits and Obligations. Do you own property or a business in Costa Rica? If so, is it registered to you personally or your corporation? Why does it matter?

Like all countries, Costa Rica has its own legal requirements and restrictions for owning a business and property in the country. The following are general considerations.

Most foreigners purchasing investment real estate or opening a business in Costa Rica form a corporation to act as a holding entity for the property or company. Corporate ownership, most often structured as a Sociedad de Responsibilidad Limitada (SRL) or Sociedad Anónima (SA), has three main advantages.

Yes, that deadline has
passed for 2019!

Corporation Basics

1. Liability

If a property or business is registered in the owner’s personal name (also known as shareholder), and a lawsuit is filed against that person, the property could be seized or a lien placed on it.

Corporate ownership, however, offers a layer of liability protection. In the event of legal action, the company assets remain separate from the personal assets. This offers a layer of protection for liability matters.

2. Flexibility

A corporation can provide flexibility and peace of mind for property or business owners while away from Costa Rica. They can grant Power of Attorney (POA) to take care of issues on their behalf. Some common examples:

applying for utilities

representing a condo owner at annual homeowner association meetings

filing and/or paying any expenses or taxes

complying with future legal requirements from overseas

3. Estate Planning

Corporate ownership of a property or business makes the process easier, with more options, for estate planning and probate.

Did you miss a deadline?

Corporate ownership of a property or business in Costa Rica carries some important tax obligations. Depending on whether your corporation is active or inactive (in terms of generating income), value-added tax (VAT) — which is replacing sales tax — may be payable monthly, in addition to annual income tax and/or corporate tax.

As a friendly reminder, January 31 is the deadline each year for corporate tax (reference Law 9428). Yes, that deadline has passed for 2019!

Especially if you don’t live here full-time or visit regularly, it may be easy to overlook or put off paying your Costa Rica taxes on time. We urge you not to let that happen, as the outcome can be regrettable.

Get current before it’s too late

If for some reason, you missed the January 31, 2019 corporate tax deadline, you are advised to pay right away to avoid interest and penalties. The National Registry will not issue, certify or register any documents for any company with unpaid corporate taxes. Nor will the company be able to hold a contract with any government or public institution.

Major consequences may apply when THREE OR MORE consecutive corporate tax payments are missed. In fact, the Costa Rica tax office (think IRS if you are from the U.S.) will proceed with the dissolution of your corporation. Then, you cannot do anything on behalf of your corporation and must undertake the liquidation process.

Remember these corporation basics and always seek legal advice from an attorney you trust.