The Costa Rica Bar Association recently hosted an interagency panel to discuss the government policy and procedures to implement the regulations to the Law to Attract Investors, Rentistas, and Retirees to Costa Rica. Present on the panel were:
President Costa Rica Bar Association, Alvaro Sanchez
Subdirector of the Costa Rica Department of Revenue, Juan Carlos Brenes
Vice-minister of Security and Director of Immigration, Marlene Luna
Sub-director of Immigration Alan Rodriguez
Legal Department of Immigration, Diana Alfaro
File Review Department Juneth Zaida
Applicant Platform Services Manager Ana Cecila Arias
The purpose of the panel was to answer questions from the general public and professionals that work in the immigration processing sector.
The following is an excerpt of the most relevant parts of the panel discussions for your evaluation.
I would be happy to introduce the members of the main table before giving the floor to Mr. Juan Carlos Brenes. At 0:19, we have Mr. Alvaro Sanchez, the host of today’s event and the Deputy Director-General of Finance. At 0:24, we have Ms. Marlene Luna, the Deputy Minister of Governance and Director-General of Migration, who is also the President of the Bar Association of Costa Rica. At 0:30, we have Mr. Alan Rodriguez, the Deputy Director-General of Migration. Thank you very much to the government authorities for joining us this afternoon, even with such short notice. This regulation has only been in effect for two weeks, and there are many expectations and questions that we will address after the presentation by the Director-General of Migration. We would also like to thank Ms. Jenny Rosales, Ms. Antonieta Salas, Ms. Diana Alfaro, Ms. Juneth Zaida Escuded, Ms. Ana Cecilia Arias, Mr. Jonathan Rojas, Ms. Andrea Carrillo, and Mr. Jose Segura, who will be answering questions. Thank you all very much. Immediately, I would like to give the floor to Mr. Alvaro to welcome everyone. At 2:13, he greeted Ms. Marlene Luna, Mr. Juan Carlos Brenes, Mr. Alan Rodriguez, and other government authorities and representatives.
“I believe that the analysis that will be conducted today will lead us to important conclusions, especially for colleagues who deal with immigration matters, and those who are more involved in the business side. The positive outlook that these two awards can provide us, not only in terms of adapting to a good economy for difficult times but also in helping us build a better Costa Rica. Thank you very much and good afternoon to everyone. Thank you, Mr. Alvaro. The activity’s dynamics are straightforward, and we will now listen to the presentation by the Director-General of Migration, Ms. Marlene. Then, we will receive questions and comments from the audience. We will clarify in a moment how colleagues following us through social media will participate. We have also requested additional microphones to hear the questions from colleagues present here. Ms. Marlene?”
ON THE RETROACTIVE APPLICATION OF THE REGULATION
As an initial consultation, at the end of the regulation it refers to its retroactive application for the benefit of other investors who have initiated the process. However, in the case of one of my office colleagues, we received a resolution indicating that an investor who, prior to the entry into force of this regulation, must demonstrate that they have the investment in their own name. Therefore, we consider this to be a retroactive application that is detrimental. How will you handle the issue going forward for those investors who made an investment through companies, as had been done through shares in companies that own registered assets? Thank you very much. Well, good afternoon. Thank you for the question, Ms. Marisela. Yes, I would like to know, since you are speaking about a specific case, the file number so that I can refer to the case in a general way. Effectively, the transitory provision indicates that it applies retroactively in accordance with article 34 of the Constitution in what benefits the person. Firstly, on the day that this regulation was released, we met with colleagues who are in charge of resolving these procedures to be able to discuss and see the scope of the application. Subsequently, in that same week, we had a meeting with the general direction and agreed that, effectively, the procedures that have already been submitted will continue to be resolved under that regulation, including those that, for registered real or personal property, have been presented through a company. That will be the general guideline for our work, as I repeat, I would like to know the file number, maybe a little later, to be able to refer to the case. Thank you. Sorry, a small clarification. So, if we understood correctly, the legislation that will be applied to all cases already presented is that prior to the entry into force of the regulation, sorry. Exactly, insofar as they have already submitted the requirements under this legislation, insofar as there is already documentation where we can verify that there is an investment….
ON COMBINING DIFFERENT INVESTMENTS FOR INVESTOR RESIDENCY
Regarding the investment, effectively starting from February 23rd of this year, the only option to submit a migratory procedure under the temporary investor residency is with this new regulation and meeting its requirements. That would be a modification, almost at the end, I think it’s article 31.
With pleasure, thank you Diana, thank you Monica.
Good afternoon. A question that I think most of us have, and I even mentioned it to you, Diana, before we started, is about the issue of shares when an investor applies for residency based on shares. The article establishes that the company must be active before the taxation department. So the question is, if a foreigner comes here and invests more than $150,000 in a property that is owned by a company, and then contributes capital to the company to buy shares, they are investing more than $150,000 in the company’s shares, but that company, like many of us Costa Ricans who own properties through companies, is inactive. What is the justification or reason why the company must be active before the taxation department?
So we will have to look internally and consult, because a society that is only there for holding assets such as movable or immovable property is not considered to be engaging in profitable activity in the country. Therefore, in this case, this would be among us maybe having more feedback because as I said, a person who looks for an economic activity for a society that only holds assets is a society that is inactive for the tax administration in activity 96013. So, I do believe that it is worth discussing this topic a little more because, by law, pensioners, renters, and investors are also prohibited from engaging in any commercial activity. So, to complicate matters a little more, we take note of this concern. Thank you very much, Mrs. Antonieta.
ON THE LENGTH OF TIME IT IS TAKING TO APPROVE FILES
Thank you very much to Attorney Diana. My question is basically regarding the current processing time for a person who has a temporary category application for investor immigration, which is currently taking about a year to resolve. Under these circumstances, with the new regulations and new categorizations that are being proposed, my basic question is what parameters are you using to reduce this waiting time? We are losing skilled labor and investors to Panama or other circumstances within the Central American area. We know we have all the resources, but migration is technically failing to meet deadlines. Clients come to the office and ask, and we don’t know what to say. Basically, I want to clarify what observations I want to send. Thank you very much for the question.
Effectively, unfortunately, we have a significant delay in case resolution, mainly in cases of temporary residency for investors. I will tell you a little about the efforts we have made in recent months with the new management. We have formed a team of five people, of the twenty that we had, and five are dedicated entirely to resolving investor cases. However, it is important to note that the internal consultations do not allow for a large amount of expedited work, as there is a limit on the number of cases that can be handled by specialists. Many consultations and verifications of different data are required, and reducing the procedure of a bond with a Costa Rican, which may only require a validation through the Supreme Court of Elections and the validation of their personal requirements, among others. In this sense, this working group has been establishing unified criteria, seeing the need, and also that it is a country’s economic recovery issue for the General Directorate. We approved overtime work, and we project that possibly, in less than six months, we can resolve what we have now, which is 700 cases, in extraordinary time, in addition to what this team is already doing in ordinary time. What happens, and maybe here I will share a little responsibility, is that the task, I believe, on the part of the public entity of the State, has been done with the promulgation of this regulation to minimize the delays as they were. It is really a success to have won the battle we had with the promotion of so many requirements with that regulation, seeing the difference between it and the previous one. Second, they give us access to work this overtime when economic reserves are available are difficult, but because it is a national issue, they supported us. In that sense, we established internally within the unit that as of February 23, with the promulgation of this new regulation, we would be parallelly resolving both the old and new procedures at the same time. Many of you will see that in less than the 90-day time frame required by the regulations, the response to the procedure you submitted may be given within 15 days or we will try to ensure that it is within this time frame. However, I do want to emphasize the cordiality and coordination that we need to have, both with you as representatives of foreign clients and with us as representatives of the state. In a sample we took of 40 files, 100% were for preventions due to defects, and I’m talking about preventions such as deposits made into the wrong account or requests made as an investor without specifying the type of investment. I know that the urgency of the stay makes you submit certain requirements and not the totality, but then that delay has been complicated because of the particularity of the type of investment in the files we have backlogged. The majority of preventable ones are very few that are resolved and approved upon first analysis. Thank you for the question because it gives me the initiative to also provide you with the suggestion that we try to present these types of procedures with this simplification of requirements that this regulation is providing in its entirety. You will see that if your client’s response is complete, it will be approved. So, we are making human efforts to the extent of our capacity, but we also need your collaboration in that sense. Thank you.
ON THE JUSTIFICATION TO REQUIRE THE INVESTMENT TO BE IN ECONOMICALLY ACTIVE COMPANIES
Good afternoon everyone, I have a couple of issues to clarify related to the topic of companies that have activity or not. I think we also need to consider the comprehensiveness of the law because even the government wants to have a tax expense to stop collecting taxes to reactivate our economy. This is within the purpose of the law. For example, when we talk about an active or inactive company, this is where the Executive defined to say let’s go with those that invest in active companies because they generate for us. In the end, I will give an exemption of two vehicles and all the household items. I will transfer these assets to them. One of the incentives associated with the activity is the exemption from import taxes for instruments or materials used for professional or scientific purposes by the person who obtains the migration status. They must demonstrate to the Ministry of Finance that the imported goods correspond to their economic activity and comply with criteria of proportionality and rationality. Probably you say Airbnb is an economic activity, and it can have and use household items, but the tax expense is high. So, we may need to validate to what extent we can modify this regulation. However, it is a significant expense due to the tax benefit it generates. The Executive says I will invest and generate a tax expense. Even the Comptroller and international levels ask us to account for the tax expense. But where is the cost-benefit generated? We don’t want to generate a lot of cost in something that will not generate much benefit. This is the equation that the Executive uses to determine where to invest.
ON THE USE OF THE PREFERENTIAL DIGITAL FILING PLATFORM
With all due respect and for your consideration, I would like to read Chapter Two, Article Three of the procedure for authorization in favor of resident investors, retirees, or rentiers before the General Directorate of Foreign Mission. Article Three, special attention procedures. Requests for legal stay under the migratory categories indicated in Article One of this regulation will be processed preferentially through the digital platforms enabled by the General Directorate of the Ministry of Foreign Affairs for this purpose. However, foreign individuals may also use physical procedures at this General Directorate. Nevertheless, such requests cannot be provided with preferential treatment via this channel. I would like an explanation of what is meant by the preferential treatment that will be given to requests submitted digitally once the system is implemented, and why requests submitted physically will be left aside. This question caught my attention. Thank you very much, Diana, and good afternoon to everyone at the table.
Currently, as you all know, this type of request cannot be submitted through the platform, and it is not a migration-specific platform. However, due to the increasing number of cases under this new law, a preferential window will be enabled on the service platform for investors, rentiers, and retirees. As the platform is not yet available, official channels will announce when it will be in operation.
ON THE APPLICATION FOR TAX EXEMPTIONS WITH THE MINISTRY OF TREASURY
Actually, it’s not an application, it’s a link within the Ministry of Finance’s website. The process is simple, it’s an automated registration that requires validation from the immigration authorities before we can approve a request. Without supporting documentation from the immigration authorities, we cannot approve a request. So, we check the records provided by the General Directorate of Migration. This is the general procedure for authorizing an extension, whether it is for importation of goods such as vehicles, articles, or for economic activities. As I mentioned before, we authorize within two months. Once the exemption is authorized, it must be associated with a Single Customs Declaration (DUA) in exonnet. Then, you are exempt from taxes. As for proportionality, this is a recent issue, and we didn’t want to limit it because the law and regulations don’t set any value or reference point. We left it open to the principles of proportionality and reasonableness. This will be a challenging issue to address. If we need to define something more specific later on, we will do so through regulations or guidelines, but we have no ceiling in terms of values for vehicles, properties, or other assets. This is a matter of proportionality, and we will have to deal with it on a case-by-case basis. If there are any doubts, we have expert evaluators at the Ministry of Finance who can help determine the value.
Regarding the requirement to maintain continuous investment for residency renewal, if an investor in the real estate business sells a property they bought for $200,000 for $250,000 after three months, they must maintain the same level of investment. If they change to a different asset, such as another property, they would need to go through the process again.
In terms of changing the nature of the investment, for example, from personal to a business entity engaged in real estate development, it would not be a problem and would not affect the conditions of the subcategory. However, it’s important to consider how we will operationalize and streamline this process for our clients.
The Regulations are new and the government seems committed to getting them implemented and functioning as soon as possible. During that implementation more questions and changes will arise but as the government pointed out – we now have the regulations. They may not be perfect but it is the only tool they now have to move forward and implement the law.
The full video of the panel discussion in Spanish is included below.