Corporations in Costa Rica

The Costa Rican Corporation (Sociedad Anónima) is the most commonly used type of business organization in Costa Rica and the main reason for that is that the liability of the shareholders is limited to their capital contributions. The Law that rules all matters regarding corporations is the Commerce Code (law number 3284), specifically between the articles 102 and 225.

To form a Corporation in Costa Rica, according to the Commercial Code, it is required that at least two persons execute the articles of incorporation and subscribe at least one share each. The incorporator can be either Costa Rican citizen or not. This procedure has to be done before a Notary Public authorized by the Notarial Directory of the Costa Rican Supreme Court.

The information that the articles of incorporation should contain is the following and can be found in the article 18 of the Commerce Codes:

a) Date and place of incorporation,
b) Name, nationality, marital status, occupation, official id number (passport) and domicile of the incorporators,
c) Name of the corporations involved in the constitution
d) Corporate purposes,
e) Name of the corporation
f) Duration and possible extensions of the term
g) The amount of Capital and the manner in which it shall be subscribed,
h) Share holders contributions
i) Domicile of the corporation it has to be a valid address in the Costa Rican territory
j) Type of administration and faculties of the Directors
k) Nomination of the directors stating who will represent the corporation and their acceptance
l) Nomination of a resident agent, when the legal proxy is not a Costa Rican resident; the resident agent has to be a lawyer with open office in Costa Rica.
m) Allocation of the balance, profits and losses of the corporations.
n) Establishment of a legal reserve fund of the 10% of the total capital.
o) Cases in which the corporation may dissolve before the term expires
p) Corporate dissolution and liquidation procedures
q) Mode for the election of the liquidators and their faculties

The persons involved in the functioning of a corporation are: the shareholders, the board of directors, the legal proxy, the inspector, the resident agent and other employees it may have for the developing it purposes.

The shareholders of the corporation should name a Legal Proxy to act on behalf the corporation, this individual can a have a limited or not power of attorney for that purposes and is the one responsible for signing documents, opening bank accounts, in general terms exercising all the actions required for the outgoing of the corporation, this person as well as the shareholders can be either a Costa Rican citizen, residents or not. The shareholders meeting and the Board of Directors could grant all kinds of powers of attorneys.

The corporation should also have a 3 member Board of Directors to manage and control its affairs, there are no nationality or residence requirements for Board members either.

The Board of Directors may authorize, jointly or separately, the opening of banking accounts in or out of Costa Rica, in national currency or in other foreign currencies, and in the same act may authorize the persons that will sign for the accounts, authorization that can be jointly or separately.

The control and supervision of the corporate business and affairs shall be in charge of an inspector, to be appointed in the shareholders meeting, according to the 197 article of the Commercial Code.

Once the articles of incorporation are executed, they must be filed in the mercantile section of the Public Registry and a legal notice must be published in the official newspaper (Gaceta); which can be done simultaneously with the presentation of the documents in the National Registry. This Registry provides the corp. with a proper corporate identity card and the registration citations indicating the book, page and entry numbers where the corporation is recorded.

Once the incorporators receive their original incorporation documents back from the Public Registry, they can file the request with the Costa Rican Revenue Department (Tributacion Directa) to formally legalize the corporate books of the corporation. By law the Costa Rican corporation must have six corporate books, three of these books are minutes books to record: board of directors meetings, shareholders meetings, and shareholder's logbook. The other three books are for accounting purposes and include: inventory and balances, general ledger and account ledger.

The corporation is required to file a tax return once a year, during the reporting period, which is October 1 through December 31. A Costa Rican corporation is only taxed on income earned in Costa Rica, foreign source income is not liable for paying any taxes.

The Costa Rican Corporation is an international business company, that can be used for a wide range of applications, for example financial management, investment holdings, property, ships or any kind of vehicle ownership, you can have share ownership in other companies, you can lease back assets from your corporation; it is a perfect vehicle for the housing of copyright and licensing revenues or to get involved with international trading of some type.

Regarding the privacy of the ownership of the assets of the corporation and the exposure and seizure of the legal books, the Costa Rican Law, specifically the Commercial Code in its article 265, regulates this issue and it states that No authority may inquire the books of the corporation nor decree the exam, communication or delivery or general recognition of legal books, mail or other papers or documents; except in cases of bankruptcy or liquidation. The exhibition of the books may be request only by interest party through a competent judicial authority. "Interest party" is referred to any person that have a legal interest in this opening, for example, one of the shareholders, the inspector of the corporation, etc. This recognition has to be done in the domicile of the corporation in presence of the legal proxy or authorized person. The Costa Rican Revenue Department (Tributacion Directa), may order the reviewing of the legal books only for tax purposes, within the domicile of the corporation and only in cases regarding corporations liable for paying taxes in Costa Rica (as stated in the tributary norms and procedures code, codigo de normas y procedimientos tributarios.) For expert tax consultations and Costa Rican accounting advice, call Costa Rica Accounting and Business Center.

Other issue to take in consideration regarding privacy is that the ownership of the shares of the corporation is not registered in the Public Registry, the only information regarding the people involved in the corporation registered is the Board of Directors, the inspector, the legal proxy and the resident agent, in general terms, all the people involved in the administration and representation of the corporation.

Regarding Banking, Private Banks in Costa Rica are regulated by the National Banking System Organic Law (Ley Orgánica del Sistema Bancario Nacional No. 1644).

Banks in Costa Rica have to report transactions of more than $ 10.000, coming in or going out Costa Rica, also those transactions that in conjunction sum more than $ 10.000 and that were made by the same person or that are for the same beneficiary; at last, the Bank may report any transaction they consider to be suspicious. (as stated in articles 20 to 27 of ley de estupefacientes y otras actividades conexas.)

Banks may freeze funds from a Bank Account only if ordered by a competent judicial authority in processes related with drugs, money laundering or debts that the corporation have previously acquired.

The reserve requirements for Private and State Banking in Costa Rica, are regulated by the National Banking System Organic Law (Ley Orgánica del Sistema Bancario Nacional No. 1644).