Humberto Pacheco A. and Gloriana Alvarado C. run down everything investors need to know about setting up shop in Costa Rica.

Costa Rica is an ideal place for foreign investment and business ventures. The main focus of this legal guide is to provide general knowledge to a foreign investor wishing to seek business opportunities in Costa Rica.


The Immigration Law provides for two migratory categories; residents and non-residents. Non-residents are mainly tourists or passengers in transit, whereas the resident category is divided into two sub-categories:
i) Permanent residence: immigration status that allows the person who obtains it to stay in the country indefinitely and with labor freedom. Those who may apply for this type of residence are: foreigners; their spouse and close relatives by blood who have enjoyed a temporary residence for three consecutive years; and foreigners with first-degree kinship by blood with a Costa Rican citizen.
ii) Temporary residence: grants temporary stay in Costa Rica, usually associated with a professional work or investment situation. The law requires the following conditions: having a Costa Rican spouse; being a religious person whose religion must be accredited by the Ministry of Foreign Affairs; executive; manager; technical personnel; as well as spouse and children there-above; independent specialized worker; dependent worker; investor; scientist; professional or intern; specialized technician; sportsman duly accredited by the National Council of Sport and Recreation; press agency personnel or correspondent; resident investor; and resident pensioner.

a) The resident investor (rentista) category is available to individuals with USD2,500 per month in income, duly accredited by a bank.
b) The resident pensioner (pensionado) category is available to individuals with USD1,000 per month from a pension or retirement fund. The typical applicant in this category has a government, private sector pension, or social security retirement benefit.
c) The investor (inversionista) category is available to individuals investing USD200,000.00 in a Costa Rican business. The investment may be made in tangible property, shares, negotiable instruments, productive projects, or projects that are deemed of national interest.


Costa Rican legislation offers five different types of legal entities for business operations: the individual enterprise with limited liability, the collective company, the limited partnership, the limited liability company, and the stock corporation.

In the collective company, the liability of the owners is unlimited. The limited partnership has a financial associate and a working associate, the former with liability limited to the amount of their investment and the latter with unlimited liability.

The limited liability company is particularly useful for medium-sized operations, where ownership is limited to one, two, or three persons and where the underlying element is the limitation of liability. This company can also be set up as a partnership.

The stock corporation or charter company is the most common form of company in Costa Rica, whether as a holding company or as an active company. For the establishment of a stock corporation, two incorporators, who can be natural or legal persons, are required. After its registration, a single person or corporation may become the sole owner of all the shares. The liability of the shareholders is limited to the amount of the share investment. The stock corporation must be organized with registered shares, but these are transmitted by simple endorsement, which virtually turns them into bearer shares. Additionally, the company may issue preferred or deferred shares, debentures, and other types of securities.

For Costa Rican purposes, the tax treatment of the last two companies is basically the same. The only significant difference is that interest paid from the limited liability company to its parent company is deemed as dividends; therefore, such payment will not be deductible. In addition, from a legal perspective the stock corporation will require a board of directors (a minimum of three individuals), whereas the limited liability company only requires appointing one or more managers instead of a Board of Directors.


Income Tax

Costa Rican income tax legislation is based on the principle of territoriality. All persons, individuals, and business enterprises residing in Costa Rica are subject to tax on income of Costa Rican source. Foreign source income is tax exempt.

The Income Tax Law specifically defines taxable income as the one derived from services rendered, goods located, and capital used within the national territory. It further clarifies that income derived from contracts, agreements, or negotiations on assets or capital located abroad is not considered taxable income, even if said activities are managed from Costa Rica. In addition, the law establishes that foreign source income is exempt, as well as dividends derived from foreign source tax-exempt income.
Law number 9104 of December 10, 2012, repealed article 61 of the Income Tax Law, which allowed the removal or relief from double taxation by providing foreign taxpayers and/or local withholding agents the ability to request full or partial exemption from withholding tax on remittances made abroad from Costa Rica for concepts such as dividends, interest and royalties (most common) to countries like the US, Mexico, Canada, and in some cases Spain, among other possible destinations where foreign recipients are not granted with credit for taxes paid in Costa Rica.

Capital Gains

In accordance with articles 6 and 8 of the Income Tax Law, capital gains should not be subject to taxation, unless derived from the sale of depreciable assets or from the sale of non-depreciable assets sold in the ordinary course of business. However, bear in mind that the sale of shares of a company owning real estate would be subject to a 1.5% transfer tax on the value of the property.

Dividends Tax

Article 18 of the Income Tax Law establishes that when a corporation makes any capital distribution in cash, in kind, or in shares of the corporation, 15% of the capital distribution must be withheld as sole tax for dividends. When corporations, the shares of which are registered in an officially recognized stock exchange, distribute the dividends, the withholding tax will be 5%. The tax payment is the sole and definitive obligation of the shareholder.

Dividends' tax will not be assessed when the shareholder is another corporation domiciled in Costa Rica and subject to this tax or when the dividends are distributed as registered shares or social participations of the payer company.

Dividends resulting from capital distributions of foreign-source tax-free income are likewise free of the dividends tax.


Free Trade Zone Regime & Temporary Admission Regime

The Temporary Admission Regime is a set of incentives that allow the importation of merchandise with tax suspension. Under this regime, the merchandise must be submitted to transformation, repair, reconstruction, or assembly.

The Free Trade Zone Regime is a set of incentives and benefits granted to enterprises that manufacture, handle, process, produce, trade in, or provide goods or services for exports or re-exports, and scientific or technological development companies that make new investments in the country. This regime, originally created to stimulate export companies, is governed by the Free Trade Zone Law and its regulations. Companies that benefit from this regime must meet certain requirements and establish their operations in designated free trade zones, which are specific areas destined for this purpose.

In general, some tax incentives are established in Article 20 of the Free Trade Zone Law. The Law provides exemption from payment of all taxes and duties on imports of raw materials required for the operation of the enterprise. The exemption applies to all taxes and duties affecting the imports of machinery and equipment for their operation, production, management, and transportation. There is exemption from all taxes and duties on imports of fuels, oils, and lubricants required for the operation of these enterprises. The Law also provides exemption from payment of taxes on capital and net assets and the payment of the real estate transfer tax for a term of 10 years, as of the start of operations. Additionally, there is exemption from sales and consumer taxes and all taxes on remittances abroad.

Currency Exchange Regulations

The currency of Costa Rica is the colon and it is subdivided into centimos, or cents. The symbol for the colon is the capital letter “C” with a double slash. All matters regarding currency are regulated by the Central Bank. Currently, the free-floating system determines the exchange rate, whereby the currency can float between the limits fixed by the Central Bank.

Foreign currency may be freely held and exchanged through the local banking system or authorized entities, except for funds derived from exports, which must be reported to the Central Bank according to Article 11 of the Exchange Market Regulations. This reporting requirement does not apply to beneficiaries of the Free Trade Zone Regime.