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For years, lawyers have recommended using a corporation for property ownership in Costa Rica for resident and non-resident foreigners. For many years, lawyers recommended a corporate structure to own a property because of personal liability, estate planning, tax planning, and a few other reasons.
Also, real estate developers used to create corporations for each of their units under construction to save the cost of transferring the title to their buyers.
Property owners primarily use 2 Basic corporations: The Sociedad Anónima (S.A.) and the Sociedad de Responsabilidad Limitada (S.R.L.).
The Costa Rican government has now imposed compliance requirements that corporation owners must be aware of. Legal residents can comply, but non-residents need the assistance of a citizen or a resident.
Would you like to learn more about those requirements? Then check out what attorney Roger Petersen explains in his blog “Company requirements 2022“.
Therefore, those looking to use a corporation for property ownership must be aware of their obligations, especially if they’re not residents. Also, please ask your lawyer about the risks of taking over a corporation that owns the property you buy from the seller.
If you’re not a citizen or a resident, you won’t be able to comply with the legal requirements yourself. But we have all the solutions for you; click on the banner below to learn more.
Mistakes customarily made
In any case, request legal advice from your attorney before you make the decision, but make sure you do not commit any of the following 6 mistakes:
1. Closing Attorney
Always use the real estate attorney of your choice for closing, never the seller’s or developer’s attorney. One way or another, you will be paying for closing, so ensure you hire someone who works for you only.
2. Limit the Use
a. If you use an S.A. to own a property, don’t do anything else with the S.A. For example, never use it to start a business.
b. Never register any vehicles within the same S.A.
c. Never register employees like maids or gardeners within the same S.A. that owns your properties or cars.
3. Share Endorsement
a. Make sure you endorse your shares on the back, so your partner won’t have to jump through legal hoops if you pass away.
b. Always keep your shares and your S.A.’s documents (constitution, purchase/sale, and corporate I.D.) in a bank safe
4. Make a will
Make sure you make a will or testament for yourself and your partner. Your testament in another country has no validity in Costa Rican courts.
5. Take Over
a. When you take over an existing S.A., ensure the old board of directors resigns. Your lawyer also needs to change the shareholders and the powers of attorney.
b. It is challenging to determine if the corporation you’re buying has open-standing debts. Ask your attorney how they will protect you from this when keeping the existing corporation for property ownership.
c. Since you are taking over the existing corporation that owns the property, the National Register will not change its value to what you buy it for. Therefore, when you sell again in the future, you’ll be paying a 15% capital gains tax over the difference between the registered property value and the sales price now.
Do not forget to ask for proof that the property is now in your S.A.’s name and an up-to-date “personería juridica” that shows the new board of directors in the National Registry.
o more hiding?
For many years, Costa Rica was the perfect place for foreigners to hide their money. The Sociedad Anonima, or anonymous corporation, was used because the shareholder information was private.
Money laundering laws and SUGEF compliance have stopped this way of doing business here, Also, in 2015, the Costa Rican and U.S. governments implemented Foreign Tax Compliance Act known as FATCA.
Are you planning to purchase a property using a corporation for property ownership? Then hire the experts; contact us now. We’ll have your back!
Used in images: Schoolboy photo created by gpointstudio – www.freepik.com