Thinking about starting a business in Costa Rica? This guide breaks down some of the practicalities so you can hit the ground running in one of Central America’s most stable and opportunity-rich markets.
Costa Rica has carved out a reputation as one of the most reliable and opportunity‑rich markets in Central America. Known for its steady economy, skilled workforce, and forward‑looking trade policies, it’s home to a well-established tourism industry, a growing technology sector, and a strong base in high‑value manufacturing.
For expat entrepreneurs, it offers much to like, although starting a business in Costa Rica comes with inevitable processes, paperwork, and timelines that need to be understood before you commit. This guide walks through the essentials: the business environment, structures you can use, the registration process, taxes, and practicalities for day‑to‑day operations.
Costa Rica’s Business Climate
Costa Rica’s steady economic growth is underpinned by tourism, agricultural exports, and a growing base of high‑value industries such as medical devices and shared service centers. Key strengths include stable governance, an educated workforce with high English proficiency, and free trade agreements that give access to major markets.
Challenges for new businesses include higher operating costs compared to some neighboring countries and administrative processes that can take longer than expected.
Choosing a Business Structure
Foreigners can choose from several legal structures, with the most common being:
- Sociedad Anónima (S.A.). A corporation requiring at least two shareholders and a board of directors. Suitable for ventures with multiple investors or plans to scale, and offers limited liability.
- Sociedad de Responsabilidad Limitada (S.R.L.). Similar to a limited liability company, requiring two shareholders but no board of directors. Easier to manage and often preferred for smaller operations.
- Sole Proprietorship (Empresa Individual). Simple to form but offers no protection for personal assets.
Foreign companies may also open a branch office, though this links local liabilities directly to the parent company.
Legal and Registration Requirements
Registering a business in Costa Rica is done through a notary public and the National Registry. The key steps are:
- Reserve a unique business name in the National Registry.
- Draft and notarise Articles of Incorporation defining the company’s structure and objectives.
- Register the business with the National Registry to obtain a corporate ID number.
- File the annual Ultimate Beneficial Owner declaration with the Central Bank.
- Obtain a digital signature certificate for official filings.
- Secure any required permits, including a municipal business licence, health permits for certain sectors, and environmental clearance where relevant.
- Register with the tax authority for income tax, VAT, and electronic invoicing.
- Enrol with the Social Security Fund if hiring employees.
A straightforward incorporation can take two to three months, though sector‑specific licensing may extend this.
Residency and Work Permits
Costa Rica allows foreigners to own a business without residency, but you cannot perform operational work in that business without legal residency. As an owner without work rights, you can oversee operations, make management decisions, and attend to shareholder duties, but tasks such as guiding tours, serving customers, or doing repairs must be carried out by authorized workers (meaning Costa Rican citizens or foreigners with legal residency).
Tax Obligations
Companies pay corporate income tax on profits from operations in Costa Rica. Smaller businesses benefit from reduced progressive rates if revenue stays below the annual threshold, while larger companies pay the standard 30 percent. The fiscal year runs from 1 January to 31 December, with returns due within two and a half months of year end.
Most goods and services are subject to a 13 percent Value Added Tax (IVA). Reduced rates or exemptions apply to certain basics such as some food products, specific medical goods, and international transport. VAT returns are filed monthly, even with no sales.
Other regular obligations include the annual corporation tax, municipal business taxes, small statutory levies, and withholding taxes on certain payments to non‑residents. Electronic invoicing is mandatory, and many business owners hire local accountants to ensure compliance and meet filing deadlines.
Free Trade Zone Incentives
Costa Rica’s Free Trade Zone Regime, managed by PROCOMER, offers significant tax and customs benefits to qualifying companies, mainly in export‑oriented manufacturing, logistics, technology, and high‑value services. Benefits often include exemptions from import duties, an initial period of full income tax exemption, and savings on VAT for eligible transactions.
Entry requires meeting investment and job creation targets, complying with environmental regulations, and operating from an approved facility. The application process is detailed, so many foreign businesses work with a consultant experienced in Free Trade Zone requirements.
Banking and Finance
To open a corporate bank account you need your incorporation documents, tax registration, and shareholder information. Non‑residents generally must appoint a local legal representative.
Many businesses hold accounts in both colones and US dollars to manage exchange rate shifts. Banking terms, fees, and the quality of online services vary between institutions, so it is worth comparing options carefully.
Employment Regulations
Employers must register all staff with the Costa Rican Social Security Fund for healthcare and pensions, pay at least the legal minimum wage, grant statutory vacation and public holidays, and provide the annual Christmas bonus known as the aguinaldo (which is an extra month’s pay).
Foreign workers require a permit, which is generally granted only for roles not readily filled by Costa Rican nationals. Hiring locals for operational positions is both common practice and, in some cases, a legal requirement.
Practical Tips for Expat Entrepreneurs
- Use a bilingual lawyer and accountant from the start.
- Allow extra time for licensing and permits.
- Keep taxes and filings current to avoid penalties.
- Understand sector‑specific regulations before launch.
- Build local connections to navigate processes more smoothly.
Final Thoughts
Costa Rica rewards entrepreneurs who combine careful preparation with a willingness to adapt. The opportunities in tourism, technology, and export industries are real, but so are the demands of navigating local compliance and timelines.
By working with trusted local professionals, building relationships, and aligning your business model with the market, you can create ventures that are both compliant and competitive in one of Central America’s most stable economies.
