With the estimated arrival of nearly 2 million tourists to Costa Rica in 2008, and a projected income of nearly $3 billion for the tourism industry, it’s no wonder that luxury hotel and rental establishments are tripping over themselves to get in on the action.

Costa Rica Investment — Luxury Investments on the Rise

Last year saw an investment of $800 million in the tourism sector alone. The Doubletree by Hilton is one of the big newcomers this year, with two hotels recently opened under their name, and another on the way.

“Costa Rica is one of the top eco-tourism destinations in the world, with visitor arrivals growing more each year,” said Hilton Hotel Area Vice President Danny Hughes. “We want to support the country’s tourism growth and welcome guests to experience the biodiversity that makes Costa Rica such an amazing place to be.”

The Doubletree Cariari by Hilton San Jose and the Doubletree Resort by Hilton Puntarenas were Sol Melia and Fiesta hotel properties, respectively, that underwent extensive renovations and brand training to meet Hilton standards. The employees also received service training to offer the same upscale, full-service product that the Doubletree hotels are internationally known for. The Hilton Papagayo Resort will also open soon in place of the Premier Fiesta Resort, with its own private beach near the Four Seasons.

Multi-billion dollar corporations are not the only ones taking part in the fun. First time investors are flocking to the Costa Rican shorelines without batting an eye at the rising land and construction costs, drawn by stories of properties that pay themselves off after several years of rental. Luxury homes that far exceed the levels of what the country once knew are on the rise, and returns on investment are growing at nearly the same rate.

After years of marketing other people’s vacation properties to clients, Costa Rican Vacations’ co-owner Tony Silva and his partner Casey Halloran finally decided that building their own Costa Rica vacation rental was a no-brainer. They combined their favorite aspects of other homes into one, and ended up with a product that far exceeded their original expectations.

“We went all out with this property,” Silva said. “In the end, if you aren’t a superlative in the industry, you’re just another rental home. Vacationers aren’t concerned about the price if they can be assured they are getting the best product with the best service.”

Their product, Villa Buena Onda, located in Playa del Coco, Guanacaste, is one of the biggest homes in the region sleeping 23 people, and rents for a minimum of $9,000 per week, which includes all-inclusive meals, drinks and service. Their unique transparent policy lets guests and fractional owners know exactly how much was spent in the construction, and how much money they intend to make once the villa is sold in two years. If you do the math, you will understand why their plans include the construction of a second villa in 2009.

Known as ‘playas’ in Spanish, the beaches of Costa Rica are often referred to as the most idyllic and beautiful in the world. With a coastline that stretches over 1800 km (1100 miles), Costa Rica is home to a multitude of amazingly breathtaking beaches. From rocky shores to gorgeous palm tree lined white sand beaches, Costa Rica’s fantastic coast offers something for everyone. Golden sand beaches, gray sand beaches, black sand beaches, and pink sand beaches can be found dotted all along Costa Rica’s lush coastal plains, making this country a truly spectacular beach destination.

Bounded on the east by the Caribbean Sea and on the west by the Pacific Ocean, 65% of Costa Rica’s borders is a coastal belt. And since most of these areas have a sparse population, the beaches here offer plenty of privacy and seclusion for a tranquil and relaxing vacation.

With Costa Rica lying on the isthmus of Central America, the country itself is quite narrow, which means that the Pacific and Caribbean coast beaches are just a few hours apart. And while some of the best and most developed beaches are found along the Guanacaste coast, for a more remote beach adventure visit the secluded beaches of the south Pacific Coast for a memorable time. However, if all you want to do is have a really good time, then visit Costa Rica’s Caribbean Coast with its fun ‘Rasta’ culture and lush vegetation.

With an almost infinite number of beaches to enjoy, Costa Rica offers tourists a plethora of beach and water sports activities as well. From surfing to scuba diving, to sports fishing, deep sea fishing, snorkeling, swimming, kayaking and yachting, the beaches here have it all. For a more relaxing time simply soak in the rays sunbathing, take a leisurely stroll along the beach or go for a long horse back ride. And with near perfect weather all year round, the beaches especially in Guanacaste are a great place to chill and have a wonderful time.

For the best surf breaks and swells visit Playa Naranjo or Witches Rock in Santa Rosa National Park & Playa Grande, Playa Avellana, Playa Negra & Playa Santa Teresa on the Nicoya Peninsula. In the central Pacific area, Playa Hermosa and Dominical have the best surf beaches, while in southern Costa Rica, Playa Pavones & Puerto Viejo de Talamanca have awesome surf swells.

The most beautiful beaches are Playa Flamingo, Playa Conchal, Playa Ballena, Playa Grande, Playa Blanca, Montezuma, Playa Zancudo and Playa Santa Teresa. Along the Southern Caribbean coast, Gandoca Manzanillo Wildlife Refuge has the best and most beautiful beach.

Costa Rica is located in the Central American, between the Pacific Ocean and the Caribbean Sea. It is a privileged destination because of its location in the middle of the Western Hemisphere. Its varied landscapes and mild climate make this small country the perfect getaway for a spectacular vacation and a great place to retire.

Land of peace, Costa Rica is the oldest democracy in Latin America with more than 100 years of political stability. Costa Rica’s economy has been constantly growing during the last 10 years; the country has signed seven trade agreements with other Latin American countries, and one trade with the United States (CAFTA), also has preferential access agreements with the European markets. This economic development has been encouraged by direct ocean access on both coastlines, easy access by road to neighboring countries, Nicaragua and Panama, as well as regular flight connections to North America, Latin America and Europe. Costa Rica has two international airports: Juan Santamaría in the capital city and Daniel Oduber in the northern city of Liberia.

Costa Rica is internationally known as a potential major electricity producer: 97% of the territory has electric power and telecommunications are available throughout the territory. In terms of health indicators, Costa Rica has the best life expectancy rate of Latin America: 78 years on average. San José, the capital city, is ranked fourth among the Latin America’s cities with the best quality of life. Ninety-five percent of Costa Ricans have access to safe drinking water.

Costa Rica attracts important investments thanks to its efficient productivity in high technology, its well-educated population and the high-quality technical education accessible in the country.
Exuberant nature, pristine beaches, active volcanoes, contrasting landscapes, impressive places of scenic beauty, biological diversity, hiking in the rainforest, horseback riding through picturesque trails, mountain biking in the country side, white water rafting in wild and untamed rivers, snorkeling through tropical reefs, surfing the most incredible breaks, sport fishing in cobalt blue waters, golfing challenging greens, kayaking…

… Costa Rica is the perfect place to spend your time in the tropics.

ABC’s to Incorporating, Buying Property and Becoming a ResidentMany of our foreign clients have similar concerns when we first discuss their investment plans in Costa Rica. Almost everyone we have met wants to know about incorporating, buying property and obtaining residency.

We believe these three issues are the main components of what we would call the “typical investment package”; which, just by following some basic steps would make your Costa Rican venture a very successful one.

Incorporating in Costa Rica

The typical limited liability company (“Sociedad Anónima” or “S.A”.) must be incorporated by at least two people before a Costa Rican Notary Public. After such incorporation, the shares may be transferred and it is legally feasible to have a corporation in which one person is the owner of all shares.

The incorporators must choose a name (which must not be similar to any existing corporate name); appoint a Board of Directors (which, by law, must have a minimum of three members, President, Treasurer and Secretary) and a Comptroller. Each one of these positions must be occupied by a different person; however, the initial incorporators may occupy them.

Other crucial issues to be decided are the capital of the corporation (the higher the capital, the more registration taxes are to be paid); the number of shares composing such capital (a share cannot be divided according to Costa Rican Law -fractions of shares are not acceptable-; thus, it is advisable to have a number of shares that would permit future distributions of the participation in the company) and the representation of the newly formed company (there must be at least one representative of the company with powers of attorney to act on its behalf; however, at the time of incorporation, or later on, the powers of the company’s representatives may be limited, for example, to specific actions or amounts).

Costa Rica has what we like to call a “hybrid” corporate system. The incorporation deed, as well as all changes to the company’s By-Laws, are recorded in the Public Registry, where any person has access to them. However, all transfers of the company’s shares are recorded in the Shareholders Registry Book, which is kept by the corporation and is only available to company’s shareholders and officials; all other parties can only review it with a Court order.

When you are buying real estate, it is advisable to do it on a corporation’s name. In this case, transfers could be made easier and the structure may be more flexible for other transactions and for organizational matters.

Buying Real Estate

Most properties in Costa Rica are registered in a computer system called “Folio Real”. This system is centralized at the offices of the Public Registry in San José. Before buying land (or even before seriously considering an offer to buy land) a title search in Folio Real should be performed.

Such a title search will show all data on the property, including area, ownership, boundaries, location, mortgages and other liens. A few properties have not been incorporated to the “Folio Real” system yet. They are still registered in special books kept in the Public Register. Such properties may also be accurately title searched in the Public Registry.

When considering buying land, the first question to be asked is if you are being offered ownership rights (derecho de propiedad) or occupation rights (“derechos de ocupación”). In the case of occupation, you would be dealing with land that has not been registered, cannot be title-searched and must go through a long process in order to be registered. Ownership rights, in the contrary, are registered and are equal to the concept of owning land in the United States or Canada.

Another situation one may encounter regarding land, especially in beaches, is the concession. In this case, the government gives a private party the right to use the land for a specific period of time. In general terms, the concession may be considered as a lease. The concessions’ registration system is different than the one for regular land, and has particular requirements regarding zoning, terms, occupation, etc.

In conclusion, before buying, before offering or even before seriously considering a piece of land, enquire about its status and perform a title search: these simple steps could save you a lot of money and effort, and will definitely make your Costa Rican investment worthwhile.

Residency

Investing in a country as beautiful as Costa Rica is the final pretext many people are looking for to leave everything behind and start a new and different life. Understandably, one of the most popular concerns is to become a resident.

Costa Rican Immigration Laws allow foreign citizens to become residents in specific cases that range from having a family relationship with a local citizen (marrying a Costa Rican, having Costa Rican children) to demonstrating the government that the applicant will not be a burden for the country, mainly showing sound resources to be established in Costa Rica and, in some cases, to create a business here. Our mainly recommended regimes are the resident pensioner and the resident annuitant status. They are both administered by the I.C.T. (Costa Rican Tourism Board).

The resident pensioner status is used for foreign citizens who have retired from government service or from selected private entities and receive from them a permanent life retirement income of no less than US$600.00 per month. Such amount must be transferred periodically to Costa Rica, and its reception and conversion into colones (Costa Rican currency) at designated institutions has to be demonstrated.

The resident annuitant regime is applicable to all foreign nationals, regardless of age, receiving a fixed monthly income of no less than US$1,000.00. The funds of the deposit can come locally or from abroad and their conversion into colones (Costa Rican currency) at designated institutions has to be demonstrated.

Investing in Costa Rica can be one of your life’s best decisions. There are many things to discover and experience. Being wise enough to plan your investment will make this venture real and sound.

INCENTIVES

Exemption from import or local taxes (proportional to third market exports of non-traditional products) on raw materials, packing goods and components related to the export product.

- Exemption from import or local taxes (proportional to third market exports of non-traditional products) on machinery, equipment and spareparts that are directly related to the export product

The Export Contract incentives expire on September 30, 1996.

The export contract incentives are to be requested at the Technic Secretary of the National Investment Council located on the second floor of the Center of Foreign Trade (CENPRO).

2. TEMPORARILY ADMISSION

Temporary admission is known as the customs regulation which allows the entry within the national territory under suspension of all taxes, of certain merchandise destined to be re-exported to foreign markets. Merchandise must be subjected to provisional storage for transformation, reparation, reconstruction, mounting and assembly processes, or to be transformed into goods, machinery or general transport equipment of greater technological and functional complexity.

The normal time limit for imported goods, to remain in the country is three months for samples and models, six months raw materials and other components used in the process, and five years for machinery and equipment. These terms can be renewed.

The benefits of this system are granted a period of five years, automatically renewed with the approval of the National Investment Council.

Application forms are sold at the Export and Investment Promotion Center (CENPRO).

3. FREE ZONES

Export Free Zones are the mainstay of Costa Rica ’s export and investment strategy. The Free Zones are, by definition, areas of customs and fiscal extra-territoriality. These are designated facilities for carrying on economic operations based on imported inputs and raw materials, manufacturing, assembly or marketing of products or services for their subsequent export.

Ease of operation, fiscal incentives, monetary and exchange facilities, excellent communications, electricity, access to basic services and highly educated labour force, make up a firm foundation for the dynamic development of companies established under the Free Zone status.

Some of the advantages of operating in the Free Zones of Costa Rica are:

- 100% exemption from taxes on capital and assets.

- Exemption from taxes on profits.

- Independent management of foreign currency.

- Streamlined processing of documentation required r installation and operation.

The Export Free Zone Corporation provides investors with centralized services to carry out established necessary procedures. The Corporation is located in the Center of Foreign Trade . Other factors that make Costa Rica a grand opportunity for investment and installation are:

- The geographical location of the country, right in the middle of the Western Hemisphere .

- The productivity of its labour force. Historically, education has always been a national priority. School is compulsory and free up to the highschool level. That is the reason why Costa Rica has the highest literacy rate in the Third World , 94%. Costa Ricans are highly disciplined people, they learn fast and they have excellent working and administrative capacities.

4. REFORESTRY INCENTIVES - LAW 7174

Forestry laws have been established by the government in order to promote the conservation and development of natural resources. The Forestry Bureau has developed several systems in order to promote reforestation projects and conservation of existing natural forest.

4-1 Forestry trust Certificate

The certificates are negotiable bonds used for tax payments, with a nominative value of $120,000.00 per reforested hectare. Any individual or legal entity involved in a reforestation project is also eligible for the following additional benefits:

a) Exemption from land taxes, for land registered under the Forest Regime Incentive System.

b) Exemption from land taxes, for non-cultivated lands (as established by Agrarian Law 2825).

c) Protection against land squatters on empty lots.

The amount of the Forestry Trust Certificate per hectare will be allocated on a yearly basis. It is applicable to cover establishment and maintenance expenses of a planted forest. During the first five years the certificate is allocated as follows: 50% for year 1, 20% for year 2, 15% for year 3, 10% for year 4, and 5% for year 5.

4-2 Reforestation programs

This system is geared towards those who have ongoing reforestation projects or who wish to reforest with their own resources. Those who reforest without the benefits of the Forestry Trust Certificate can enjoy the above mentioned benefits (points a, b and c), plus the following;

- Exemption from land taxes and from income taxes derived from sales of plantation products.

- Those who freely submit to forestry management of specific farms will be protected by an approved forestry management plant.

4-3 industrialization and transport of wood

Those industries wishing to reorganize or to increase their efficiency according to the policy of the Forestry Bureau, will enjoy the following benefits:

a) Priority as to approval and endorsement of loans.

b) The Forestry Bureau will facilitate exports of the industrial production.

c) if companies invest in training, they will be exempted from paying the training compulsory lee to the National Training Institute.

5. INCENTIVES FOR TOURISM

Infrastructure LAW 6990 Incentives are granted to the following activities:

1. Hotel services

2. Local and international air transport of tourists.

3. Vehicle rental to local and foreign tourists.

4. Tourist aquatic transportation.

5. Inbound tourism activities for travel agencies exclusively dedicated to this activity.

Upon request and approval, some of the benefits granted to the above mentioned activities are exemptions from tax and surtax on the import or purchase of essential goods, and advanced depreciation of assets.

THER ADVANTAGES FOR FOREIGN INVESTORS

TRADE AGREEMENTS: there is a bilateral free trade agreement between Costa Rica and Panama and Mexico . Bilateral trade agreements are on their way with Colombia and Venezuela . Preliminary conversations have been held with Chile to establish bilateral trade agreements.

Among others, these bilateral free trade agreements grant benefits related to customs and non-customs duties in order to facilitate imports to the signing countries under favorable conditions, thus guaranteeing exports to those specific markets.

GENERALIZED SYSTEM OF PREFERNCES (GSP)

Generalized systems of preferential customs duties are mechanisms used by most of the developed and market-oriented countries in order to grant access to their markets. Products subject to these preferential systems are wholly or partially manufactured in developing countries, including some agricultural and sea related products.

Costa Rica has GSP benefits granted by Japan , Canada , the European Community, Australia , Austria , New Zealand , Norway , Sweden , Switzerland , Bulgaria , Slovakian Republic , Hungary and Poland . Preferences include products that most developing countries do not yet export, either because they do not produce them or because their industry is still oriented to their local markets. In this case, the generalized preferences are an incentive to local and foreign investment for promoting industrialization processes in the beneficiary countries.

CARIBBEAN BASIN INITIATIVE (CBI)

The Caribbean Basin Initiative II is a unilateral concession granted by the United States for most products imported from beneficiary countries, including Costa Rica . One of the main advantages of this Initiative is its indefinite time limit, which improves the access conditions to the US market, thus granting security to the exporters. The list of products and preferential benefits broaden specially for those industries with intensive workmanship, thus promoting investment in our country.

TREATIES ON PROMOTION AND RECIPROCAL Protection OF INVESTMENTS

In September 1993 Costa Rica signed an agreement with Germany to suscribe the Treaty on the Promotion and Reciprocal Protection of Investments”.

This treaty is a great supporting tool to Costa Rican policy of investment promotion since if offers security and confidence to German investors. It Is also a guarantee to the investor who, according to the legal framework, can invest in Costa Rica and enjoy the same protection granted to Costa Ricans and to citizens of other countries. The treaty establishes rules in case of expropriation and compensation, free transfer of payments related to the investment, the use of international arbitration courts, etc.

In addition to this treaty with Germany , Costa Rica is in the process of negotiating treaties with other countries.

SUMMARY OF ADVANTAGES FOR PRODUCING IN AND
EXPORTING FROM COSTA RICA

- Political stability.

- Peace and democracy.

- No army.

- Fiscal incentives and local exemptions.

- Regional incentives.

- Low cost and highly qualified labour force.

- Good access by air, sea and land transportation.

- Proximity and access to important international markets through agreements, conventions and bilateral and multilateral treaties.

- Access to raw materials.

- Streamlined investment procedures.

- Simple and streamlined import and export procedures.

- Official participation in important international exhibitions and commercial missions to main international markets.

- Excellent electricity, water, telecommunications, insurance, banking and health services.

- Well located free zone parks.

- Infrastructure suited to export and tourism needs.

- Excellent weather and geographic location.

- Adequate recreational areas.

- Protected national parks and reserves with great variety of flora and fauna.

- Public and private centers for technical and academic education.

- Well organized and active chambers and private associations that participate in the definition of development policies.

- Timely and updated information about the country.

- Special immigration status for investors, executives, technicians and their families.

- Highly experienced private consultants.

- Public and private specialized laboratories to support quality production.

- International prestige and recognition of Costa Rican products.

- Open support to private development initiatives that promote employment, technology transfer, national income, social and economic development and the preservation of the environment.

IMMIGRATION PROCEDURES

CENPRO offers a support program to investors through the immigration category of: RESIDENT INVESTMENT VISA.

RESIDENT INVESTMENT VISA

Residence as an investor can be requested by foreign investors who can prove having invested no less than US$ 200.000 in the country or US$ 50.000 in activities declared as high priority by the Executive Branch.

For this immigration category, CENPRO’s responsibility is to endorse the application; it is the National Immigration Council who will grant or deny the requested status.

CENPRO is the official agency for the promotion of exports and investments. It was founded by Law 4081 in February 1978 to promote non-traditional exports to third markets and local and foreign investments that involve export development activities. CENPRO is the operative branch of the Ministry of Foreign Trade.

Following its export and investment promotion task, CENPRO offers its services to export companies, potential exporters, foreign and local investors, foreign importers, trading companies, cooperatives, associations, chambers, local and foreign consultants, international organizations, embassies, universities, governmental institutions, foreign and local diplomats, and any interested party.

CENPRO is an export information bank providing its users with a wide range of data related to the export potential of the country, incentive systems granted to exporters, rules and procedures for exports and imports of raw materials and components, and foreign trade statistics. If offers information and guidance to investors interested in doing business in Costa Rica . In addition, CENPRO provides information on international markets, ranging from prices and regulations to international contacts.

CENPRO trains and offers assistance in international trade to producers, exporters, potential exporters, governmental staff and students.

CENPRO also organizes and coordinates local participation in international exhibitions and commercial missions, as well as missions of foreign businessmen interested in buying Costa Rican products or investing in the country.

CENPRO is the official contact point between importers and foreign investors and the country, and between producers and local exporters and the international markets.

To attain its goals, CENPRO is divided into one administrative and four technic divisions.

I. Export Promotion

This Division specializes in the gathering, selection, analysis and distribution of commercial information. As a complement, this division has three programs for the support of producers and exporters:

Commercial Attaches, Immigration Procedures for the Investor, and Training and Technic Assistance in International Trade.

This division has the following programs:

A. Commercial Information

It is responsible for giving assistance on commercial topics related to products, markets, prices, international demands, etc.

1. Technic support to exporters.

2. International demands.

3. information on products and markets.

4. Exportable supply.

5. Elaboration of the Official Export Directory of Costa Rica .

B. The National Statistics Center (CENEX)

It is a computerized information system specialized in foreign trade. It offers the following information and services:

- Behavior of traditional and non-traditional products.

- Statistical information on commercial exchange of products, by economic sector, area and country.

- World statistics on imports and exports.

- Exportable supply by company, showing company profile and short and long-term supply.

- Behavior of the main world markets.

- Macro-economic statistics and economic indicators.

- Access to international data bases such as those of the European Economic Community, the Organization of American States and the International Trade Center . Through these there is access to information on international prices, lists of importers, laws and regulations in international markets, marketing studies and world statistics.

C. Integrated System of Investment Services -S’S’

This system allows CENPRO to offer adequate and competitive attention to investors, local and foreign businessmen, public and private institutions and general public, regarding information on financial, customs, ports and tax services, brands and registers, insurance, immigration procedures, incentives, environment, water, energy and construction services, socio-economic profile of Costa Rica, communications and transportation.

D. Documentation Center

It is the largest foreign trade documentation center in the country. If offers information on the following:

- Import duties and regulations for Costa Rican products in international markets.

- Selected commercial literature from books and journals.

- Directories of local and foreign companies.

- Product and market studies and research.

- Foreign trade local and international incentive systems.

- Design, package and packing.

- International transport of cargo.

- Transport and credit insurance, etc.

- Quality control and regulations.

- Duty nomenclature and correlations.

E. Program of Commercial Attachés

Through this program, CENPRO is linked to the Costa Rican embassies and commercial offices abroad, thus promoting exports and foreign investment.

F. Training and Technic Assistance in Foreign Trade - PROCEX

This specialized training program counts with both local and international experts. The program extends to all regions of the country and includes a wide range of issues related to international trade. Its goals are attained by seminars, conferences and visits to production sites.

II. Foreign Trade One-Stop Office

All documentary procedures for import and export are processed by this division. It is surprising how the country was able to simplify and centralize export and import procedures in such a way, that today it is possible to go through the process in approximately 4 minutes, making these procedures among the shortest in Latin America .

The One-Stop Office offers the following services:

1. Assistance on export procedures and required documentation.

2. Assistance on import procedures and required documentation.

3. Processing of import and export documentation.

4. Certification of processing operations.

5. Export and import statistics.

6. Sale of export and import required documentation.

7. Descentralized service in customs offices in the country.

8. Centralization of import exemptions included in Export Contracts and import exemptions processed by the Industrial Director of the Ministry of Economy, Industry and Commerce. Once the system is fully automatized, other exemption processes will be included.

9. Centralization of procedures derived from bilateral commercial agreements that Costa Rica has signed and will sign in the future.

III. International Exhibitions and Commercial Missions

This division is in charge of planning, organizing and coordinating the participation of Costa Rican companies in international well known commercial events. These international opportunities allow businessmen to have practical and effective ways of making contacts, selling, assessing the trends in the international markets, and promoting exports and Costa Rican products.

In a periodic and successful way, Costa Rican non-traditional products are exhibited in Germany , France , Holland , The United States, Canada and other countries.

This division is also in charge of coordinating and receiving international missions of businessmen searching for Costa Rican products.

IV. Export Incentives

This division is in charge of all related to the Secretariat of the National Investment Council (CNI). It provides assistance to exporters and investors about the incentives granted by the Export Contract. Export Contracts are agreements signed between private applicants and the Government of Costa Rica which grant attractive fiscal incentives.

According to the Export Contract regulations, this division receives, examines and recommends applications for tax exemptions to the Ministry of Treasure.

This division also offers assistance on the Temporary Admission or Draw-Back System, specially regarding requirements and benefits.

An increasing number of American, European and Canadian investors are being drawn to the real estate market in Costa Rica; they find it offers them a genuine alternative to the volatility and insecurity of equity markets and also an escape from their restrictively expensive domestic property markets.

With the profile of this small, democratic and peaceful Central American country being raised, more and more people looking for a second home or a new home abroad are also awakening to the delights of the Costa Rican property market.

This article examines some of the main reasons why investment in the real estate market in Costa Rica is seen as so attractive by so many and why the property market is booming.

Land and house prices in Costa Rica are highly affordable, the current boom in the market is of course naturally inflating prices, but levels have yet to reach any where near those in the US, UK or Canada. For example, on a luxury beach front development plots are available from as little as USD 80,000 with completed detached homes on sizeable plots starting from just USD 249,000. The country also has a strong resale market.

There are already over 50,000 US citizens living in Costa Rica and the country is accepted by America as a politically and economically stable country, as a result many US brokers are able to arrange finance for property purchase in Costa Rica.

The country is famous for its neutrality and as the most stable country in Central America and the CIA World Fact Book lists the country as “a Central American success story”. Citizens happily boast that they are so peaceful a nation they have no need for an army, that school children are able to preside over crowd control at election time and that the country has more teachers than it does policemen!

An added lure for investors and those looking to move to the country or retire in Costa Rica is the favourable low taxation regime that the country has adopted. Add to this the fact that land ownership is widespread and property ownership rights in Costa Rica for non-residents or foreign citizens are unrivalled across the whole Central and Latin American region and you begin to get a feel for how attractive the country is.

The Costa Rican people emulate the American or Western way of life and as a result they strive for a good quality lifestyle; for those moving to the country this means they benefit from excellent infrastructure and communications as well as a high standard of service and choice commercially speaking. Electricity is available even in the remotest outer lying regions, internet and telecommunication links are strong, the water throughout the country is pure and drinkable, Costa Rica even has around a dozen TV channels and countless radio stations. All in all this Central American country is as sophisticated as it is beautiful.

With active and inactive volcanoes, stunning mountains, rain forests, an abundance of rare flora and fauna, the stunning Caribbean Sea on one side and the wild North Pacific Ocean on the other, Costa Rica has an ideal climate, beautiful scenery and offers something for everyone!

For those interested in relocating to Costa Rica the cost of living is low, health care services are incredibly sophisticated and affordable with most doctors and specialists being US trained. This has actually resulted in a new industry developing in the country for low cost health care and cosmetic surgery performed by world class doctors at Central American prices! Education and literacy standards are very high, most Costa Ricans have an excellent command of English, the legal system in the country is based on the Spanish system, the country is democratic and its economy is strong, stable and based on tourism, agriculture and the export of electronics. The boom in the property market has not upset this balance at all and the economy is not reliant on the real estate market meaning it will remain stable and property prices are not being artificially talked up.

Costa Rica has long been a haven for those seeking an oasis of beauty, calm, the perfect climate and eco-diversity, it offers an incredible quality of life, an affordable idyllic lifestyle and is an opportunity waiting to be further explored.

1. Planning to invest in Costa Rica

ABC’s to Incorporating, Buying Property and Becoming a Resident. Many of our foreign clients have similar concerns when we first discuss their investment plans in Costa Rica. Almost everyone we have met wants to know about incorporating, buying property and obtaining residency.

We believe these three issues are the main components of what we would call the “typical investment package”; which, just by following some basic steps would make your Costa Rican venture a very successful one.

Incorporating in Costa Rica

The typical limited liability company (“Sociedad Anónima” or “S.A”.) must be incorporated by at least two people before a Costa Rican Notary Public. After such incorporation, the shares may be transferred and it is legally feasible to have a corporation in which one person is the owner of all shares.

The incorporators must choose a name (which must not be similar to any existing corporate name); appoint a Board of Directors (which, by law, must have a minimum of three members, President, Treasurer and Secretary) and a Comptroller. Each one of these positions must be occupied by a different person; however, the initial incorporators may occupy them.

Other crucial issues to be decided are the capital of the corporation (the higher the capital, the more registration taxes are to be paid); the number of shares composing such capital (a share cannot be divided according to Costa Rican Law -fractions of shares are not acceptable-; thus, it is advisable to have a number of shares that would permit future distributions of the participation in the company) and the representation of the newly formed company (there must be at least one representative of the company with powers of attorney to act on its behalf; however, at the time of incorporation, or later on, the powers of the company’s representatives may be limited, for example, to specific actions or amounts).

Costa Rica has what we like to call a “hybrid” corporate system. The incorporation deed, as well as all changes to the company’s By-Laws, are to be recorded in the Public Registry, where any person has access to them. However, all transfers of the company’s shares are recorded in the Shareholders Registry Book, which is kept by the corporation and is only available to company’s shareholders and officials; all other parties can only review it with a Court order.

When you are buying real estate, it is advisable to do it on a corporation’s name. In this case, transfers could be made easier and the structure may be more flexible for other transactions and for organizational matters. 

 

2. Buying Real Estate

Most properties in Costa Rica are registered in a computer system called “Folio Real”. This system is centralized at the offices of the Public Registry in San José. Before buying land (or even before seriously considering an offer to buy land) a title search in Folio Real should be performed.

Such a title search will show all data on the property, including area, ownership, boundaries, location, mortgages and other liens.

A few properties have not been incorporated to the “Folio Real” system yet. They are still registered in special books kept in the Public Register. Such properties may also be accurately title searched in the Public Registry.

When considering buying land, the first question to be asked is if you are being offered ownership rights (derecho de propiedad) or occupation rights (“derechos de ocupación”). In the case of occupation, you would be dealing with land that has not been registered, cannot be title-searched and must go through a long process in order to be registered. Ownership rights, in the contrary, are registered and are equal to the concept of owning land in the United States or Canada.

Another situation one may encounter regarding land, especially in beaches, is the concession. In this case, the government gives a private party the right to use the land for a specific period of time. In general terms, the concession may be considered as a lease. The concessions registration system is different than the one for regular land, and has particular requirements regarding zoning, terms, occupation, etc.
In conclusion, before buying, before offering or even before seriously considering a piece of land, enquire about its status and perform a title search: these simple steps could save you a lot of money and effort, and will definitely make your Costa Rican investment worthwhile. 

 

3. Purchasing Property in Costa Rica.

A Guide to Understanding the Real Estate System and Buying Process

 Introduction

The acquisition of real estate is one of the most significant investments a person makes during his or her lifetime. It can also be one of the most stressful. In foreign countries such as Costa Rica, the normal stress of the purchasing process can be compounded with other risk factors, such as language barriers and unfamiliarity with local laws and procedures. That said, foreigners can and do legally and successfully purchase property in Costa Rica. In fact, Costa Rica offers potential buyers many types of real estate products including houses, condominiums, time-shares, farms, finished lots and beachfront property. The following guide is designed to help buyers navigate their way through the real estate buying process for all types of purchases. The guide is divided into three main sections covering:

 I. Property Types and Property Rights

II. Purchase Process:

a. Legal vocabulary of property purchase
b. Methods of Purchase
c. Buying process step-by-step
d. Fees

III. Investment Protection: strategies and tools to protect property investment

 

 I. Property Ownership and other common forms of possession

Just like in the US, Canada, and Europe, there are different types of property available to buyers. Understanding the various types that are available for purchase is critical in the evaluation process. This section highlights the property types that can be purchased in Costa Rica and the implications of each type of ownership for the buyer.

a. Fee Simple:

i. The most comprehensive form of property ownership in Costa Rica is fee simple ownership. Fortunately for foreigners, the conditions for this type of ownership are the same for Costa Rican nationals as they are for foreigners. The concept of fee simple ownership is the same in Costa Rica as in the US. Basically, fee simple ownership gives the owner of the property the absolute right to materially own the property, use it, enjoy it (i.e. usufruct), sell it, lease it, improve it (i.e. transformation), etc., subject only to conditions outlined in the Costa Rican Laws. Fee simple also means that if the owner is obstructed from enjoying any of his/her rights to the property, he/she has the right to be made whole, in other words, have the property restored in its original condition. Buyers who purchase fee simple title have the most rights under to law to enjoy and use the property as they see fit.

b. Concessions in the Maritime Zone:

i. Concession property is more commonly known as beachfront property. In Costa Rica, 95% of beachfront property is considered concession property and is governed by the Maritime Zone Law and other specific regulations including but not limited to special dispositions stated by municipalities and the ICT (Costa Rican Institute of Tourism). These legal dispositions set forth the conditions under which foreigners and local residents can own concession property. A concession in Costa Rica is defined as the right to use and enjoy a specific property located on the maritime zone for a pre-determined period of time. The state, through its respective municipality, grants this right. Note that the first 200 meters measured horizontally from the high tide line defines the boundary of the maritime zone. This zone also includes islands, pinnacles of rock, mangroves, estuaries, small islands and any small natural formation that overcome the level of the ocean. This 200 meter zone is divided into two areas:

1. Public Area: The first 50 meters measured horizontally from the high tide line. This zone is not available for ownership of any kind. No kind of development is allowed except for constructions approved by governmental entities. Further, this area is deemed a public area and any individual wishing to utilize this area for enjoyment has the right to do so. In other words, there are no truly private beaches in the Maritime Zone.

2. Restricted/Concession Area: The next 150 meters. This area is available for Concessions to be granted. A concession is in essence a “lease” on the property granted to the lessee for a specific period of time. Normally the concession period is granted for 20 years. An owner of a concession may build on that concession, subdivide the concession and perform other acts to the property. However, appropriate permits from the local municipality must be obtained.

3. Ownership Limitations: Unlike fee simple property, foreigners do not have the same rights as citizens when it comes to purchasing concession property. The law establishes that foreigners cannot be majority owners of a concession property. A foreigner can, however, enter into a partnership with a Costa Rican citizen where the ownership is divided 49% / 51% between the foreigner and Costa Rican respectively. One exception is if a foreigner has resided in Costa Rica for at least five years, then they may be majority owners of a concession. Both foreigners and Costa Ricans alike are required to purchase all Maritime Zone property through concession.

c. Properties in Condominium:

i. When US citizens think of Condominiums, they normally think of large apartments or townhouses. In Costa Rica, however, there is a specific law called “Condominium Law” that provides certain benefits to developers of many different types of properties, including single family residence projects, finished lot projects, condos, etc. This set of laws allows a developer to restrict and regulate certain aspects of the development. Each Condominium developments has its own by-laws containing all of the restrictions, limitations and privileges that can be enjoyed by individuals who purchase a property in such a development. Ownership of property “in condominium” is fee simple ownership, but usually carries with it a few additional restrictions set forth by the developer. It is advised that you require the owner of the property to give you a copy of the by-laws to check for architectural guidelines, land use restrictions, and other limitations that may be placed on your property. Most often, developers use the condominium laws to allow them to build private roads in a development and set architectural guidelines. For the most part, condominium laws are designed to protect the integrity of a development and maintain the “look and feel” of the project.

d. Untitled property

i. There are properties in Costa Rica that are not recorded at the Public Registry of Properties. Families have inhabited some properties of this type for generations while others have never been occupied. In either case, it is possible that someone claims that they “own” the property and may put it up for sale. They may even have fence lines or other boundary markers that separate “their” property from a neighbor’s. Regardless of the time that an inhabitant has lived on the property or to what extent they have demonstrated ownership, unless that property is registered at the Public Registry, there is no official owner. i.e. the title is unclear. It is strongly recommended that this type of property be avoided at all costs because there is no way to prove that the “owner” has the right to transfer the property, or even worse, what the dimensions of the property really are.

e. Time Share:

i. This option allows an owner the right to use a property for certain weeks of the year. In most cases the time-share ownership grants similar rights as implied in the condominium regulation except that in the time-share it is limited to certain weeks during the year. In this manner one single unit is subdivided into parts and sold individually. Time-share resorts are not common in Costa Rica.

 

II. The Purchase Process

A. Basic Terminology

Feeling comfortable with the purchase process starts with understanding the most common terminology. While the purchase process may seem very simple, there are some keys ideas with which a buyer should be familiar. The following defines the most common vocabulary used in real estate transactions in Costa Rica.

a) Folio Real: This is the “social security” number of properties. It is the unique number assigned to each property to identify it and distinguish it from other properties. This number is comprised of three parts: the first number indicates the province, the second group of six numbers is the number of the property itself and the last group of numbers indicates how many co-owners the property has. All titled properties MUST have this number in order for clear title to be obtained.

b) Transfer or Conveyance Deed: (escritura de traspaso): This document contains all of the stipulations regarding the transfer of real estate including basic information about the buyer, seller, the property, and any special terms of sale, such as easements or mortgages. An attorney who is also a Public Notary must prepare this document and the deed must be recorded in his/her Notary Book as well as at the Public Registry of Property. Once the deed has been prepared and signed at the close, it is the attorney’s responsibility to record the deed immediately at the Public Registry. The recording process consists of two phases. In the first phase, the notary presents the deed to the public registry for its annotation; from this moment the property is protected against any third party interest. After the registry verifies the deed is structurally correct, the second phase of registration begins and the property is recorded in the name of the new owner. Because Costa Rica operates on a “first in time, first in right” system, registering the deed immediately is critical to ensuring that the new buyer’s rights to the property are ahead of any other claims by third parties.

c) Public Registry of Properties

d) Notary Public: Attorney licensed by law to perform legal acts with Public Faith. All transactions performed by a Notary are recorded in his/her Notary Book. A public notary is necessary in order to purchase a property. Most attorneys in Costa Rica are also Public Notaries.

e) Power of Attorney: ( Poder )

(1) This document authorizes a person to act on behalf of another to perform specific actions such as the purchase of a property. This tool is especially useful for clients that wish to close on their property without returning to Costa Rica. It is best to sign the power of attorney before leaving the country because the law requires that the power of attorney be signed in the presence of a Costa Rican notary. Thus, a visit to a Costa Rican consulate in the US is necessary. One exception to this rule, however, is if the property is being purchased through a corporation. In this case, a signed proxy letter will suffice and there is no need to visit a consulate.

(2) Powers of Attorney come in two forms, general and special. General power of attorney allows a representative to sign on behalf of an individual for multiple transactions and must be recorded at the Public Registry. A specific or special power of attorney allows the representative to sign ONLY for the item specified in the power of attorney contract and under the conditions specified there. It is highly recommended that only a specific power of attorney be granted for property purchases to limit the rights of the representative to sign only for the property in question and nothing else. Additionally, The specific power of attorney does not have to be recorded at the Public Registry, however it should be granted before a Notary Public.

f) Survey Plan (Cadastral Department): In addition to the Public Registry of Properties, which holds all property deeds, Costa Rica also has a Cadastral Office that holds all of the property surveys. In order to transfer, mortgage or acquire a property, a survey must be recorded at the Public Registry. When dealing with property segregations, a municipality authorization is also required on the survey. The official drawing of the property is validated through an approval process by the Public Registry of Properties as well as by the municipality in which the property is located. Because the Public Registry and Cadastral Office are separate entities, it is not uncommon for old property surveys to be on file at the Cadastral Office. If this is the case, it is recommended that a new survey plan be registered with the Cadastral Office so that there can be no dispute over boundary lines.

 

B. Purchasing Methodologies

1. Acquiring Properties through direct transfer: A purchase process whereby one or more physical individuals acquire a property in their personal name.

2. Acquiring Properties through corporations: A common practice in Costa Rica is to acquire properties through a new corporation or through an existing corporation that currently owns the property of interest. The process of setting up a corporation is not complicated, but does require a knowledgeable attorney who understands the exact protocols and procedures necessary to properly set up the corporation. The advantage of this system is that it allows a buyer to protect their asset anonymously. Further, if a purchaser acquires a property through an existing corporation that already owns the property, there are no government transfer taxes and stamps to pay. The reason is that transfer taxes and stamps must be paid anytime that there is a change in the ownership of the property. If a buyer acquires the shares of an existing corporation, technically there is no change in the recorded owner of the property (i.e. the corporation still owns the property). However, if a property is acquired through forming a new corporation to buy the property, the transfer taxes and stamps must be paid because the name of the property owner has changed. The risk for the buyer in acquiring an existing corporation is that the corporation might have other liabilities and there is no way to verify 100% that the corporation is clean. When buying a Costa Rican corporation, it is important to keep in mind that there are other obligations and responsibilities that must be addressed. Examples include yearly tax declarations (even if the corporation is inactive), payment of income taxes if any, and keeping the legal books of the corporation up to date and in order.

 

C. Step-by-Step through the purchase process:

1. Once a buyer has seen a property of interest, the next step is to understand what the process of acquiring the property may entail. The following are the basic steps that a purchaser follows when buying a property.

• Step 1: Sign an Option to Purchase/Sale with seller.
• Step 2: Deposit funds into escrow (if available).
• Step 3: Title research performed by the Notary Public / Lawyer (review if property is free and clear of defects)
• Step 4: Closing – Execution of Transfer Deed, Endorsement of Shares and/or Mortgage Deed and disburse funds
• Step 5: Register new owner with Public Registry

D. Fee Structure

1. Transfer taxes, stamps and other charges: In order to record the transfer of the property, the government charges 1.5% of the purchase price and an additional 1% is charged for other stamps at the Public Registry.

2. Notary Fees: Notaries are required by law to charge 1.25% as their legal fees.

3. Survey fees: If you require or demand a new survey for your property, there are qualified surveyors available to perform this function. Pricing depends on the location and size of the property.

4. Mortgage registration fees: The government charges 0.6% of the mortgage value to register the mortgage deed on the property.

5. Escrow Fees: Fees are dependant on the escrow provider.

6. Incorporation: Fees for purchasing a corporation typically run between $500-$1000 or +.

 

III. Protecting the real estate investment:

One of the greatest concerns of foreigners purchasing real estate in a foreign country is to ensure that the transaction will be executed legally and if the system can ensure a lifetime of enjoyment of the property. The Costa Rican legal system, if followed correctly, does give+ ample protection to investors, but if the transaction is not executed properly, loss can and does occur. To guarantee the security of any real estate investment, there are three tools that should be present in any real estate transaction.

a. Adequate legal representation and experienced Notary - While a notary’s primary duty is to provide Public Faith to a transaction, his/her job is also to act as the legal representative of the buyer, providing legal advice and representation throughout the process.

b. Escrow - Most buyers from the US understand Escrow service to include not only the managing of funds for a property purchase, but all of the administrative work required to execute a closing. In fact, in states where an attorney is not required for a real estate purchase, the escrow agent becomes the central party responsible for ensuring that all documentation is in order before the close. In Costa Rica, the escrow agent performs many of the same duties. The primary function is the financial service to prevent manipulation or mishandling of funds prior to closing. The escrow agent is a neutral third party with responsibility for issuing checks and executing payments. This system gives confidence to all interested parties (e.g. attorneys, brokers, seller, buyer) that funds are protected during the buying process and that all funds will be disbursed appropriately to all parties at closing.

c. Title Guaranty: Why Title Guaranty?

When you decide to buy a property, you must be certain that after the sale has been completed you will be the true owner of the property. You need to be confident that no liens, encumbrances or other impediments will prevent your free use and enjoyment of the property.

Guaranty for the property owner

The same way you purchase life insurance to protect your interests, a Title Guaranty should be purchased to protect your property title interests. Your real estate investment will probably be the biggest investment you will ever make and loss of this investment can be financially devastating. You need to be certain that you are financially protected from potential losses.

What does a title guaranty provide?

·         Protection against monetary losses, brought about by hidden ownership claims that may be made against the property title;

·         Payment of legal expenses if the company must defend your property title against a claim covered by the Title Guaranty in the local courts;

·         Payment of valid claims against your property title, up to the amount of the Title Guaranty.

Some of the risks covered by a Title Guaranty

• • Invalid documents executed under expired or no existent power
  • False assumption of identity of legitimate property owner
  • Falsification of documents, legal power, and other papers related to the transfer of property title.
  • Liens or other financial burdens charged to the previous property owner.
  • Non-registered property easements
  • Hidden heirs of previous property owners
  • Documents executed by minors of age
  • Invalid Documents delivered after death of previous owner

Peace of mind

Once acquired, a Title Guaranty remains in place as long as you own the property, giving you a lifetime of security and peace of mind backed not by a promise but by a company financial stability. Because only one payment is required a Title Guaranty is a cost effective method of protecting your real estate investment and enhancing the value of your property.

Conclusion

The real estate buying process in Costa Rica need not be intimidating or confusing. By understanding the steps in the process and pitfalls to avoid, a buyer can confidently invest in and enjoy their property for years to come.

About Costa Rica

Map of Costa Rica. The property lies 7 miles northwest of Moin.

The fact that more than one million tourists visit Costa Rica each year does not happen by chance. Our country, located in Central America, is an isthmus where life seems to have created its roots. Covering only 0.03% of the surface of our planet, Costa Rica has approximately 6% of the world’s biodiversity.

In addition, Costa Rica is characterized by an impressive scenic beauty, consolidated system of protected areas, social and political stability, high educational levels, and efficient infrastructure and services. All these characteristics you can find in a territory of only 51 thousand square kilometers, surrounded by both the Pacific and Atlantic Oceans, only three to four hours away from each other by land or 45 minutes by air.

The country’s strategic position, in the heart of the western hemisphere, the Government’s positive attitude towards foreign investment, its infrastructure, access to international markets, and labor quality and cost, make Costa Rica an ideal place to establish commercial operations.

Why Costa Rica?

During the past century, Costa Rica has experienced an outstanding period of political stability. In the past years, significant facts and achievements have placed Costa Rica as the leader in the Central American region with a number of noteworthy milestones.

Then-President Oscar Arias authored a regional peace plan that earned him the 1987 Nobel Peace Prize — his popularity had him re-elected in February 2006. Astronaut Franklin Chang-Diaz has served in various and important Space Shuttle missions. Claudia Poll won an Olympic gold medal for Costa Rica.

This history of outstanding success has been translated across other platforms including economics. Costa Rica is the only nation in Central America with industries such as Tourism and Technology that surpass agriculture as the main source of revenue. Tourism is one of the main economic activities in Costa Rica; in 2005, 1.6 million tourists generated $1.5 billion.

Major investment players such as Intel, Unysis, Acer, Procter & Gamble have established a solid presence in Costa Rica. The travel / hospitality industry has seen the arrival of major hotel chains from the U.S. (Marriott, Best Western) and Spain (Barcelo, Melia).

New foreign investment is in the growth in Costa Rica and names such as McDonald’s, Pizza Hut, Burger King, KFC, Subway, TGIF, Tony Roma’s and others are seen across the country.

The U.S. and Costa Rica have a history of friendly relations. As many as 35,000 U.S. citizens reside in Costa Rica and 500,000 U.S. citizens visit the country annually. Important numbers are also applicable to residents from Canada and Western Europe.

To learn more, we invite you to view the Costa Rica profile by the U.S. Department of State.