The Buying Process
Purchasing
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Incorporation
Why should I incorporate to buy real estate in Costa Rica? There are many reasons why this is the strongly prefered meathod of purchasing Costa Rican real estate. You can keep anonymity by purchasing through a corporation. Your title deed does feature your name when it is searched at the Registro Nacional. Ones personal assets are not held responsible for any unforeseen costs that arise from the property. If you experience financial trouble or get into debt, you cannot lose your home if it is owned by a company. If your real estate is a personal asset, it must be used to pay back debt. Company shares can be put in the names of close family to evade probate should the situation arise.
The biggest and most applicable reason to buy through a corporation is to avoid the transfer tax. When your company sells the property, the buyer just buys the shares of that company. This is an expeditious way to transfer real estate. The pitfall can come in the fact that liens and encumbrances are transferred along with the asset if they exist. Visit the local Registro Nacional for free and full disclosure on these issues.
Costa Rican companies are required by law to file income tax returns. If there has been no ownership changes in your company and you are using just as a holding company for the real estate then you are subject to a much lower property tax! All that you have to pay is the annual stamp duty and the property tax which is only 0.25% of the registered value!
How do I incorporate? There are two types of companies to choose from.
The most commonly used is a Sociedad Anonima. In order to do this one must have at least three board members that are from abroad or from Costa Rica. Also it is mandatory that you have a fiscal and agent resident in the country that is certified to practice law. There is no tax on this corporation if it is used exclusively as the real estate's holding company. The Timbre de Educacion y Culture or the annual stamp fee is the only money due. Sale or transfer of stock is not taxable for there is no capital gains tax on these corporations.
A Sociedad de Responsabilidad Limitate (Limited Liability Company) is less often used due to the fact that it takes more time to start one. If one purchases it from the owner of the property during the transaction this problem is alleviated. Only one owner is required for this type of company, but all shareholders must sign off on any transfer of shares. If this is the method you choose, make sure that the business had no commercial activities and has no financial burdens on the side.
There are two other forms which may be the best in some unique circumstances. These situations are easily diagnosed by a good lawyer and they can guide you in real estate purchases with these business types: Sociedad en Nombre Colectivo and Sociedad Comanditaria. For commercial agility and versatility in dealings, the corporation if choice is typically the Sociedad Anonima.
