When it comes to owning property in Costa Rica, you have the option of holding it either in your personal name or through a Costa Rica company (LLC). Let’s explore the pros and cons of each ownership approach:
Ownership in your Personal Name
Pros:
Simplicity and Direct Control: Owning property in your personal name offers simplicity. You have direct control over the real estate asset, making it easier to manage, sell, or transfer. There’s no need to navigate corporate governance, compliance or deal with additional administrative tasks associated with owning property in the name of a Limited Liability Company (LLC).
Lower Initial Costs: The initial setup involves fewer legal and administrative steps, reducing the costs associated with establishing an LLC.
Lower Taxes: If the property is your Costa Rica primary residence then you will be exempt from capital gains when selling the property. This option is also available if you own the property in your Costa Rican LLC and prove that it is your only personal residence in Costa Rica.
Ease of Estate Planning: In some cases, transferring property upon death can be more straightforward when owned in a personal name, especially if the owner’s home country has treaties with Costa Rica that simplify international inheritance issues. If you have more complex estate planning with multiple heirs then personal ownership may not be a good option for you.
Cons:
Personal Liability: Owning property in your name exposes you to personal liability. In the event of legal action related to the property, your personal assets would be more at risk since you would not have the shield of the company entity around you.
Limited Flexibility: You won’t have the estate planning, tax management, and legal benefits that come with a company. If you structure the company correctly then you may have the option of avoiding probate of the estate when you pass. For this to occur you must have the correct estate planning structure in place since it is not automatic.
Privacy Concerns: Ownership of real estate in your personal name is publicly recorded, offering less privacy than titling the property in the name of an LLC.
Ownership through a Costa Rican LLC
Pros:
Asset Protection: Assets are held within the company LLC structure, shielding them from personal liabilities
Flexibility in Ownership: An LLC allows for more sophisticated ownership structures, including multiple owners or partnerships.
Estate and Succession Planning: Ownership in an LLC can offer more options for estate planning.
Cons:
Higher Setup and Maintenance Costs: Establishing and maintaining an LLC involves legal fees, registration costs, and annual taxes.
Complexity and Administrative Requirements: Operating an LLC requires compliance with Costa Rican company and tax laws, including annual tax filings, maintaining corporate books, and other administrative duties. This complexity demands time and, often, the assistance of local legal and accounting professionals.
Imperfect Protection: While better than personal ownership, it’s not foolproof.
What are the approximate Costs ?
The typical costs involved in owning and maintaining an LLC are approximately as follows.
Set up a Costa Rica LLC $850-$1250 depending on the structure and complexity involved.
Annual Filings and Fees
Pay the annual company tax (approx) $120
Pay the Education and Culture Stamp $15
Pay a Management company to handle filings $150
Resident Agent. If you don’t have a local address you will need a resident agent $200-$300
File the annual Beneficial Owner and Transparency Disclosure Form with the Central Bank. $300-$400. If you have residency and a Costa Rican digital signature card then you can do this on your own at no cost. If you need a Power of Attorney to do the filing for you then you will need to hire a local Attorney to handle the filings for you.
File the annual D-195 Company tax disclosure form with the Department of Revenue. Costa Rica requires all companies to file an informational tax declaration every year disclosing company assets. This may require you to hire a local CPA to handle this filing for you. Approximate cost can range $350 – $550.
In addition to the Costa Rican requirements your country of origin may have additional requirements that you will need to check with your local home tax advisor.
Conclusion
The choice between owning Costa Rican property in your personal name or through an LLC hinges on several factors: the scale of the real estate investment, administrative capacity, and long-term plans for the property. Personal ownership suits those seeking simplicity and direct control, albeit with higher personal liability and potential privacy concerns. In contrast, an LLC offers limited liability, flexibility, and estate planning advantages but at the cost of higher initial and ongoing expenses and administrative complexity.
All properties in Costa Rica must pay property taxes and that amount will be the same if the property is titled in your personal name or in the name of a Costa Rican LLC.
Before deciding, it’s crucial to consult with legal and tax professionals familiar with Costa Rican and the tax laws of your home country, ensuring your decision aligns with your objectives, legal obligations, and financial planning goals.
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