Costa Rica Law 9416 Requires Shareholder Registration

Costa Rica law 9416, know as the “Law to Improve the Fight Against Fiscal Fraud” (Ley para Mejorar la Lucha contra el Fraude Fiscal), requires that all shareholders and owners of legal entities ( ie corporations that hold property) register their identity with the government. The Banco Central has been tasked with recording the identity of all natural persons that are final beneficiaries of Costa Rican corporations.

They want to know who holds ownership of, exercises control over, or participates significantly in the activities of the legal entity. The only exceptions are corporations that are already under the control of governmental institutions. Examples of such exceptions are pension funds, public trusts, and financial institutions.

Like thousands of other expats, you want to own a piece of paradise in Costa Rica. Of course, you want your property—home, condo, or farm–to be legally registered. What does Costa Rica law require? Can a non-resident fulfill those requirements and thus legally own property in Costa Rica? Those questions are related to recently enacted law 9416. It was passed by the Costa Rican legislature on December 14, 2016 and went into effect on the 30th of that month.

Why does that matter to someone who owns property in Costa Rica? Because often a legal entity is used to hold ownership of that property. The “sociedad anonima” (SA), or Limitada similar to the LLC in the United States, is the legal instrument that is most commonly used for property ownership because it facilitates the transfer of title. According to Law 9416, the president of the SA is the only officer that is authorized to register. And the president must have a “firma digital” (digital signature) registered with the Banco Central in order to comply with the requirement.

Here’s where it gets tricky for non-residents. Only Costa Ricans and foreigners who have permanent residency status can obtain a digital signature. So what do you do if you’re an expat without legal residency and you want to hold property in Costa Rica through a sociedad anonima? How can you legally register it? There is a work-around, but it involves some expense. You can go to a notary public and assign a special power-of-attorney to a third party who will serve as your representative. The person you authorize can be an attorney but doesn’t have to be. As long as the person is a citizen or legal resident of Costa Rica in good standing with the government, they can represent you for registration purposes.

What about just ignoring the Costa Rica law that requires registration? The fines for not filing the information are expensive. Current penalties for failure to register start at $2,250 and can go up to $75,000. Is the law being enforced? That’s a valid question. If you already own a Costa Rican SA or Limitada or are considering the purchase of a property in that is held by either one, it’s smart to check with an attorney. They can provide up-to-date information on Costa Rica law 9416, it’s enforcement, and how it applies to your individual situation.

Why was the law enacted in the first place? Costa Rica is attempting to comply with the rules established by the global financial system. Registration is mandated in order to insure transparency of ownership and to prevent fraud. This, in turn, helps Costa Rica remain in good standing with the international banking institutions that are in important source of funding for Costa Rica’s government.

So do not hesitate if you happen to be a share holder of a Costa Rica corporation. Contact your legal representative here in Costa Rica and get the ball moving as you do not want to deal with penalties or other issues.

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