You have finally made the decision to buy your dream property in Costa Rica! But one question remains… Should you own the property in your personal name or a Costa Rican corporation? Below are the pros and cons of both to help make the right decision for you. I highly recommend you also talk to your trusted Costa Rica legal team as they will guide you in the right direction.
Owning Costa Rica Property in Your Personal Name
Great news! Foreigners are permitted to own property outright in Costa Rica. They have the same rights as Costa Rican citizens when it comes to real estate. There are only two exceptions.
- Foreigners cannot own 100% of property in a maritime zone or concession land.
- Foreigners cannot own INDER property (which is land donated to poor farmers).
Pros of owning Property in your personal name
- Cheaper. You will pay fewer taxes because you will not have to pay the corporate tax. No resident agent fees. No shareholder registration fees.
- Less headache. The rules and regulations are always changing for owning a corporation.
Cons of owning Property in your personal name
- If you sell your property, you will have to be at the closing.
- You cannot own concession/maritime property.
- Local banking is more restrictive.
- You cannot put a phone plan under your name.
Owning under your name is the perfect option for those looking to move to Costa Rica and start working on their residency process right away.
Owning Property Through a Costa Rican Corporation
First, let’s go over some details about Costa Rican Corporations.
The two most commonly used types of corporations are the Sociedad de Responsabilidad Limitada (S.R.L. or Ltda) or the Sociedad Anonima (S.A.). Both the S.R.L. and the S.A. are limited liability corporations. This means that owners are only responsible for the corporation’s debts with their own personal assets up to a certain limit. A S.R.L does not require a board of directors a S.A does.
Whether you are forming a S.R.L. or a S.A. corporation in Costa Rica, the process is fairly simple. A corporation may be formed by as few as two individuals with legal capacity. By law, the corporation will have to file a formal incorporation deed with a Costa Rican Notary Public. The incorporation deed will also need to be filed for registration at the Commercial Section of the Public Registry. All information contained in it becomes available for public access and future changes to the by-laws must be recorded at the Registry.
Pros of Owning Through a Costa Rica Corporation
- Corporate ownership offers a layer of liability protection.
- Estate planning and probate is a much easier process when your property is under a corporation.
- A corporation can offer more flexibility. You can grant Power of Attorney (POA) to take care of issues on your behalf. For example: Signing closing documents, applying for utilities, complying with legal requirements when out of the country.
Cons of Owning Through a Costa Rica Corporation
- Expensive. You must pay to open a corporation. Each year you must pay a corporate tax and pay a fee for shareholder registration.
- The rules and regulations are always changing, you must stay up to date with all the new information.
Owning under a corporation is a great option for those who plan to rent out their property and those who are not ready to move to Costa Rica full time.
When making this big decision it’s a good idea to sit down with an attorney you trust as mentioned before and consider your options. This is a personal decision and you want to pick what will work best for you. If you have any questions, please reach out and I would be happy to assist you.
Further information on How to Buy Costa Rica Property.