FAQ's Living, Purchasing and Developing in Costa Rica

ABC´s of the Real Estate.

1. Legalizing your Immigration Status in Costa Rica

A step that due to recent polices you should not wait too long to take.

Many foreign citizens living in Costa Rica with an irregular immigration status may have felt a real and immediate threat in the last few months: a considerable increase in actions by the Immigration Authorities against individuals staying illegally in the country has been detected, which, although mainly targeted to the large number of Nicaraguan irregular immigrants historically present in Costa Rica, has certainly affected Americans, Canadians and Europeans as well.

The above-mentioned measures are a follow-up to a policy established during the administration of ex-President Rodriguez for the massive deportation of illegal aliens. To that effect, the Immigration Authorities acquired buses to transport illegal immigrants (mainly Nicaraguan) to their country of origin and trained specific officers for the duty of investigating and deporting them. Nevertheless, once this policy was ready for operation, the process was stopped by a decree authorizing an immigration amnesty for Central American citizens.

By the end of the amnesty period the deportation process reinitiated. Immigration officers and policemen have gone to several areas of the country where a large number of illegal aliens live and many of them have been deported and taken to their countries of origin. Immigration Authorities also randomly visit companies that employ foreigners and other places frequented by them in order to detect and deport individuals with an irregular status. It must be clear that although these measures mainly affect Nicaraguans, they definitely apply and cover all foreign citizens staying illegally in Costa Rica, either because they entered the country illegally or because their tourist visas or residency permits have expired.

Under those premises, it is surprising how many foreigners living as investors or working as expatriates for multinational companies in Costa Rica do not legalize their immigration status and that of their dependents. In many cases, we consider that this happens mainly due to a lack of appropriate knowledge of the regulations and policies in force. In most cases, as stated above, these individuals face the uncertainty of an irregular situation which; if they would have been better informed, could have allowed them to become legitimate residents of the country: As we have also made clear, this situation may even result in being deported from the country, as well as spending the night in jail and/or not being permitted to re-enter after leaving for a few days.

A considerable number of the individuals forming the above mentioned groups assume that the country's immigration "entanglement" will not permit them to obtain their residency because the procedures are very complicated and offer uncertain outcomes and that the requirements are impossible to be met. In such situations, it is important to make them aware of the existence of a fairly broad menu of possibilities of being covered by the law and that although the different regimes, procedures and requirements seem not to be aligned following a clear path, understanding them, together with qualified counsel, can make obtaining residency in Costa Rica a reachable goal.

Based on the above, we consider important to briefly refer to the different immigration regimes that might be applicable for the previously mentioned profiles.

General Requirements

When initiating residency procedures, it is important for the applicants to produce a series of documents which must meet several key formalities that will facilitate the progress of the applications; among them:

1. Birth Certificate, to be issued by the appropriate authorities at the place of birth.
2. Certificate of Clean Criminal Record, to be issued by the corresponding authority of the country where the applicant has lived during the last six months before his arrival to Costa Rica.
3. Marriage Certificate, to be issued by the country of registration of the marriage (if applicant's spouse is to be included under the regime).
4. Physical presence in Costa Rica for fingerprinting (which generates a background check).
5. All documents originating abroad require authentication by the Costa Rican Consulate nearest to their place of issue and in the event they are not in Spanish, they must be officially translated in Costa Rica.

Resident Annuitant and Resident Pensioner Policies

These two policies allow a fast and positive outcome for residency applications based on (i) receiving a monthly income of no less than one thousand United States Dollars for at least five years, in a permanent, irrevocable and constant manner (in the case of the resident annuitant status) or (ii) receiving a life pension of no less than six hundred United States Dollars (in the case of the resident pensioner status), pension that we recommend to come from a government entity.

In both cases, the applicant's spouse and children under eighteen years old can be covered in the regime.

Company Recognition Status

This policy permits companies established in the country and with an accounting net worth currently higher than approximately one hundred forty five thousand United States Dollars to be granted, after filing a series of corporate and legal documents, a specific authorization in the form of a recognition from the Immigration Authorities, permitting to obtain residencies for its foreign employees. Currently there is no limitation as to the number of non Costa Rican employees that could be covered by this regime by the company.

This residency will be linked directly to working for the applicant company (this residency allows staying in the country as long as the beneficiary works for said company only). This status allows coverage of the main applicant's spouse and children under eighteen years old, who may study but not work while in the country.

Entrepreneur's Residency

This policy is applicable to financially sound people who wish to establish a business venture in Costa Rica . The business plan must be determined beforehand, and presented to the immigration authorities as part of the application.

The applicant must be able to prove that he or she will not be a burden to the country and that his or her enterprise (of which such individual shall be the holder of a full power of attorney) will produce enough revenue to support the applicant while residing in Costa Rica .

The applicant must incorporate his business according to Costa Rican law, and must prove that all necessary permits and authorizations for the business have been at least requested, if not already granted. The existence of actual business premises must be documented, and the financial feasibility or soundness of the business venture proven.

The residency status produced in this case does not permit the beneficiary to be hired as an employee, and he or she may only work as an administrator to his own business.

Temporary Work Permit

This regime allows the applicant to obtain the residency based on the existence of a labor contract.

The applicant must be able to prove that, he has been hired by a local company, attaching a copy of the labor contract and an application by the company.

Financially Sound Immigrant Residency

This status is applicable to financially sound foreign citizens who want to reside permanently in Costa Rica , but prefer to determine how their income
will be generated only after they are established in the country.

The Immigration Council has ample discretion regarding this kind of application. Policies and procedures of this entity may change from time to time and its determination of what is a financially sound individual is subjective. Due to such fact, it is difficult for us to offer certainty as to the outcome of this kind of application, although adequate planning and analysis allows for a high rate of success.

As with other similar policies, it is imperative that the applicant proves that he or she will not be a burden to the country. Among the most accepted, the following constitute strong proof of income: real estate ownership in the country or abroad, revenue from rental of houses or business premises, bonds or securities and bank accounts with balances of at least US$100.000, and any other sources of income that could be duly documented.

An assessment of each case's particular situation will permit to better support a decision on one of the above indicated options. The applicant's awareness of the existing choices and his understanding of the broad range of existing alternatives certainly justify the regularization of a precarious immigration situation.

2. Planning to invest in Costa Rica

ABC's to Incorporating, Buying Property and Becoming a Resident.  Many of our foreign clients have similar concerns when we first discuss their investment plans in Costa Rica. Almost everyone we have met wants to know about incorporating, buying property and obtaining residency.

We believe these three issues are the main components of what we would call the "typical investment package"; which, just by following some basic steps would make your Costa Rican venture a very successful one.

Incorporating in Costa Rica

The typical limited liability company ("Sociedad Anónima" or "S.A".) must be incorporated by at least two people before a Costa Rican Notary Public. After such incorporation, the shares may be transferred and it is legally feasible to have a corporation in which one person is the owner of all shares.

The incorporators must choose a name (which must not be similar to any existing corporate name); appoint a Board of Directors (which, by law, must have a minimum of three members, President, Treasurer and Secretary) and a Comptroller. Each one of these positions must be occupied by a different person; however, the initial incorporators may occupy them.

Other crucial issues to be decided are the capital of the corporation (the higher the capital, the more registration taxes are to be paid); the number of shares composing such capital (a share cannot be divided according to Costa Rican Law -fractions of shares are not acceptable-; thus, it is advisable to have a number of shares that would permit future distributions of the participation in the company) and the representation of the newly formed company (there must be at least one representative of the company with powers of attorney to act on its behalf; however, at the time of incorporation, or later on, the powers of the company's representatives may be limited, for example, to specific actions or amounts).

Costa Rica has what we like to call a "hybrid" corporate system. The incorporation deed, as well as all changes to the company's By-Laws, are to be recorded in the Public Registry, where any person has access to them. However, all transfers of the company's shares are recorded in the Shareholders Registry Book, which is kept by the corporation and is only available to company's shareholders and officials; all other parties can only review it with a Court order.

When you are buying real estate, it is advisable to do it on a corporation's name. In this case, transfers could be made easier and the structure may be more flexible for other transactions and for organizational matters.

Buying Real Estate

Most properties in Costa Rica are registered in a computer system called "Folio Real". This system is centralized at the offices of the Public Registry in San José. Before buying land (or even before seriously considering an offer to buy land) a title search in Folio Real should be performed.

Such a title search will show all data on the property, including area, ownership, boundaries, location, mortgages and other liens.

A few properties have not been incorporated to the "Folio Real" system yet. They are still registered in special books kept in the Public Register. Such properties may also be accurately title searched in the Public Registry.

When considering buying land, the first question to be asked is if you are being offered ownership rights derecho de propiedad) or occupation rights "derechos de ocupación"). In the case of occupation, you would be dealing with land that has not been registered, cannot be title-searched and must go through a long process in order to be registered. Ownership rights, in the contrary, are registered and are equal to the concept of owning land in the United States or Canada .

Another situation one may encounter regarding land, especially in beaches, is the concession. In this case, the government gives a private party the right to use the land for a specific period of time. In general terms, the concession may be considered as a lease. The concessions' registration system is different than the one for regular land, and has particular requirements regarding zoning, terms, occupation, etc.
In conclusion, before buying, before offering or even before seriously considering a piece of land, enquire about its status and perform a title search: these simple steps could save you a lot of money and effort, and will definitely make your Costa Rican investment worthwhile.

Residency

Investing in a country as beautiful as Costa Rica is the final pretext many people are looking for to leave everything behind and start a new and different life. Understandably, one of the most popular concerns is to become a resident.

Costa Rican Immigration Laws allow foreign citizens to become residents in specific cases that range from having a family relationship with a local citizen (marrying a Costa Rican, having Costa Rican children) to demonstrating the government that the applicant will not be a burden for the country, mainly showing sound resources to be established in Costa Rica and, in some cases, to create a business here. Our mainly recommended regimes are the resident pensioner and the resident annuitant status. They are both administered by the I.C.T. (Costa Rican Tourism Board).

The resident pensioner status is used for foreign citizens who have retired from government service or from selected private entities and receive from them a permanent life retirement income of no less than US$600.00 per month. Such amount must be transferred periodically to Costa Rica , and its reception and conversion into colones (Costa Rican currency) at designated institutions has to be demonstrated.

The resident annuitant regime is applicable to all foreign nationals, regardless of age, receiving a fixed monthly income of no less than US$1,000.00. The funds of the deposit can come locally or from abroad and their conversion into colones (Costa Rican currency) at designated institutions has to be demonstrated.

Investing in Costa Rica can be one of your life's best decisions. There are many things to discover and experience. Being wise enough to plan your investment will make this venture real and sound.

3. Purchasing Property in Costa Rica .

A Guide to Understanding the Real Estate System and Buying Process

 Introduction

The acquisition of real estate is one of the most significant investments a person makes during his or her lifetime. It can also be one of the most stressful. In foreign countries such as Costa Rica , the normal stress of the purchasing process can be compounded with other risk factors, such as language barriers and unfamiliarity with local laws and procedures. That said, foreigners can and do legally and successfully purchase property in Costa Rica . In fact, Costa Rica offers potential buyers many types of real estate products including houses, condominiums, time-shares, farms, finished lots and beachfront property. The following guide is designed to help buyers navigate their way through the real estate buying process for all types of purchases. The guide is divided into three main sections covering:

 I. Property Types and Property Rights

II. Purchase Process:

a. Legal vocabulary of property purchase
b. Methods of Purchase
c. Buying process step-by-step
d. Fees

III. Investment Protection: strategies and tools to protect property investment

 I. Property Ownership and other common forms of possession

Just like in the US , Canada , and Europe, there are different types of property available to buyers. Understanding the various types that are available for purchase is critical in the evaluation process. This section highlights the property types that can be purchased in Costa Rica and the implications of each type of ownership for the buyer.

a. Fee Simple:

i. The most comprehensive form of property ownership in Costa Rica is fee simple ownership. Fortunately for foreigners, the conditions for this type of ownership are the same for Costa Rican nationals as they are for foreigners. The concept of fee simple ownership is the same in Costa Rica as in the US . Basically, fee simple ownership gives the owner of the property the absolute right to materially own the property, use it, enjoy it (i.e. usufruct), sell it, lease it, improve it (i.e. transformation), etc., subject only to conditions outlined in the Costa Rican Laws. Fee simple also means that if the owner is obstructed from enjoying any of his/her rights to the property, he/she has the right to be made whole, in other words, have the property restored in its original condition. Buyers who purchase fee simple title have the most rights under to law to enjoy and use the property as they see fit.

b. Concessions in the Maritime Zone:

i. Concession property is more commonly known as beachfront property. In Costa Rica , 95% of beachfront property is considered concession property and is governed by the Maritime Zone Law and other specific regulations including but not limited to special dispositions stated by municipalities and the ICT (Costa Rican Institute of Tourism). These legal dispositions set forth the conditions under which foreigners and local residents can own concession property. A concession in Costa Rica is defined as the right to use and enjoy a specific property located on the maritime zone for a pre-determined period of time. The state, through its respective municipality, grants this right. Note that the first 200 meters measured horizontally from the high tide line defines the boundary of the maritime zone. This zone also includes islands, pinnacles of rock, mangroves, estuaries, small islands and any small natural formation that overcome the level of the ocean. This 200 meter zone is divided into two areas:

1. Public Area: The first 50 meters measured horizontally from the high tide line. This zone is not available for ownership of any kind. No kind of development is allowed except for constructions approved by governmental entities. Further, this area is deemed a public area and any individual wishing to utilize this area for enjoyment has the right to do so. In other words, there are no truly private beaches in the Maritime Zone.

2. Restricted/Concession Area: The next 150 meters. This area is available for Concessions to be granted. A concession is in essence a "lease" on the property granted to the lessee for a specific period of time. Normally the concession period is granted for 20 years. An owner of a concession may build on that concession, subdivide the concession and perform other acts to the property. However, appropriate permits from the local municipality must be obtained.

3. Ownership Limitations: Unlike fee simple property, foreigners do not have the same rights as citizens when it comes to purchasing concession property. The law establishes that foreigners cannot be majority owners of a concession property. A foreigner can, however, enter into a partnership with a Costa Rican citizen where the ownership is divided 49% / 51% between the foreigner and Costa Rican respectively. One exception is if a foreigner has resided in Costa Rica for at least five years, then they may be majority owners of a concession. Both foreigners and Costa Ricans alike are required to purchase all Maritime Zone property through concession.

c. Properties in Condominium:

i. When US citizens think of Condominiums, they normally think of large apartments or townhouses. In Costa Rica, however, there is a specific law called "Condominium Law" that provides certain benefits to developers of many different types of properties, including single family residence projects, finished lot projects, condos, etc. This set of laws allows a developer to restrict and regulate certain aspects of the development. Each Condominium developments has its own by-laws containing all of the restrictions, limitations and privileges that can be enjoyed by individuals who purchase a property in such a development. Ownership of property "in condominium" is fee simple ownership, but usually carries with it a few additional restrictions set forth by the developer. It is advised that you require the owner of the property to give you a copy of the by-laws to check for architectural guidelines, land use restrictions, and other limitations that may be placed on your property. Most often, developers use the condominium laws to allow them to build private roads in a development and set architectural guidelines. For the most part, condominium laws are designed to protect the integrity of a development and maintain the "look and feel" of the project.

d. Untitled property

i. There are properties in Costa Rica that are not recorded at the Public Registry of Properties. Families have inhabited some properties of this type for generations while others have never been occupied. In either case, it is possible that someone claims that they "own" the property and may put it up for sale. They may even have fence lines or other boundary markers that separate "their" property from a neighbor's. Regardless of the time that an inhabitant has lived on the property or to what extent they have demonstrated ownership, unless that property is registered at the Public Registry, there is no official owner. i.e. the title is unclear. It is strongly recommended that this type of property be avoided at all costs because there is no way to prove that the "owner" has the right to transfer the property, or even worse, what the dimensions of the property really are.

e. Time Share:

i. This option allows an owner the right to use a property for certain weeks of the year. In most cases the time-share ownership grants similar rights as implied in the condominium regulation except that in the time-share it is limited to certain weeks during the year. In this manner one single unit is subdivided into parts and sold individually. Time-share resorts are not common in Costa Rica .

II. The Purchase Process

A. Basic Terminology - Feeling comfortable with the purchase process starts with understanding the most common terminology. While the purchase process may seem very simple, there are some keys ideas with which a buyer should be familiar. The following defines the most common vocabulary used in real estate transactions in Costa Rica .

a) Folio Real: This is the "social security" number of properties. It is the unique number assigned to each property to identify it and distinguish it from other properties. This number is comprised of three parts: the first number indicates the province, the second group of six numbers is the number of the property itself and the last group of numbers indicates how many co-owners the property has. All titled properties MUST have this number in order for clear title to be obtained.

b) Transfer or Conveyance Deed: (escritura de traspaso): This document contains all of the stipulations regarding the transfer of real estate including basic information about the buyer, seller, the property, and any special terms of sale, such as easements or mortgages. An attorney who is also a Public Notary must prepare this document and the deed must be recorded in his/her Notary Book as well as at the Public Registry of Property.  Once the deed has been prepared and signed at the close, it is the attorney's responsibility to record the deed immediately at the Public Registry. The recording process consists of two phases. In the first phase, the notary presents the deed to the public registry for its annotation; from this moment the property is protected against any third party interest. After the registry verifies the deed is structurally correct, the second phase of registration begins and the property is recorded in the name of the new owner. Because Costa Rica operates on a "first in time, first in right" system, registering the deed immediately is critical to ensuring that the new buyer's rights to the property are ahead of any other claims by third parties.

c) Public Registry of Properties

d) Public Notary: Attorney licensed by law to perform legal acts with Public Faith. All transactions performed by a Notary are recorded in his/her Notary Book. A public notary is necessary in order to purchase a property. Most attorneys in Costa Rica are also Public Notaries.

e) Power of Attorney: ( Poder )

(1) This document authorizes a person to act on behalf of another to perform specific actions such as the purchase of a property. This tool is especially useful for clients that wish to close on their property without returning to Costa Rica . It is best to sign the power of attorney before leaving the country because the law requires that the power of attorney be signed in the presence of a Costa Rican notary. Thus, a visit to a Costa Rican consulate in the US is necessary. One exception to this rule, however, is if the property is being purchased through a corporation. In this case, a signed proxy letter will suffice and there is no need to visit a consulate.

(2) Powers of Attorney come in two forms, general and special. General power of attorney allows a representative to sign on behalf of an individual for multiple transactions and must be recorded at the Public Registry. A specific or special power of attorney allows the representative to sign ONLY for the item specified in the power of attorney contract and under the conditions specified there. It is highly recommended that only a specific power of attorney be granted for property purchases to limit the rights of the representative to sign only for the property in question and nothing else. Additionally, The specific power of attorney does not have to be recorded at the Public Registry, however it should be granted before a Notary Public.

f) Survey Plan (Cadastral Department): In addition to the Public Registry of Properties, which holds all property deeds, Costa Rica also has a Cadastral Office that holds all of the property surveys. In order to transfer, mortgage or acquire a property, a survey must be recorded at the Public Registry. When dealing with property segregations, a municipality authorization is also required to be inserted on the survey. The official drawing of the property is validated through an approval process by the Public Registry of Properties as well as by the municipality in which the property is located. Because the Public Registry and Cadastral Office are separate entities, it is not uncommon for old property surveys to be on file at the Cadastral Office. If this is the case, it is recommended that a new survey plan be registered with the Cadastral Office so that there can be no dispute over boundary lines.

B. Purchasing Methodologies

1. Acquiring Properties through direct transfer: A purchase process whereby one or more physical individuals acquire a property in their personal name.

2. Acquiring Properties through corporations:

A common practice in Costa Rica is to acquire properties through a new corporation or through an existing corporation that currently owns the property of interest. The process of setting up a corporation is not complicated, but does require a knowledgeable attorney who understands the exact protocols and procedures necessary to properly set up the corporation. The advantage of this system is that it allows a buyer to protect their asset anonymously. Further, if a purchaser acquires a property through an existing corporation that already owns the property, there are no government transfer taxes and stamps to pay. The reason is that transfer taxes and stamps must be paid anytime that there is a change in the ownership of the property. If a buyer acquires the shares of an existing corporation, technically there is no change in the recorded owner of the property (i.e. the corporation still owns the property). However, if a property is acquired through forming a new corporation to buy the property, the transfer taxes and stamps must be paid because the name of the property owner has changed. The risk for the buyer in acquiring an existing corporation is that the corporation might have other liabilities and there is no way to verify 100% that the corporation is clean. When buying a Costa Rican corporation, it is important to keep in mind that there are other obligations and responsibilities that must be addressed. Examples include yearly tax declarations (even if the corporation is inactive), payment of income taxes if any, and keeping the legal books of the corporation up to date and in order.

C. Step-by-Step through the purchase process:

1. Once a buyer has seen a property of interest, the next step is to understand what the process of acquiring the property may entail. The following are the basic steps that a purchaser follows when buying a property.

Step 1: Sign an Option to Purchase/Sale with seller.
Step 2: Deposit funds into escrow (if available)
Step 3: Title research performed by the Notary Public / Lawyer
(review if property is free and clear of defects)
Step 4: Closing - Execution of Transfer Deed, Endorsement of Shares and/or Mortgage Deed and disburse funds
Step 5: Register new owner with Public Registry

D. Fee Structure

1. Transfer taxes, stamps and other charges: In order to record the transfer of the property, the government charges 1.5% of the purchase price and an additional 1% is charged for other stamps at the Public Registry.

2. Notary Fees: Notaries are required by law to charge 1.25% as their legal fees.

3. Survey fees: If you require or demand a new survey for your property, there are qualified surveyors available to perform this function. Pricing depends on the location and size of the property.

4. Mortgage registration fees: The government charges .6% of the mortgage value to register the mortgage deed on the property.

5. Escrow Fees: Fees are dependant on the escrow provider.

6. Incorporation: Fees for purchasing a corporation typically run between $500-$1000 or +.

 III. Protecting the real estate investment

One of the greatest concerns of foreigners purchasing real estate in a foreign country is to ensure that the transaction will be executed legally and if the system can ensure a lifetime of enjoyment of the property. The Costa Rican legal system, if followed correctly, does give ample protection to investors, but if the transaction is not executed properly, loss can and does occur. To guarantee the security of any real estate investment, there are three tools that should be present in any real estate transaction.

a. Adequate legal representation and experienced Notary - While a notary's primary duty is to provide Public Faith to a transaction, his/her job is also to act as the legal representative of the buyer, providing legal advice and representation throughout the process.

b. Escrow - Most buyers from the US understand Escrow service to include not only the managing of funds for a property purchase, but all of the administrative work required to execute a closing. In fact, in states where an attorney is not required for a real estate purchase, the escrow agent becomes the central party responsible for ensuring that all documentation is in order before the close. In Costa Rica , the escrow agent performs many of the same duties. The primary function is the financial service to prevent manipulation or mishandling of funds prior to closing. The escrow agent is a neutral third party with responsibility for issuing checks and executing payments. This system gives confidence to all interested parties (e.g. attorneys, brokers, seller, buyer) that funds are protected during the buying process and that all funds will be disbursed appropriately to all parties at closing.

Conclusion

The real estate buying process in Costa Rica need not be intimidating or confusing. By understanding the steps in the process and pitfalls to avoid, a buyer can confidently invest in and enjoy their property for years to come.

4. Choosing a Corporate Structure to do Business and/or invest in Real Estate in Costa Rica

Many foreign individuals starting a business in Costa Rica or merely purchasing real estate for investment purposes decide to use a corporate entity as the owner of such. This decision is a very wise one, and it is what we highly recommend to our clients as the first choice to be followed.

Ownership through a corporation allows one to have flexibility and more predictability in areas ranging from estate planning (if share ownership is properly structured the investor can avoid his heirs a painful and lengthy long-distance probate procedure), tax management (as an example, rules on corporate expenses are more flexible than the ones on personal ones), and representation (shareholders meetings can facilitate granting special powers of attorney or other types of authorizations for many actions thus not requiring local presence in the country).

The first question often asked by our clients is whether to use (or form) a Costa Rican corporate entity or use one already existing and controlled by such individuals abroad. Our advice is, in most cases, the use of a local entity. Although foreign corporate entities can own land and engage in business activities in the country, registration procedures (both at the Public Register and with government entities) as well as negotiation of contracts with private parties can get complicated, delayed and/or find obstacles when they are involved.

In any event, if a foreign entity will be used, note should be taken that we normally recommend registering the foreign entity in the Costa Rican Commercial Register as a branch or at least to register specific powers of attorney for such also in the Costa Rican Commercial Register. Both cases require a special and formal procedure that may take several weeks.

As mentioned before, in the great majority of cases, the use of a local corporate entity is preferred. Although Costa Rican commercial law contemplates many types of corporate forms, only two of them offer the investor the comfort of having structures similar to the limited liability companies to which he or she may be used to in their countries of origin.

Such corporate forms are the "Sociedad de Responsabilidad Limitada" and the "Sociedad Anónima". In both cases, shareholders are only responsible for their participation on the company's social capital and their own personal assets are fully protected and out of reach from any potential creditor the company may have.

The "Sociedad de Responsabilidad Limitada", also referred to as "S.R.L.", "Limitada" or "Ltda", is a simpler form than the "Sociedad Anónima" and in most cases fills-up the blanks on its legal treatment from the much broader regulation of the "Sociedad Anónima". S.R.L.'s are usually used only if any of their special features are especially appealing to the investor.

The special features of the S.R.L. are mainly the following:

1. Shares cannot be transferred to non-shareholders without the previous express consent of the other shareholders, who have a right of first refusal to purchase them.
2. These companies require, for their administration, no more than one individual (Manager), thus this is an especially appealing structure for cases in which the investor does not want to use and register (making public) the names of additional individuals to form part of what in the S.A. would be called a Board of Directors, as explained below.

The "Sociedad Anónima", also referred to as "S.A.", is the most widely used corporate structure in Costa Rica . It is pretty flexible and its legal treatment is extensive. In general terms, it can have any type of social capital (usually a low amount is used without any negative consequence) divided in as many shares as the investor desires (normally structured in a way in which they can be divided in as much shareholders that can be previewed, since such shares are, by law, not divisible).

The S.A. has many features, of which the most important are:

1. Since the positions of President, Secretary and Treasurer are legally mandatory and must be occupied by three different individuals, it must have a Board of Directors of at least three members, as well as one Comptroller, who must not hold any powers of attorney on behalf of the company.
2. Shares are represented by physical documents and more than one of them can be included in a certificate. They can be transferred to any non-shareholder without the approval of the other shareholders. Transfer is made through a combination of a transfer contract, the endorsement of share certificate(s) and an entry in the company's Shareholders Registry Book.
3. Its By-Laws can be changed at any time, as well as any powers of attorney existing for the company, by means of a Shareholders Meeting, which can be held with the presence of all the shareholders or with individuals appointed by a proxy issued by them.
4. It is possible to establish special features for the protection of minorities and their voting rights.
5. Their legal representatives (holding powers of attorney to act on behalf of the company) are liable for any actions taken against the interest of the company and/or its shareholders.
6. They must have three corporate books (shareholders meetings, shareholders registry book and board of directors meeting book) and three accounting books. These books must be authorized by the local tax authorities and are a requirement for implementing any change in the company's By-Laws or in its power of attorney structure since no shareholders meeting can be held without being recorded in the specific book authorized for such purposes.

Companies in Costa Rica must additionally register before the Tax Authorities. In the event the company is not involved in business activities in the country for the specific fiscal year (for example, when it is solely used for holding assets), formal tax registration is not required (only book authorization) although a fiscal year end declaration is always needed (though it will state that no economical activity existed during the period) in order to avoid the application of penalties.

The normal fiscal year for companies declaring taxes in Costa Rica goes from October 1 to September 30 of each year; filings can usually be made until the end of December. A different fiscal year can be authorized for companies that are fully owned or related to foreign entities that have a different term in their countries of registration.

It is important to conclude that the choice of corporate structure must ideally be made at the time the investment or business project is being created. This decision will have a major impact and specific consequences on the implementation of said project and if taken wisely, it will be one of the foundations for its success.

5. Calculation table for transfer of real estate

Example value - $ 100,000.00

** Over the first ¢ 100,000.00 a fixed rate of ¢ 75.00 has to be cancelled.
* According to specific table rates, shown maximum payment in colones.
Up to ¢1,000,000.00 you pay 1.50% in legal fees, and 1.25% above that