Procedures to set up or create a Costa Rican Corporation:

The Law requires a minimum of two (2) persons to register the corporation. After the incorporation, the number of shareholders may be reduced or increased, with NO limitations as to the nationality.

The articles of incorporation must be recorded in a notarized public instrument and registered in the Mercantile Registry.

The Corporation’s name must be expressed in Spanish, Latin or Greek, though it may include Fantasy names. The name must be followed by the expression "Sociedad Anónima" or its abbreviation, "S.A."

For new corporations and for capital increases in all companies, the law establishes that all payments or capital stock must first be deposited in a bank account. This transaction must be certified by a Notary Public. The deposit may be returned only to the legal representative of the corporation, once the new company or the capital increase has been registered.

Twenty-five percent (25%) of each subscribed share must be paid at the moment of registration. Shares that are to be paid in kind have to be fully paid.

The types of shares must also be stated. Bearer shares or non-par value shares are not allowed. Common shares have equal rights and one vote each. Accumulative vote is operative in the election of Board Members if stated in the articles of incorporation.

Registration procedures usually last at least four weeks. Shell companies can be used in case of immediate application.

Basic Features of Corporations in Costa Rica

The corporation is managed by a Board of Directors of no less than three members, President, Secretary and Treasurer, who do not need to be shareholders (there are no citizenship or residency requirements). No one person can hold two office positions.

The President of the Board legally represents the corporation, as well as any other member specified in the charter. They are able to delegate all or some of their power to other members of the Board if the charter permits. They may also appoint one or more managers.

One half of the members of the Board are required for meetings and a majority of those present to hold a resolution. The President has two votes in case of a tie.

Supervision of the corporate business should be exercised as provided in the charter. It is normally performed by a Controller that is not part of the Board of Directors.

Ordinary meetings should be held at least once a year. The topics reviewed at ordinary meetings include: Approval or rejection of financial statements, distribution of profits, appointment or dismissal of Board members, statutory or external audits, and other matters not reserved to special meetings and proposed in the agenda.

Special meetings are to be held to review topics such as: amendment of the articles of incorporation or by-laws, issuance of other classes of shares not included in the by-laws, when required by law or by the incorporation charter.

Meetings may be held outside Costa Rica when so allowed by the articles of incorporation.

Quorum for ordinary meetings on first call should be constituted by fifty percent (50%) of voting shares. For special meetings, quorum is constituted by seventy-five percent (75%) of voting shares, unless a higher percent is required by the articles of incorporation.

Resolutions for ordinary meetings are formed by more than one-half of the present votes. For special meetings, by more than one-half of all shares with the right to vote.

On second calls, any attendance constitutes quorum and more than one-half of the present votes decides.

The company must have a Resident Agent, normally an attorney with office in Costa Rica. The Resident Agent must be registered in the Mercantile Registry and will be in charge of receiving all legal notifications.

Source: CINDE

Costa Rica is not a financial center in the traditional sense and so does not distinguish between onshore and offshore activity. The main taxes affecting a business are business income tax, employers social insurance, withholding tax, import duty and sales tax at 13%. Tax exemptions applying to businesses under various foreign investment incentive schemes are described in Offshore Legal and Tax Regimes. Since 2002, the government has been struggling to pass a Permanent Fiscal Reform Package in an attempt to reduce the country's deficit. The key components of the package are a switch from a territorial tax system to one which taxes worldwide income and the replacement of the 13% sales tax with a Value Added Tax system; taxes payable by Free Zone companies would also be increased over a period of time.

Scope of Income Tax

In Costa Rica business tax legislation is currently based on the principle of territoriality meaning that all business income which has a foreign source is tax exempt. Only that proportion of business revenue earned within Costa Rica is subject to an assessment by the tax authorities.

All business entities whatever their form and whether they be sole proprietorships, partnerships, branches, stock corporations or limited liability companies pay income tax on the profits of their trade