Real Estate Investment Residency in Costa Rica: Immigration and Tax Implications of Using a Corporate Entity
- Oscar Andrés López Hernández & José David Garro Castro
- 2 days ago
- 5 min read
In Costa Rica, as in many other jurisdictions, one of the available pathways to obtain lawful residency is through investment -either by acquiring real estate or by purchasing certain qualifying assets. For the purposes of this analysis, we will focus specifically on real estate acquisitions.
Thanks to the tax incentives established under the “Ley para la atracción de inversionistas, rentistas y pensionados” (Law No. 9996), this option has become even more appealing, as it not only allows foreign nationals to obtain legal residency in the country but also grants a series of special tax exemptions derived from the recognition of the Investor immigration category. Among these benefits are:
● Tax-exempt importation of up to two motor vehicles;
● Duty-free importation of household goods;
● A 20% exemption from the Real Estate Transfer Tax; and
● Exemption from import duties on professional or scientific instruments or materials necessary for the resident’s occupation.
It´s important to consider that all such tax benefits remain in force until July 14, 2026, unless an extension is enacted by the Legislative Assembly.
Ownership and Corporate Structures
A common practice among foreign investors in Costa Rica is to avoid registering real property under their individual names. Instead, they incorporate a business entity -typically a Sociedad Anónima (S.A.) or Sociedad de Responsabilidad Limitada (S.R.L.), to hold title to the property. This strategy may serve purposes of asset protection, tax planning, or personal privacy, yet it directly affects the way in which residency is processed, since the investment requirement is assessed based on ownership of the asset.
Ownership and Proof of Investment
The fundamental premise is straightforward: To qualify for Investor Residency based on the purchase of real property, the property must be registered in the applicant’s personal name. Consequently, real estate titled in the name of a corporate entity will not be accepted under any circumstance. This necessitates alternative means to substantiate the investment, in order to comply with the immigration regulations that authorize this residency category.
Because it is common for foreign investors to channel their funds through a corporation -of which they are the shareholders or quota holders, the valid alternative is to evidence the investment through ownership of corporate participation interests or shares with a value of no less than USD $150,000.
In this scenario, proof of investment shall be provided through:
1. A notarized certificate of corporate representation and share capital, issued on the basis of the corporation’s legal books, confirming the investor’s actual ownership interest in an amount not less than USD $150,000 (or its equivalent in Costa Rican colones at the official exchange rate published by the Central Bank of Costa Rica), issued within 30 days prior to filing the residency application; and
A certification from a Certified Public Accountant (CPA) attesting to the effective investment of the required amount.
It is important to note that the corporation must be active and registered with the Ministry of Finance (Ministerio de Hacienda). Inactive entities -those without declared commercial activity, do not qualify for this residency category.
Tax Considerations When Using an SRL
When a corporate structure such as an S.R.L. (Limited Liability Company) is used, specific tax implications arise, particularly if the shareholder or manager is not domiciled in Costa Rica.
Income Tax (Impuesto sobre la Renta):
Costa Rica’s tax system is primarily based on the principle of territoriality, meaning that it taxes income derived from goods, capital, or services utilized within Costa Rican territory.
Costa Rican-Source Income: If the S.R.L.
Engages in business activities in Costa Rica, or is deemed to have a permanent establishment, its profits are subject to the Corporate Income Tax applicable to Costa Rican-source earnings.
Withholding on Payments to Non-Residents:
The reference to a specific withholding relates to the Tax on Remittances Abroad (Impuesto sobre las Remesas al Exterior – ISRE), which applies to Costa Rican-source income paid or credited to a person not domiciled in the country.
The 2.5% Withholding: While most case law addresses the Income Tax and ISRE (which historically has higher rates for non-residents), the 2.5% rate is generally associated with the Real Estate Transfer Tax withholding, applied when the seller is a non-resident individual or entity.
Strategic Advantage
By structuring property ownership through an S.R.L., one may conduct a future sale of the property through the transfer of corporate ownership interests rather than by selling the real estate itself. Depending on the ownership structure and the domicile of the shareholders, this may lead to different tax treatment compared to a direct sale of the property—though such transactions remain subject to Costa Rican-source taxation and any withholding obligations applicable to non-residents.
In summary, acquiring residency through a corporate structure may offer asset-protection and tax-planning advantages, yet it also entails a more complex immigration process, particularly when proving the minimum investment required by law.
There is no universally correct approach; the optimal strategy depends on each investor’s personal objectives and preferred method of managing assets in Costa Rica. The key is to align the corporate structure with the migratory strategy pursued before the competent administrative authorities.
From Legal Theory to Living Reality: Investment Residency in Costa Rica
When I managed the British Ambassador's residence here in Costa Rica, I learned something crucial: understanding the rules is just the beginning. The real magic happens when you have someone who knows every notary worth their salt, which CPA actually returns calls during tax season, and how to navigate the infamous "Tico time" when you need documents yesterday.
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