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Smart Real Estate Investment:
Why use corporations to purchase Costa Rica real estate?

RE/MAX, Los Tres Amigos' team of real estate professional will assist you step by step in your quest for Costa Rica real estate.

Legally Speaking

Some people name them after a beach they like or a geographic structure, or something that reminds them of home.  Others jumble the letters of their children's names.  And animals are popular, particularly, the humble iguana.

The Real Estate Registry

Regardless of what you call it, forming a local corporate entity and using it to purchase and manage your property holdings is a practical, common sense approach to property ownership in Costa Rica.

While it is extremely easy to create a corporation in our country, it is also a smart move, which serves your interests since it will in many ways make things easier and safer for you.

Unlike the restrictive regulations found in other jurisdictions, according to Costa Rican law, this new entity may be fully owned by a foreign citizen.

Nevertheless, a new local corporation is a distinct entity from its owners (shareholders).  Thus, the new Costa Rican corporation will be also to sign contracts, purchase and sell its assets, and enter into business in its own name.

The legal system allows for several specific corporate entities from which to choose.  The two most attractive and commonly used forms are the Sociedad Anonima, generally abbreviated S.A., and a less elaborate form of the first, called Sociedad de Responsabilidad Limitada, known as S.R.L. or Ltda.

Both the S.A and the S.R.L. are limited liability corporations, meaning that its owners are only responsible for the corporations debts with their own personal assets up to certain limit: their initial participation in the social capital, which in practice can be insignificant.

The two may be used to conduct the same type of activities as regulations do not require for you to select one or the other depending on what you plan on doing.  Not withstanding this, there are differences between them, and you should select the one that vest suits your needs.  For instances, the administration of the S.A. is more complex than that of the S.R.L.  The former must be managed by a board of directors, that is, at least three different individuals occupying the positions of president, secretary and treasurer, plus a fourth person acting as a comptroller.  In the S.R.L. on the other hand, a single manager is sufficient according to the law.

Forming a corporation in Costa Rica, whether an S.A. or S.R.L, is a simple but formalistic issue.  It is simple because a corporation may be formed by as few as two individuals with legal capacity, although having to perform a formal incorporation deed with a Costa Rican Notary Public is required by law.  Such deed will show the names of those incorporating the new entity, the names of those people appointed to represent and act on behalf of the corporation, and obviously, the name of the corporation being created.

Choosing a name for the new entity is always an interesting exercise.  The name may be a word or more likely a group of words in Spanish or in any foreign language, provided a translation in Spanish is given.  It can be a name with no meaning whatsoever.  The only condition is that the new name must be must not be identical or similar to any corporation name already registered in the country.  To avoid rejection of registration because of name similarity and risk of confusion, a quick name search at the Registry before the incorporation is recommended and should be performed by the law firm in charge of the process.

The by-laws of the corporation, and in particular its scope of activity, which can be drafted to cover a very wide range of commercial activities, will need to be stated on the Notary document and the same is true concerning the initial capital and stock distribution among partners.

The incorporation deed will also need to be filed for registration at the Commercial Section of the Public Register.  All information contained in it becomes of public access, meaning anyone can look it up.  Future changes to these by-laws must equally be recorded at the Register.

In contrast, share transfers that take place after the incorporation remain in the private sphere of the company, and must only be recorded in its shareholders registry book, well kept by the corporation and only available to third parties holding a Court order.

More generally, land ownership through a local corporation is highly recommended as future transactions are rendered considerably easier.  Ownership through a corporation allows greater flexibility and predictability concerning land and property management, including tax and estate planning, and representation.

Costa Rican law allows you to use a corporation to own Costa Rica land, even when this entity does not conduct actual business in the country.  There are advantages when proceeding is this way, and, although it may not be the best solution in all cases, most of the time ownership through a corporation can save you money and, perhaps more importantly, spare you unnecessary headaches.