Years ago, if you were going to purchase real estate in Costa Rica, there was one major overarching, omnipresent, everyone-and-their-lawyers-said-it piece of advice: put your property in a corporation. Today, well… the advice has changed. Mostly.
That’s the way of the world, after all: Things change. Technology grows smaller. Kids get bigger. And laws evolve.
And Costa Rican laws have evolved. In most ways, it’s for the better: Today, things are more clear-cut. The law is more transparent. And there are fewer loopholes. The only problem is that the laws changed after the evolution of the internet. And what that means is that there’s a lot of outdated information online.
We’re not talking about that archived article from 1996, either. Even that snazzy, still-new-looking blog post from 2015 – well, it’s outdated. Because the laws are really, really new here. So, source your information from the newest of the new. And always, always consult your trusted attorney.
All that said, here’s what you should know as of 2022:
Why “Own” a Corporation?
Similar to many countries, there are several types of “corporations” out there – that is, if we’re going by the dictionary, rather than legal definitions.
In Costa Rica, the word sociedad refers a company or partnership, which many people translate as “corporation.” There are several types of sociedades, from general partnerships (una Sociedad en Nombre Colectivo) and limited liability partnerships (una Sociedad en Comandita) to the more common limited liability corporations (una Sociedad de Responsabilidad Limitada) and standard corporations (una Sociedad Anónima, commonly referred to as an S.A., pronounced essay-ah).
That doesn’t answer your question, though! We’re almost there but first, know that, again, similar to many countries, there are two primary reasons to own a Costa Rican corporation:
- You plan to do business in Costa Rica and a corporation will help you legally form your business, so you can meet goals and conduct business either alone or with partners; and
- You need to separate personal assets from business assets.
Our answer resides with – or perhaps, adjacent to – that second reason. Because, for decades, expatriates were told to purchase real estate in a corporation to protect their home from liability (particularly with a limited liability corporation).
Additionally, for resale purposes, transferring a corporation was once considered easier than transferring property. Some expats also put their real estate into corporations for inheritance purposes. And still others opened a corporation in order to fast-track their path to bank accounts, phone/internet, and other public services. But again, that was decades ago; with new laws came change.
So, Should I Put my Real Estate in Costa Rica in a Corporation?
Not for many of the old reasons, that’s for sure!
To begin, the primary reason was always to protect against liability. Today, a corporation will not insulate you from liability. For example, if you were to cause an accident and get sued as a result, assets in a corporation are not kept separate from a lawsuit. (As an alternative, get good car insurance!)
The primary reason to open and own a corporation remains: you plan to own a business in Costa Rica.
The other advantage – and you’ll have to run your own cost-benefit analysis – is in estate planning. Without going into too much detail (we’re not lawyers and this is a topic best discussed with your trusted attorney!), a corporation can help families avoid probate.
In the simplest terms, if you own certain types of corporations, you can add your children or heirs as partners (even inactive) in your company. When parents pass away, their adult children/heirs may present a certified death certificate and then assume executive powers for the corporation. This is a much, much easier process than Costa Rican probate or the inheritance process (known as sucesorio).
The Bottom Line
For most buyers in most situations, a good attorney will recommend that you purchase property in your own name.
That’s because most of the advantages have now been legislated away, replaced with costs and annual taxes that typically add up to a couple of hundred U.S. dollars per year – again, without the benefits you once would have had.
That said, the bottom line is a personal decision: Just as you wouldn’t (and definitely shouldn’t) take your legal advice from an online forum or website, you should also discuss with an attorney before purchasing any property.
Don’t yet have an attorney? Get recommendations. Ask for references. Be informed, before you even choose your lawyer. Because you want someone on your side and in your court – someone who prioritizes your goals and wellbeing, not just the firm’s bottom line. (And there are a lot of great attorneys in Costa Rica, really. Ask around! You’ll get glowing reviews. We have a few of our own, if you need suggestions!)
And then, discuss the options. Lay out your short-, medium-, and long-term goals. Discuss all the pros and cons. Because, at the end of the day, there really is no one-size-fits-all answer. While most people no longer reap major benefits from putting their property in a corporation, others still do. And for those others, a corporation can be an excellent idea.
If you do decide to purchase real estate in Costa Rica and to put it in a corporation, then ask about the proper type of corporation. Because again, what once worked for most no longer works for many.
While most homes were once owned as S.A.s, today, an SRL (una Sociedad de Responsabilidad Limitada, or limited liability corporation) or an EIRL (una Empresa Individual de Responsabilidad Limitada, an individual limited liability corporation, ideal for sole owners) is often most appropriate. But again, that’s an answer best sought at your attorney’s office…
Moving, Life, and Real Estate in Costa Rica: Have Questions? We (Usually) Have the Answers!
Moving to (and flourishing in) a new-to-you country is no easy task. From the broader strokes – What area is a good fit for me? Can I work? What is everyday life like? And how am I going to learn Spanish?! – to the nitty-gritty details, like choosing a school or deciding whether to put your property in a corporation; these details weave the tapestry of life (and successful life) in Costa Rica.
We’re here to help. Really. Whether you’re just getting your toes wet in the dreaming stage or have already made the move, we are happy to answer questions. We’re happy to make connections. And we’re even happier when we make new friends.
Along the way, we’ll help you explore all the many possibilities, joys, and roads to life in paradise. And when we don’t know, we’ll refer you to someone who does. That’s what we do. Because at Blue Water Properties of Costa Rica, we thrive on real relationships. We crave authentic connection. We value honesty. And our goal is never to “sell a house;” it’s to fulfill dreams. It’s to make people happy. It’s to help you. Genuinely help.
We promise the fastest communication and best services in the industry. We will work to deliver on your dream. We will never pressure you. And we really do hope we’ll become friends along the way.
We’re proud to offer some of the best Costa Rica real estate, from condos and homes to land and businesses for sale. So, go ahead – try us. Give us a chance to show off our expertise – and wow you with the possibilities! We look forward to it.