If you’re thinking about purchasing real estate in Costa Rica, chances are you’ve been conducting some investigation and have come across the recommendation to utilize a Costa Rican corporation for the purchase. Perhaps you’ve heard differing opinions on its necessity. Consequently, you’re pondering whether forming a Costa Rican corporation is advisable for acquiring property in the country. As is often the case, there are numerous factors to weigh, hence today we’re examining the advantages and disadvantages of acquiring property in Costa Rica through a corporation.
Purchasing Property in Costa Rica Through a Corporation – Advantages
Numerous individuals advocate for acquiring property in Costa Rica under a corporation’s name. What are the advantages of employing a corporation for property acquisition in Costa Rica? Here are several benefits to consider.
Asset Protection: In Costa Rica, shell corporations are legally regarded as entities, affording individuals the opportunity to safeguard their assets. This becomes pertinent in scenarios such as a car accident. For instance, if your house is held under a separate corporation from your car, it remains shielded from any legal entanglements involving the vehicle.
Flexibility: Acquiring property within a corporation provides the flexibility to appoint a power of attorney for various tasks, such as arranging utilities or facilitating sales remotely.
Convenience: Utilizing a corporation significantly streamlines the process of applying for utilities and opening bank accounts compared to doing so as a foreigner without residency status.
Purchasing Property in Costa Rica Through a Corporation – Drawbacks
As is often the case, there exists an alternative perspective to contemplate. Below are several reasons why you might opt against utilizing a corporation for property acquisition in Costa Rica.
Cost: Establishing a corporation entails an initial outlay of approximately $700. Furthermore, there’s the ongoing cost of the annual corporation tax, which amounts to around $120 per year.
Administrative Hassle: Alongside the added cost, there’s the burden of managing annual shareholder registrations and asset declarations. Depending on your chosen approach, this may also incur additional expenses.
Purchasing Property in Costa Rica Under Your Personal Name – Advantages
If you opt not to utilize a Costa Rican corporation, you’ll be acquiring your property in your individual name. Here are the primary reasons why people select this approach.
Reduced initial expenditure: Acquiring property under your personal name will spare you several hundred dollars in closing expenses.
Lower ongoing expenses: Beyond the initial purchase, you’ll also enjoy savings on annual expenditures for shareholder registration and corporate taxes.
Purchasing Property in Costa Rica Under Your Personal Name – Drawbacks
Although the allure of saving money is undeniable, there are other factors to take into account.
Liability: Unfortunately, unforeseen events can occur in life. If you acquire your property in your personal name, it becomes an asset susceptible to seizure in worst-case scenarios such as a car accident.
Inconvenience: Owning a property in your personal name entails the necessity to physically sign for any property-related matters. This could pose challenges, especially during eventual property sales. Consider this scenario: if you fall ill and decide to return to your home country, necessitating the sale of your Costa Rican property. When the time comes for closure, you’ll either have to return to Costa Rica for the process or appear in person at the nearest Costa Rican embassy in your home country to provide a special power of attorney. This task isn’t always straightforward. Conversely, if the property is held within a corporation, all logistical details can be easily managed from abroad.
How do you reach a decision?
Your attorney can assist you in determining whether or not to utilize a corporation for property acquisition in Costa Rica. Here are several factors to consider.
How do you intend to utilize the property? Will you reside in Costa Rica full-time or oversee the property remotely from abroad? If remote management is your plan, purchasing through a corporation could potentially save on travel costs.
What’s your exit plan? While contemplating selling a property before even buying it may seem premature, considering future scenarios is crucial in making this decision.
With numerous factors to ponder, don’t navigate this process solo. For assistance in navigating the decision to purchase property in Costa Rica, reach out to the team at Magnolia Real Estate —we’re here to assist you!
