Real Estate in Costa Rica: Should You Put Property in a Corporation?
Years ago, when buying real estate in Costa Rica, it was common advice to place the property in a corporation. Today, the advice has changed. Laws and regulations in Costa Rica have evolved and become more clear-cut and transparent, with fewer loopholes. However, as the laws are relatively new, it’s important to seek the most up-to-date information and consult a trusted attorney. As of 2023, it is important to note the current laws and regulations when purchasing real estate in Costa Rica.
Why “Own” a corporation?
In Costa Rica, the term “sociedad” refers to a company or partnership, which is often translated as “corporation.” There are several types of sociedades, including general partnerships, limited liability partnerships, limited liability corporations, and standard corporations.
The primary reasons for owning a Costa Rican corporation include legally forming a business and separating personal assets from business assets. In the past, expatriates were advised to purchase real estate in a corporation to protect their home from liability and to make it easier to transfer ownership. Additionally, some expats put their real estate into corporations for inheritance purposes, or to gain access to bank accounts, phone/internet, and other public services. However, with new laws and regulations in place, the need for owning a corporation for these reasons may have changed.
So, Should I Put my Real Estate in Costa Rica in a Corporation?
The primary reason for owning a corporation in Costa Rica is to legally form a business and conduct business with partners. However, owning a corporation will not insulate you from liability, such as in case of a lawsuit. Instead, it is recommended to get appropriate insurance.
Another advantage of owning a corporation is in estate planning. Without going into too much detail, a corporation can help families avoid probate. By adding children or heirs as partners (even inactive) in the 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 easier process than Costa Rican probate or the inheritance process (known as “sucesorio”). It is important to consult with a trusted attorney to understand the specific ways a corporation can be used for estate planning and if it is the right choice for your specific situation.
The Bottom Line
For most buyers in most situations, a good attorney will recommend purchasing property in your own name. This is because most of the advantages of owning property in a corporation have been legislated away and replaced with additional costs and annual taxes. It is important to consult with a trusted attorney before making any property purchase decisions. It is recommended to get recommendations and references for an attorney, and to discuss your short-, medium-, and long-term goals to understand the pros and cons of owning property in a corporation.
If you do decide to purchase real estate in Costa Rica and to put it in a corporation, it’s essential to consult with your attorney to determine the appropriate type of corporation. Today, an SRL (Sociedad de Responsabilidad Limitada) or an EIRL (Empresa Individual de Responsabilidad Limitada) is often the most appropriate, rather than the S.A (Sociedad Anónima) which was commonly used in the past. Your attorney will be able to guide you through the process and help you make the best decision for your specific situation.
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