Set up Your Subsidiary in Costa Rica
Capital
San Jose
Official Language
Spanish
Currency
Costa Rican Colón
Payroll cycle
Monthly
Quick facts about Costa Rica
Located in a Central American rainforest, Costa Rica has a powerful economy, especially relative to its small population. Sectors like tourism, agriculture, and electronics continue to be important, as well as biomedicine and sustainable energy. The country is particularly open to foreign investment and trade opportunities.
Setting up a subsidiary in Costa Rica can be difficult. Depending on where you set up your subsidiary in Costa Rica will determine how long the incorporation process will take.
If you handle the subsidiary process incorrectly, you will either 1) not be able to operate your company or 2) be shut down with a large amount of fines. This is why many companies choose to partner with an EOR service like Via to avoid any confusion or legal liability.
This article goes over everything corporate employers who wish to expand to Costa Rica need to know about opening a subsidiary or entity.
How to open a subsidiary in Costa Rica
Before beginning the process of opening a business or corporation in Costa Rica, you will need to consider a few different aspects of your expansion.
The subsidiary process differs based on the region where you incorporate the business, so having a lawyer who understands the local process is crucial. Different regions operate under their own regulations and cultural factors, both impacting business.
In Costa Rica, the two main subsidiary models for foreign businesses include:
Sociedad Anónima (SA)
Sociedad de Responsabilidad Limitada (SRL)
An SRL is like an LLC in the United States and offers the most benefits for international expansion.
There are quite a few steps for opening a Costa Rican subsidiary as an SRL:
Submit a notarized document to the Mercantile Registry and request a corporate identification number
Verify the proposed trade or commercial name with the Public Registry through a public notary
Prepare a study of the registry in case the company’s capital stock includes personal property or real estate
Publish an announcement of formation in La Gaceta, the country’s legal newspaper
Pay all due revenue stamps and registry rights at any branch office of Banco de Costa Rica
Completing all of these steps can take anywhere from a few weeks to a few months, and you will need the help from local lawyers, accountants, and HR specialists. You will also need the resources to establish a board of directors.
Costa Rica subsidiary laws and regulations
Costa Rica’s subsidiary laws depend on what type of entity you choose. However, operating as a limited liability company separates you from the parent company. This means that the subsidiary has its own accounting system, management structure, and share capital.
For limited liabilities, you need at least 1 director and two shareholders of any nationality to make up the board of directors. You also need at least $1 of paid-up share capital that is provided to the Costa Rican government to complete the incorporation process.
Businesses do the majority of the subsidiary process in-person in Costa Rica or over the phone. So, either knowing Spanish or having a lawyer and consultant that can translate for you is important.
Subsidiaries also need a physical address in Costa Rica to keep accounting records. If none of the directors live in Costa Rica, you also need to appoint a registered agent in-country.
Finally, before you can run payroll, you need to set up in-country bank accounts to pay employees and keep track of accounting. Opening bank accounts in Costa Rica can be a challenging endeavor, so saving ample time for this part of the process is necessary.
Pros and cons of setting up Costa Rica subsidiary vs. branch
As the parent company, there are two main options for setting up ventures in Costa Rica. You can set up either a branch or a subsidiary, with subsidiaries being the most popular option. However, branches do have some advantages.
Local opportunities
Subsidiaries operate as a local company. Branch offices, on the other hand, are not technically resident corporations. Once a subsidiary is established, it is viewed as a local Costa Rican company. As a local operation, there are more opportunities for trade and attracting potential employees.
Independence from parent company
As a subsidiary, you retain full independence from the US parent company. Independence makes it easier to tailor business practices to Costa Rican culture.
The bottom line
While setting up a subsidiary in Costa Rica allows you more freedom from the parent company, you need a lot of time and investment capital. As the process can take months to complete, you will need to account for time and travel expenses.
Most importantly, you will need a team of legal advisors to help guide you through tax laws, subsidiary laws and employee benefits, but any problems with legal compliance will always be reserved for the parent company
Costa Rican Subsidiary vs. EOR: What’s right for you?
Many growing companies want to hire talented employees in Costa Rica, but aren’t sure about where to start in the hiring and recruiting process. Using a global EOR service like Via expedites the process and ensures that companies follow all hiring and employment laws correctly.
With Via, we help you hire, onboard, and pay remote employees across the world. As your employer-of-record abroad, we take care of the local human resources (HR) logistics, such as salary, payroll, benefits, paid leave, and tax deductions. Maintaining compliance is our responsibility. You simply focus on building your team and running your business.
