Doing Business in Costa Rica


Not too long ago, the Costa Rican government made some decisions about the future of their country and its role in a global economy. It decided to invest in its people and its infrastructure to make their country an attractive place for foreign investment. With an educated workforce, a stable government and few limits on foreign investment and ownership, Costa Rica has become a destination for entrepreneurial foreigners and expanding multinational corporations. Quite simply, foreign money combined with strict labor laws and residency requirements ensure that Ticos have the benefit of job creation. The government makes it easy for foreigners to do business here, offering incentives and tax exemptions for the right companies. Even small businesses are easy to start and maintain. But by no means is Costa Rica a lawless nation for foreigners. Tax laws, business regulations and labor codes are strictly enforced here. If you pay taxes and treat your employees well, there is no real obstacles to business success in Costa Rica.


Starting a Business

Costa Rica has a special philosophy, different from many developing countries, towards foreign business ownership and investment. Instead of making it difficult for foreigners to start businesses and invest in the country, it encourages people from around the world to do business in Costa Rica. This encouragement comes in the form of investment incentives and tax rebates for certain types of businesses. Basically, the government wants more jobs for Ticos - a good reason for allowing foreign investment with few strings attached.

There are a number of tax exemptions and incentives for certain types of businesses. A local attorney, or abogado, will be able to help you research and apply for any incentive programs available. If your export company qualifies for the Free Trade Zone program, it's possible to receive full exemptions on import duties of raw materials, export taxes, capital taxes and corporate income taxes for a number of years. Some programs also offer residency to foreign investors in environmental or tourism companies.

Starting a business is a relatively easy process in Costa Rica. A corporation is referred to as an Anonymous Society, or Sociedad Anónima, or S.A. in Costa Rica and it doesn't require a Costa Rican partner to form one. You don't even have to be an official resident to start a company.

A corporation requires a minimum of two shareholders that appear before a notary public to execute the orders of incorporation. All companies need a Board of Directors made of a minimum of three officers - president, secretary and treasurer. The two shareholders usually take two of these positions and a friend or colleague will take the other. The third officer doesn't even have to appear in front of the notary public, as long as there's a letter accepting the position. The corporation also needs a resident agent, typically a local lawyer, to handle any legal or administrative duties for the corporation.

After executing the orders of the corporation, a legal notice must be published in Costa Rica's national newspaper, La Gaceta, to allow anyone to object to the corporation or its name. Be sure to check the national registry to find out if your chosen corporation name is already taken before you go through with all the paperwork.

Next, the corporation needs to be registered in the National Registry, Tax Agency and the Social Security Agency. The notary public that executes the orders of corporation will usually do the registration. As a last step, the corporation's books need to be legalized by the government. These books include three accounting books - general journal, general ledger, and inventories and balances - and three other books - Register of Shareholders, Minutes of Shareholder Meetings and Minutes of the Board of Directors. All of these books need to be bound, pre-numbered and pre-stamped by the Tax Agency before they can legally contain the official business of the corporation.

Incorporation takes anywhere from a couple of weeks to three or four months and no business can occur until the process is complete. All of the steps cost up to USD$1000, not including attorney fees.


Taxes and Regulations

Like most countries, Costa Rican tax codes for businesses are complex systems that typically require professional help to understand. While Paradise Hunter aims to provide the most current and accurate information, it should not replace the expertise of a local attorney or accounting professional.

All businesses are required to keep specific accounting records, as determined by the government. There are three main accounting books:

  • General Journal, or diario, must record all transactions on a daily or monthly basis for which there is supporting documentation for each individual transaction.
  • General Ledger, or mayor, documents the outstanding balances, debits and credits for each general ledger account.
  • Inventories and Balances, or inventarios y balances, is completed after every fiscal year, and records the asset, liability and equity accounts along with their outstanding balances. The profit and loss statements must be recorded in this book.

These books must be bound, pre-numbered and stamped by the tax agency before use. These accounting books, along with the Register of Shareholders, Minutes of the Board of Directors and the Minutes of the Shareholder Meetings, must be in Spanish and all amounts in Costa Rican currency.

The tax year in Costa Rica ends on September 30 and begins on October 1, with tax returns due by mid-December. A corporation is only taxed on income earned within the country, with a corporate tax rate of 12 to 36 percent. But there are a number of other taxes that a company in Costa Rica may encounter, depending on the type of business:

Payments to individuals or companies residing in another country are subject to taxes ranging from 5 percent to as much as 50 percent of the payment.

  • There is a 13 percent sales tax that applies to individuals or corporations that sell goods or services.
  • Sales and excise taxes are applied to the import or transport of goods within Costa Rica.
  • Dividends paid to individuals or foreign companies are subject to 5 to 15 percent tax. This tax doesn't apply to stock dividends.
  • Municipal taxes are assessed on the gross revenue of a company located in their jurisdiction, depending on the type of business.

There are certain tax-exempt businesses, such as non-profit organizations, exporters and tourism companies, which must apply directly to the government for this status. And Costa Rica offers special investment tax credits for new investments that will be used to develop or increase productivity. These credits can apply to tourism, agriculture and fisheries, as well as fixed assets other than land.



Another benefit of doing business in Costa Rica is the approximately two million strong available workers. For over 60 years, developing an educated populace has been the government's goal. They have a system of colleges, technical institutes and universities that produce a computer-literate, well-educated and hard-working population. While the country's educational system doesn't rival European or North American schools, Costa Rica is head and shoulders above its Latin American neighbors.

Before you employ anyone, your company must be registered with the Costa Rican Social Security agency, Caja Costarricense de Seguro Social, or CCSS. All employers are required to register and contribute to their employees' social security plan. The employer pays approximately 25 percent of the employee's salary and the employee contributes nine percent. These funds go towards the employee's health care and pension fund.

There are labor unions in Costa Rica, with most existing within the government agencies. There are also some unions in the private sector, mostly in textile factories and banana plantations. The largest union is the Confederation of Costa Rican Workers. There are more employee associations than unions in Costa Rica. These associations have no collective bargaining power but are typically a savings and loan organization. Both the employer and employees deposit a percentage of salaries into these associations for savings and to cover severance packages.

In Costa Rica, there are a number of regulations determining how you can fire an employee and what kind of severance payment they receive. Employers have to give 30 days termination notice to the employee. If they don't, the employer has to pay 30 days of wages to the employee. However, if there is cause for termination, the employer doesn't have to give notice or pay any severance. If there is no cause shown for termination, the employer must pay 30 days wages, severance (as calculated by the length of their employment) and any vacation pay owing to the employee.

Employers also have to comply with these regulations:

To hire anyone, employers must purchase an occupational safety insurance policy that covers all of their employees.

  • Companies have to pay all employees the minimum wage for that particular occupation. The government takes this very seriously and produces a guide to minimum wages every six months with an exhaustive list of occupations.
  • Employers have to give one day of vacation for every month of employment, with two weeks of vacation time due after 50 weeks of work. These vacation days do not include weekends or paid national holidays.
  • Expectant mothers are entitled to one month of paid pre-natal leave and three months of paid post-natal leave. Women cannot be legally dismissed for getting pregnant.
  • Employees are entitled to a Christmas bonus equal to one month's salary. This is commonly known as the thirteenth-month salary or aguinaldo.


Business Etiquette

The ease of doing business in Costa Rica also extends to local etiquette and working conditions. The hierarchy and behaviors here are very similar to North America and Europe, as well as business hours and expectations. Most offices are open for eight hours a day, Monday to Friday. They open at 8:00 a.m. and close around 5:00 p.m. or 6:00 p.m., with one or two hours for lunch. Retail and commercial operations are usually open over the weekend, and some factories run on shifts, with three shifts per day. Almost all businesses are closed on all of Costa Rica's eleven national holidays.

In business dealings, Costa Ricans are very similar to North Americans and Europeans. Both men and women wear business attire at the office, punctuality is expected and there is a respect for senior officers of the company. Business associates are addressed either by don for men, or dona for women, followed by their surname. If you know their company title, address them using that title.

If you're accustomed to doing business in other Central American countries, you might be surprised at the attitudes in Costa Rica. Ticans are much more serious and conservative than their Latin American neighbors. They are reluctant to take risks and new business projects may take some time to develop. Threats, pressure and heavy sales tactics won't work in Costa Rica. Ticans avoid conflict and react adversely to confrontations. Decisions are made by working within existing relationships, trying to achieve a consensus within the group.


Fast Facts

  • Average Daily Work Hours: 8:00 a.m.-5:00 p.m., with one or two hours for lunch.
  • Total Business Taxes: Approximately 50% of profit is taken by taxes.
  • Average Time to Start Up a Business: 60 days or two months.
  • Average Work Week: 5 days, 40 hours
  • Typical Yearly Vacation: The law requires one day of vacation for every month of employment. A two-week vacation is due after fifty weeks of work. The employer can choose the time the vacations are taken and can require that half be taken at two different times, but they must be granted within 15 weeks of the time when they were due. Vacations cannot include weekends or paid holidays, they must be regular working days.
  • Minimum Wage: As of July 2008, the minimum monthly salary for the private sector is ¢180,000 ($346.40). Minimum wages are legally enforceable and the government publishes an exhaustive list of occupations and corresponding minimum wages every six months.



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