Investing in Costa Rica
Costa Rica remains one of the safest and most attractive country for foreign investment in Latin America. The Costa Rican government, its ministries and financial institutions maintain a decidedly pro-U.S. and continental stance in regard to financial security and tax laws. The stated aim is to entice primarily high-tech corporations to take advantage of Central America's most educated, computer literate and disciplined workforce, along with the modern production infrastructure the country is currently creating. The economy is being transformed from its long-time dependence on coffee, bananas and cattle raising to one centered on microprocessor production and high-tech telecommunications services.
AmCham
The Costa Rican-American Chamber of Commerce
AmCham is an important resource for anyone interested in doing business in Costa Rica.
http://www.amcham.co.cr/
This investment-friendly climate and government policy of making Costa Rica "the Silicon Valley of Latin America" has enticed commercial leaders such as Acer, Microsoft, GE, Abbot Laboratories, Continental Airways and Intel Corporation to make sizable investments here, both financially and physically, with major production and distribution facilities. Western Union has chosen Costa Rica to host its Latin American regional operations center. In 1998, for the first time ever, Costa Rica is poised to earn more from high technology exports than from coffee or bananas or even its lucrative, thriving tourism industry.
The World Bank has given Costa Rica an excellent bill of overall political and economic health. At its annual conference in El Salvador this year, the bank lauded the country as possessing "one of the most stable and robust" democracies in Latin America. It went on to praise the Costa Rica's "healthy economic growth rate" and "some of the best social indicators" on the continent.
Costa Rica is one of the most vocal supporters of continental free trade, and already has its own agreement with Mexico and other countries of the region. Costa Rica's numerous free trade zones and tax holiday opportunities are extremely enticing. They offer benefits such as exemption from import duties on raw materials, capital goods, parts and components; unrestricted profit repatriation; tax exemption on profits for eight years and a 50 percent exemption for the following four years.
A study done recently for the Ministry of Foreign Trade (COMEX) projects that by the year 2005, Costa Rica's export earnings will amount to $15.7-billion, about four times the current figure. Intel will be leading the way; its exports, from the three manufacturing facilities the processing giant is building here, are expected to reach an annual $3.5-billion by the year 2001.
High-tech companies will spur the export boom, while traditional exports, such as coffee and bananas, will fall in percentages of overall figures, but in terms of revenue, will continue to grow.
Costa Rica is building a competitive advantage for itself and the many high-tech companies who have chosen or are pondering the option to operate here. It is a country at a turning point in integrating itself into the modern world economy. Those doing business here will have the inside track.
Getting Here
The best way for potential investors to begin their search is to travel to Costa Rica and find out first-hand about the favorable business climate and opportunities. There are direct flights to San José from many cities in the United States and Canada. For all accommodations and tourism inside the country, there is no better service than Travel Web, which you can easily contact by phone at our toll-free number or on-line.
Business Resources
CINDE, the Costa Rica Investment and Development Board, has been officially commissioned by the government of Costa Rica to be the main promoter and advisor to foreign investors. CINDE is a private, non-profit organization that provides complete and updated information on the economy and the business environment in Costa Rica, and helps in the initial contact with potential investors. It has an office in New York to provide tailor-made services. PROCOMER, the Foreign Trade Promotion Institute, can help exporters understand relevant legislation, acquire export permits, seize the advantages of market opportunities and chart their way through related fields of endeavor. CADEXCO, the Costa Rican Exporters Chamber, provides information to entrepreneurs, private and public institutions on export procedures and requirements; trade barriers and how to overcome them; how to sell products abroad; information on export credit lines and export contracts, international prices, etc.
Internet Services
Costa Rica's Internet services are the most readily available and sophisticated in Central America. Informática Internacional, the country's longest-serving private sector Internet services company; is one of the leading providers of Internet services nationwide. Through its diverse client base and wide range of products and services, Informática has ways to improve any business, personal communications needs, or assist in the electronic marketing of products and services. Through Informática, corporations and individuals planning to settle in Costa Rica can acquire Internet domains and E-Mail addresses in the country even before making the actual physical movement.
Real Estate
All individuals and private companies, local or foreign, can own land and property in Costa Rica. Few restrictions apply, the most important being physical occupancy and a 50-meter limit from the beach on oceanfront property. Potential real estate investors, and their lawyers, must first go to the National Registry for a title search, to the Ministry of the Environment and Energy for an environmental impact study, the local municipality for zoning laws and building permits, and then perhaps to other ministries and institutions for pertinent information. There are some excellent Real Estate agents who can find you the property you want. In addition, pick up The Golden Door to Retirement and Living in Costa Rica. It covers all aspects of living and investing in the country, and is required reading for anyone thinking of living full- or part-time here.
Costa Rican Law: In the states, our legal system is based on Common Law whereas Civil Law is used in Costa Rica. This is an important distinction to make in regard to how judges make decisions and how contracts are written. Civil Law is more restricted with less interpretation by the judges. Precedent is not necessarily a factor and may be considered or viewed only for clarification purposes. The Supreme Court or Sala Cuarta, is the exception and will hear cases where the lower courts were restricted to rule only on provisions provided in the civil code.
Written contracts in Costa Rica are of a simpler form than their stateside counterparts. Contracts include only what the law does not already state. Under Common Law, contracts are more specific and detail oriented since they must allow for as little interpretation as possible.
Protection of Private Property: You may ask, "Can the government take my property from me?" Yes, it is possible, but very difficult. One thing to understand is that there are similar conditions we find even in the United States and other countries where the government has and can expropriate private property for public interests, i.e. roads, easements, protected areas, etc. There have been cases in the past where the Costa Rican government has expropriated lands for national parks and protected areas, however these are the exception and not the rule. Especially today with new constitutional procedures where the government must legally demonstrate public interest and justly compensate the landowner. Article 45 of the Costa Rican Constitution guarantees equal rights and protection of private property, be it owned by nationals or foreigners.
Taxes: Income Tax - Costa Rica is a "source" jurisdiction from an income point of view. Residents, non-residents and corporations generally are subject to tax only on their Costa Rican source income. For this reason, Costa Rica offers no credit for foreign taxes paid on foreign source income by Costa Rican residents or non-residents. Tax Rates - 30% on corporations / 30% catch-all rate on non-residents, and a graduated scale of 10% - 25% for nationals depending on the type of income source. There is no capital gains tax in Costa Rican unless the income is derived from "habitual" activities. National sales tax is 13%. Property taxes are 0.025% of the declared property value.
Immigration: Under certain conditions, Costa Rica allows foreigners to gain residency status. This is not to be confused with citizenship. Being a Costa Rican resident allows certain benefits while you reside here but still maintain your foreign citizenship. Foreigners "living" in Costa Rica on a tourist visa do not necessarily qualify for residency as they must first meet certain requirements ( listed below). As a tourist, your visa must be renewed every 90 days (depending on the country of origin) by checking out of the country for 72 hours. Aside from not having to renew your tourist visa, benefits of residency include access and discounts on some public services like health care, insurance, and education.
In years past, Costa Rica was a haven for retirees, offering foreign residents certain incentives like importation of household goods and a vehicle exempt from import duties. These incentives were discontinue several years ago. Today, benefits are few unless you qualify through an investment scenario.
NOTE: You can own property as a foreigner and live here on tourist visa.
One of the confusing issues is gaining residency but also having the right to work. Working status is not part of your residency and is given only under special circumstances, like an investment scenario. This requires a lengthy and bureaucratic process so be sure this is something necessary to your plans or project.
Qualification categories are as follows:
1. Pensionado Status - You must demonstrate a permanent income from a retirement source such as a pension. The minimum amount is $600 per month and you must reside in the country for a at least 4 months each year.
2. Rentista Status - This is for individuals who do not have retirement income but can show income from other capital investments. You must provide documentation that you receive a minimum of $1,000 each month for a period of at least five years. You must also change a minimum of $12,000 per year into colones through the Costa Rican National Banking System.
3. Investor Status - Those making a minimum investment of $50,000 can qualify for residency if the investment is made in a priority industry such as non-traditional exports or tourism. Residency along with other incentives are offered with investments of $100,000 in reforestation projects or $200,000 in non-priority industries. Ask your attorney for further details.
4. Permanent Residency – is usually reserved for people who marry Costa Ricans, have a child born in Costa Rica, or are seeking political asylum.
5. Temporary Residency – is regularly awarded to people employed by international companies or students and teachers participating in official exchange programs with the Costa Rican Universities.
In all cases, you must provide a series of documentation from your home country such as certificate of birth, marital status, police report, photos, income certification, etc. All documents must be certified by the Costa Rican Embassy in your home country and then translated here in Costa Rica. Fingerprints and a written declaration are taken in Costa Rica at the immigration office. If you solicit for investor status, you will be required to provide a financial study of your project. If the project involves real property, you must provide proof of ownership. In theory, the process should only take a few months but this would be an exception. Some cases can take up to a year or more depending much on the efficiency of your lawyer.
Our Advice: Most attorneys will do immigration work but very few specialize in it. It is best to talk to an immigration specialist to see if you qualify before getting started
|
