Should You Use A Corporation To Buy Property In Costa Rica? The Pros & Cons
If you’re considering buying property in Costa Rica, you’ve likely been doing some research and have stumbled upon the suggestion to use a Costa Rican corporation to buy the property. Maybe you’ve heard it’s not necessary. So now you’re asking the question, should you create a Costa Rican corporation to buy property in Costa Rica? As with most things, there are many things to consider, so today we’re breaking down the pros and cons of buying property in Costa Rica with a corporation.
Buying Property in Costa Rica In A Corporation – Pros
Many people will tell you that you should buy your property in Costa Rica in the name of a corporation. Why use a corporation to buy a property in Costa Rica? Here are a few of the benefits.
- Asset protection – in Costa Rica, shell corporations are treated as a person under the law. This allows an individual to protect their assets. When is this an issue? Let’s say you have a car accident. If your house is in a different corporation than your car, it’s protected from any legal proceedings involving the car.
- Flexibility – when a property is purchased in a corporation, you have the flexibility to designate a power of attorney to take care of things like setting up utilities or selling it from abroad.
- Convenience – it’s far easier to apply for utilities and open a bank account using a corporation than it is as a foreigner without residency status.
Buying Property in Costa Rica In A Corporation – Cons
As with most things, there is another side to consider. Here are a few of the reasons you might not want to use a corporation to buy property in Costa Rica.
- Expense – there is an initial expense of around $700 to create a corporation. Additionally, there is the additional expense of the annual corporation tax (around $120/year).
- Administrative Burden – along with the extra expense comes the additional administrative burden of the annual shareholder registration and the annual asset declaration. Depending on how you choose to handle this, there may also be an extra expense involved.
Buying Property in Costa Rica In Your Personal Name – Pros
If you don’t use a Costa Rican corporation, then you’ll be buying your home in your personal name. Here are the main reasons people choose this option.
- Lower upfront expense – When you buy property in your personal name, you will save yourself several hundred dollars in closing costs.
- Fewer recurring costs – Not only will you save on the initial purchase, but you’ll also save on the annual expenses for shareholder registration and corporate taxes.
Buying Property in Costa Rica In Your Personal Name – Cons
While saving money is always tempting, other things must be considered.
- Liability – unfortunately, sometimes bad things happen in life. If you purchase your home in your personal name, it’s an asset that could be seized in a worst-case scenario like a car accident.
- Inconvenience – when you own a property in your personal name, you must physically sign for anything related to the property. Where it can become problematic is when you (eventually) sell your property. Let’s use this example, you get sick and decide to return to your home country and need to sell your Costa Rican home. When it comes time to close, you’ll either have to return to Costa Rica for the closing or appear in person at the nearest Costa Rican embassy in your home country to provide a special power of attorney. Not always an easy task. If the property is in a corporation, all of the details can be easily handled from abroad.
How do you make the decision?
Your attorney can help you make the decision about whether or not to use a corporation to buy property in Costa Rica. Here are some things you’ll want to think about.
- How will you be using the property? Will you be living in Costa Rica full-time or managing the property from abroad? If you’re managing the property from abroad, you can likely save on travel expenses by buying it in a corporation.
- What’s your exit strategy? Obviously, no one wants to think about selling their property before buying it, but considering the future is an important part of making this decision.
So many things to consider! Don’t do it alone. For help navigating the decision to buy a property in Costa Rica, contact the team at Coldwell Banker Samara, we’re here to help!
