Types of offshore companies in Costa Rica

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The most used forms of registration of an offshore company in Costa Rica are: The Limited company, Public Limited company, General Partnership, Sole Proprietorship  and Trusts. The commercial code of 1964 governs the creation of companies, partnerships, trusts, and one-person businesses that will be described in this article. The public limited company is the most used type of corporate entity, and the single-person company is an interesting concept, even if only because its difference from the single-person company of common law jurisdictions. 

Although Costa Rica is a civil law jurisdiction, trusts are allowed. The tax laws do not differentiate between onshore and offshore operators, and therefore the concept of tax exemption for companies does not exist. The international regulatory authorities, that seek to control the activities of the offshore centers, consider a non-discriminatory tax system as one of the factors that define a reputed and well-regulated tax haven.   

The article 227 of the commercial code includes the transfer of a foreign company to a foreign country, through the presentation of a shareholders’ resolution. The transfer does not involve the dissolution of the company in its original country of registration or the constitution of a new company in Costa Rica. The law of the foreign company must allow its re-domiciliation. It is also important to note that all the documents submitted by the company must be in Spanish and checked by a notary public. 

Costa Rica Limited Companies  

Limited Company registered in Costa Rica restricts the liability of the members to the value of the nonpaid capital. It is governed by the section 104(a) of the commercial code. Although when registering a company it must have two subscribers, further a single shareholder will be permitted. Similarly, corporate shareholders are not permitted.

The main difference between a limited liability company and a public limited company lies in the levels of administration. Instead of being controlled by directors, the limited company can be governed by a top management with power of attorney. In this respect, therefore, it is similar to a common law company. However, the management of a public limited company is subjected to very detailed rules. 

Costa Rica Public Limited Company 

The Public Limited Company is the most popular form of business organization and includes the following characteristics:

  • It must have two subscribers at the moment of the incorporation; then, only a single shareholder is allowed. Corporate shareholders are allowed.
  • The shareholders` meeting must be held annually, and can be carried out anywhere in the world.
  • There is no minimum share capital required, and however at least the 25% of such capital must be paid during the incorporation.
  • Neither shares with a par value nor bearer shares are allowed. However, preferred and differential shares are allowed.
  • The Public Limited Company must have a registered office, a fiscal agent, a resident agent (a local lawyer) and a minimum of three directors (resident or nonresident) of which one of them (the president) has full power to manage the company; the meetings of the directors may be carried out anywhere if such article allows it.
  • The president is assisted by the secretary and the treasurer and contrary to other jurisdictions, his authority to act on behalf of the company comes from the power of attorney issued by the shareholders, which defines what he can or what he cannot do. 
  • The fiscal agent is basically an accountant and his responsibilities include monitoring the board of directors and informing the members directly. The fiscal agent and his closest relatives cannot be the directors.

These requirements can be has to fulfill due to certain standards of the common law offshore jurisdictions, in addition to constant increasing of administrative costs of a Public Limited Company. The three-minute books and accounting records must be kept. One for the directors, another for the shareholders, and the third one must be kept in the registered office.

The information requirements are minimal. The company must file a tax return, regardless of being subject to the payment of taxes on its income.

The incorporation process is relatively quick for a civil law jurisdiction, since it takes about 4 weeks. The stamp duty is paid on the issued share capital, so the practice is to hold down the value of the issued share capital and to hold to a minimum the incorporation costs. 

Costa Rica General Partnership

The shareholders of a General Partnership have unlimited liability. Therefore, this type of trading company is not widely used. It is comparable to the General Partnership of the common law countries, but without some of its advantages.

Costa Rica Foreign Company

Foreign companies can operate in Costa Rica through a branch or subsidiary. A branch must be registered under the terms of the article 226 of the commercial code, by submitting to the company registration a resolution of the shareholders whose authenticity has been verified by the consul of Costa Rica at the registered office of the foreign company.

Such procedure does not apply when a foreign parent company wants to incorporate a subsidiary (for example, a Public Limited company, see above).  Subsidiaries are subject to more favorable tax regime than branches, since the latter have tax withheld on account of all remittances from its parent company.   

If a foreign company applies the domiciliation instead of creating a local subsidiary, it will be subject to the rules of its initial domicile.   

Costa Rica Sole Proprietorship  

In Costa Rica the Sole Proprietorship is very different from the Sole Proprietorship of a common law jurisdiction. It could be said that it has both, the characteristics of a Limited Liability Company and those of a Limited Partnership.

This concept was originated in Liechtenstein, but has been adopted by a small number of countries.

Under the commercial code of the Costa Rican law, Sole Proprietorship is a company with an owner whose liability is limited to the value of his participation in the share capital of the company. Under exceptional circumstances, when the Sole Proprietorship has been involved in fraudulent practices, the personal assets of the owner could be seized to satisfy any judgment against the company when the assets of the company are insufficient to satisfy the creditors‘ claims.   

The benefits of Sole Proprietorship can only be distributed as dividends when a trading profit has been achieved that year. The owner must be an individual and not a legal entity such as, for example, a Public Limited Company. 

Costa Rica Limited Partnership 

A limited partnership must have at least a general partner with unlimited liability for the debts of the Partnership and a partner whose liability for the debts of the partnership is limited to the value of the unpaid capital. When there is more than one general partner all of them declare themselves liable for the debts of the company. Exceptionally, if a limited partner participates in the management of the company actively, he will have a limited liability on the debts of such partnership.    

Costa Rica Partnership 

In a partnership, all partners have unlimited liability and are jointly liable for the debts of the company. Benefits are distributed according to the percentage of participation. 

Costa Rica Trusts 

Although it is a civil law jurisdiction, Trusts can be created under the Costa Rican law. The articles 633-662 of the commercial code establish the legality of Trust governing, the jurisdiction and the location of its administration.