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An investment guide to Costa Rica

April 2020 - Prepared for the Canadian Embassy in Costa Rica

Learn how to effectively leverage Costa Rica’s many foreign direct investment opportunities to find success in this market.  This guide will help Canadian investors seeking to establish a presence in Costa Rica to apply international standards while meeting local requirements.

Table of contents

The Canadian Trade Commissioner Service (TCS)

The Canadian Trade Commissioner Service (TCS) helps companies navigate the complexities of international markets and make better business decisions. The TCS is on the ground in more than 160 cities worldwide, and helps Canadian companies to:

The TCS is a free service of the Government of Canada, helping companies prepare for international markets, assess market potential, find qualified contacts and resolve business problems.

Our network of international contacts is unbeatable. As part of Global Affairs Canada (GAC) and of Canada’s network of embassies, the TCS has access to local governments and key business leaders and decision makers. The TCS can help increase the credibility of Canadian companies in foreign markets, helping them gain access to local contacts not readily available to outside businesses.

TCS insights can help you save time and money by avoiding costly mistakes that can result from trial and error. We often know what questions companies need to ask but may be unaware of. Research shows that companies that use TCS services are more successful than those that don’t: the value of their exports is higher, and they access more markets.

We have hands-on knowledge that comes from helping thousands of companies each year to pursue opportunities in foreign markets. We understand the sensitivity of your business information and we respect its confidentiality. Whether you’re looking to export, invest abroad, attract investment or develop innovation and R & D partnerships, our international business professionals can help.

Get help from the Trade Commissioner Service

Introduction to the investment guide by Dentons Muñoz

Dear Investor,

Costa Rica is an extremely welcoming location for foreign direct investment, supported by a developed legal system, and a Constitution which protects direct and participatory democracy. Costa Rica’s history is a testament to stability and the rule of law, in which legislators also aspire to adapt to sophisticated investment needs and international thresholds. However, these efforts sometimes come into conflict with the lack of clear procedures and parameters to obtain most authorizations needed to operate in the country. In spite of this, the country has achieved constant change for the better, and continues to make significant progress in many important areas for investors, as demonstrated in its growing overseas and local investment.

Two factors that enable this growth are Costa Rica’s education and healthcare standards which are up to par with those in the world’s most developed nations. This offers investors access to a well-educated, capable, and healthy workforce, while the country’s strategic location and its network of Free Trade Agreements guarantees privileged access to the world’s main economies.

To effectively take advantage of Costa Rica’s many investment opportunities, an investor in Costa Rica, national or foreign, will do well keeping abreast of international standards while keenly adhering to local requirements. Additionally, investors also play a crucial role in influencing the Government of Costa Rica to employ well-documented procedures and fulfill its legal and Constitutional obligations with transparency. An in-depth understanding of local processes is critical to success, and an asset that will enable investors to take advantage of the great opportunities Costa Rica offers.

Dentons Muñoz is deeply honored to partner with the Government of Canada and the Canadian Embassy to Costa Rica in creating this investment guide. As the world´s largest firm with presence in all of Central America, and since our legacy Pan Central American firm, we have helped clients successfully navigate the region’s legal, political and regulatory framework for over 20 years.

We hope this investment guide, which seeks to help you navigate and comply with national and international “doing business” standards, will accompany you in your investment decision.

We encourage you to continue exploring the many opportunities Costa Rica offers. Your presence in the country is warmly welcomed and will strengthen Costa Rica’s social and business climate.


José Antonio Muñoz
Founding Partner
Dentons Muñoz

Legal framework

Contract enforcement in Costa Rica

Under Costa Rican law, contracts have “the force of law” between the contracting parties. Legal disputes arising out of contracts can be brought before local civil courts or, if the parties so consent, to arbitration. This section will cover the following elements of contract enforcement in Costa Rica:

  1. Reparation of damages
  2. Adhesion contracts and limits to contractual liberty
  3. Dispute resolution mechanisms in Costa Rica

Reparation of damages

Under Costa Rican contract law, only direct damages that are an immediate consequence of the responsible party’s actions can be recovered. These direct damages have to be linked to the alleged contractual breach that caused them.

Recovery for direct damages can include compensation for the damage caused, moral damage and lost profits.

Since Costa Rican law only recognizes direct damages, other damages (e.g. indirect damages) are not recoverable.

Adhesion contracts and limits to contractual liberty

Despite the general rule regarding contractual provisions having the “force of law” between the parties, the Costa Rican Civil Code states that abusive clauses used in contracts may be annulled by courts or arbitration panels. Some examples of clauses that pose a risk of being annulled are those where the weaker party in the relationship (e.g. the consumer) has no ability to negotiate the contractual terms (such as in the case of adhesion contracts), and where there are “abusive clauses” such as warranty rights or liability being excessively limited or waived, or where the counterparty is given excessive powers over the contract relationship. In addition to this, contracts that have anticompetitive intent or effects are also illegal and may be subject to sanctions under Antitrust Legislation.

Contracts in connection with insurance and other regulated markets, such as telecommunications and banking, may be subject to prior approval by the regulator. Mergers and acquisitions that meet certain standards are subject to the control of the national antitrust authorities.

Dispute resolution in Costa Rica

The Costa Rican constitution safeguards the right to access fair and prompt justice for all people, regardless of nationality. The right to pursue alternative dispute resolution mechanisms, such as arbitration is also guaranteed under the law and the Constitution. Foreign investors will be able to access both mechanisms if a contractual dispute were to arise with a private counterparty. Dispute resolution with the government will be regulated by specific provisions outlined in section IV.D of this guide. The default dispute resolution mechanism in Costa Rica is the access to local courts, which have a specialized section dealing with civil and commercial disputes. Arbitration and alternative dispute resolution mechanisms are accessible as long as there is a contractual agreement between the parties agreeing to such mechanism.

The Costa Rican law entitled Law for the Alternative Resolution of Conflicts regulates alternative dispute resolution methods such as conciliation, mediation and arbitration. International arbitration is legally recognized and regulated by the International Arbitration Law taking advantage of Costa Rica´s reputation as a country with a strong Arbitration culture and professional community.

Arbitration clauses may be added to contracts and provide for a faster and more cost effective resolution process compared to Costa Rican court proceedings in the contract itself or separately and at any time.

Anti-Corruption laws in Costa Rica

Costa Rica has strong anti-corruption laws that regulate activity in the public sector and the dealings of private officials with government officers. Foreign investors dealing with the government should be aware of these anti-corruption regulations to prevent any legal problems for their officers and their investment. The main laws that deal with this subject are:

  1. Law against government corruption and illicit enrichment
  2. Criminal Code
  3. Law for criminal liability of legal entities on domestic bribery, transnational bribery and other crimes

Law against government corruption and illicit enrichment

Costa Rica has a “Law against Government Corruption and Illicit Enrichment”. This law primarily applies to public officials. However, individuals who interact with public officials and directors of political parties can also be punished for certain crimes under the law. The law also applies to certain agents, administrators, managers, and legal representatives of companies that hold, manage or use public funds, goods or services.

Therefore, the law may apply to certain foreign investors under certain circumstances. Generally, violations of the law result in an administrative sanction (e.g. cancelation of the contract without responsibility for the State, payment of damages, suspension of business activities, cancellation of concessions or operation permits, and loss of tax benefits and exonerations. In the event a violation of the law is found to have been committed with intent or recklessness, criminal penalties, including jail time, may be imposed.

The main acts prohibited by the “Law against Government Corruption and Illicit Enrichment” include the following:

Illicit enrichment

It is prohibited for a public servant to take advantage of his/her position to increase their assets, acquire assets or cancel debts.

Self-serving decisions

Public officials are barred from engaging in behavior that directly benefits family members or companies they are involved in up to a third degree.

Price alterations

Under the law, charging an inflated price in the sale of a good or service, is illegal when it is done with the purpose of improperly benefiting a public official or third parties.

Contracts without substance/not in the public interest

The law requires that all contracts funded by the public sector be “real” and requires that the obligations under such contracts be fulfilled.  This rule extends to public private partnership agreements and public service contracts.

Undue influences

Under the law, it is illegal for someone to influence a public official’s decision through an economic benefit for the official or a third party. Undue influence may arise within the chain of command or from informal positions of power.  It is also prohibited and punishable to abuse influence or offer to influence others.  An aggravating circumstance will be found where the person holds a high position in government, as defined by the law (President, Vice President, Supreme Court justice among others).

Transnational bribery

Under the law, both the briber and the public official who accepts a bribe are punished. 

Whoever offers, delivers, requests, accepts, or receives, directly or indirectly, any gift, kickback, or undue favor to or from a public official with the aim of causing an action to be taken within his hierarchy of authority shall be punished under the law.

It is also a crime for any official from another country, regardless of the government level, or an official from an international organization or from an international entity to accept or receive a gift, payment or undue advantage as bribe.   

Criminal code

The Costa Rican Criminal Code imposes sanctions on both public officials and individuals who interact with public officials. Under criminal law, although only individuals can be punished with incarceration, nevertheless, legal entities can be held liable for the criminal actions of their agents according to the Law for Criminal Liability of Legal Entities. The main activities that are penalized in the Code for any potential investor are:


Under Costa Rican [Criminal Law], the penalties established for the crimes of bribery, aggravated corruption, and corruption of judges, will be applicable to the person who improperly gives, offers, or promises a gift or favor to a public official.

Abuse of position

It is prohibited for a public official to abuse his or her position and demand or induce another person to give or promise to give an economic benefit (extortion), or to demand a payment greater than is required (exaction).


The official or individual who takes or diverts public assets or public funds that he or she invests, administers, or cares for shall be punished.  This includes the use of public assets or funds paid by the State for private ends. 

Aiding and abetting

The law punishes anyone who, although not participating in the crime, collaborates in hiding the evidence or the proceeds of the crime.

Law of criminal liability for legal entities on domestic bribery, transnational bribery and other crimes

This law enforces criminal liability against legal entities (public or private) registered and domiciled in Costa Rica, and also to foreign companies that have agencies, subsidiaries, or branches or that carry out business in our country, in regards to criminal offenses committed by its employees or representatives, and that are related to corruption issues, domestic and transnational bribery, regardless of the value.

Penalties may apply to parent companies abroad for crimes committed by one of their subordinated or controlled companies on their behalf or representation, or if they obtain a direct or indirect benefit.

The main penalties established are:

The penalty may be reduced up to 40% if it is proven that the company has adopted models of organization and prevention of corruption and bribery crimes.

Environmental regulations in Costa Rica

Costa Rica has always attached great importance to the conservation of its natural resources. At the same time, industrial and land development in Costa Rica has increased exponentially in the last decades. In recent years, development has been focused in coastal areas and in the Central Valley, especially in areas deemed “Free Trade Zones”. Economic and social progress is essential for the country, and public policy is highly concentrated on the need to protect nature through sustainable development.

Under Costa Rican law, in order to develop any project with an environmental impact, an environmental license must be obtained. Applying for an environmental license consists of providing certain documents in accordance with the type of project to be developed (e.g. cadastral plan, land use certificate given by the local municipality, a water availability certification, soil survey, geological survey, wastewater treatment system, basic study on storm water management, presence of forest cover or wetlands, study on the access of roads, information on the location of nascent or pipeline easements, public streets alignments, topographic data and contours, basic archeology study; among others).

The main environmental regulations that investors will deal with in Costa Rica are:

  1. land use and zoning
  2. protected areas
  3. construction regulations
  4. water use

Land use and zoning

The area where a project or industry will be located needs to be suitable for its intended purpose. Every project must comply with zoning regulations in the municipal area where it is located. In forest areas, the Costa Rican Forestry Law prohibits changing the land use, and only authorizes the use of 10% or less of the existing forest area of the property (including roads, trails, viewpoints, buildings, etc.).

Protected areas

Costa Rican legislation recognizes, different types of protected areas according to their nature, such as forestry zones or water bodies protection areas.

For instance, the Forestry Law, establishes the following categorization for water bodies protection areas:

Thus, when investing in property in Costa Rica it is important to inquire about possible aquifers, mangroves, wetlands, proximity to National Parks and other possible environmental restrictions to property.

Furthermore, any project or activity that may generate a possible negative environmental impact requires an initial and subsequent environmental assessment issued by the Costa Rican Environmental Authority (known as “SETENA”, its Spanish acronym). Elements of the project such as size, location, activity will be taken into account when analyzing a request for an environmental license. No construction or operation can start without the approved environmental feasibility.

Construction regulations

Under Costa Rican law, each municipality has to authorize new construction through the issuance of a permit, in accordance with the zoning established. SETENA’s Environmental License is required for such a permit to be issued, as well as the payment of a 1% tax on the total construction value.

Contracts with construction companies and related services should include clear environmental compliance clauses drafted according to Costa Rican law. A breach of the environmental compliance laws can lead to an administrative or even criminal case against company management. Any work that alters the environmental conditions of the site (for example, the removal of vegetation cover) should be performed only in previously authorized spaces.

Water use

Water availability

Water permitting is regulated by two institutions in Costa Rica, the National Water Institute (AyA) and the Ministry of Environment (MINAE) through its Water Department.

Water availability is fundamental for any project development in Costa Rica. Investors should perform an adequate due diligence on water availability before investing in a project. Although water is abundant in Costa Rica, infrastructure or capacity may be lacking and the permitting process often involves multiple national and local institutions.

Projects face two main situations when trying to obtain water availability: either the area has an existing infrastructure for water service or there is no existing water infrastructure. If the area has existing infrastructure, the water service will be provided by an entity authorized by the Government either AyA, a municipal aqueduct or a local aqueduct run by a community association that reports to AyA. In this scenario, a water availability letter should be obtained from the local supplier to guarantee water availability for the development of a project.  In fact, the water availability letter is an essential requirement to obtain a construction permit. In the second scenario, if an area does not have water infrastructure, water can be obtained through a concession to drill and exploit wells or to draw water from nearby rivers and streams. These concessions require hydrological studies and are approved by MINAE’s Water Department.

Desalinization plants are also a possibility. Costa Rica has enacted regulations for the construction and operation of desalinization plants. The first plant of this type in the country entered into operation in 2016.

Waste water

Under Costa Rican law, waste water produced by projects or industries may not be discharged without prior treatment and a discharge permit issued by the Water Department of MINAE. Before disposal into the sewer system or water bodies, the discharge has to meet certain minimum standards outlined by the regulations. Any activity, work, or project that generates non ordinary waste water must have a wastewater treatment system to prevent any contamination.

Control of air pollution

Costa Rican Regulation establishes the maximum emission values ​​to which establishments whose processes or activities include the operation of boilers and furnaces of indirect type, must be adjusted. To control the emissions of each generator entity, all the establishments that use boilers and ovens of indirect type in their processes, must submit operational reports to the Ministry of Public Health.

The periodic filing of the operational reports is mandatory.  Therefore, the Ministry of Public Health will not grant the renewal of the sanitary operating permit to those generating entities that have not submitted the operational reports.

Solid waste management

Costa Rican Law establishes a framework for the management of solid wastes that mandates that those who produce all kinds of wastes have the obligation to have a waste management plan, including the traceability of the wastes delivered to authorized companies for recycling or the final waste disposal.

The law defines three categories of waste: ordinary, special and hazardous, all of them with a specific regulation.

In order to ensure compliance, Ministry of Health officers may visit, without prior notice, the facilities of public and private generators to monitor the existence and implementation of the respective waste management program.

As a novel aspect on this topic, in 2019, the Costa Rican Legislative Assembly enacted a law that prohibits the commercialization and free delivery of disposable plastic straws, and the commercialization and free delivery of plastic bags to the final consumer in supermarkets, as well as in other types of businesses that use bags for the transport of the product. This law contemplates an exception for small and medium-sized plastic bags that have been manufactured with at least 50% reprocessed material.

Influence of congressional or parliamentary committees on the Costa Rican investment climate

Costa Rica is organized as a presidential democracy. It has three main branches of government (executive, legislative and judicial), and a fourth branch which is in charge of the civil registry and electoral matters. Several agencies and government owned companies are in charge of specific sectors of the economy. For example, electricity production, oil refinement, fuel distribution and water distribution are all managed by the State.

The Costa Rican Executive Branch is led by a President and two Vice-Presidents who are elected by national popular vote and a government council of ministers who are directly appointed by the President.

The Costa Rican Congress (the Legislative Branch) is a unicameral organization, formed by a fifty-seven representative body elected by popular vote in seven provincial electoral districts. Congress is led by a board with three members: a president, a secretary and a deputy secretary. Members of both the Executive and the Legislative Branch have four-year terms with no immediate reelection permitted. Non-elected employees in both branches consist of a permanent body of civil servants protected under a statutory regime.

The Costa Rican Supreme Court (the Judicial Branch) is formed by a body of twenty-two Justices elected by the Congress, and organized into four Chambers divided by areas of specialization (civil and administrative law, labor and family law, criminal law and constitutional law). The Costa Rican Supreme Court is led by the Judiciary’s President and an Administrative Council. Justices have an eight-year renewable term which, in practice, is always renewed by Congress.

The Costa Rican Congress rarely has any direct influence over an investment project. Instead the permits, authorizations, government contracts, and supervision of compliance are the authority of the Costa Rican Executive Branch. However, the Costa Rican Congress and some of its committees have the authority to investigate public servants and administrative behavior. 

Additionally, when a project requires external financing or a sovereign guarantee, congressional approval must be obtained. The Costa Rican Congress holds the authority to approve or disapprove public loans when they are financed by foreign resources. Such loans must be approved by two thirds of the Congress’ members.

Mining, water exploitation and use, public infrastructure, power generation and distribution, public transportation, and other economic activities are subject to government procurement processes or concession granting procedures through the Executive Branch.

These activities are more likely to be subject to congressional investigation and to media scrutiny.

Corporate governance

Steps to start a business in Costa Rica

Although the steps to start a business in Costa Rica vary depending on the nature and model of the business, most foreign businesses will need to go through the following procedures to be able to operate:

  1. establish a local presence
  2. register before the tax authority
  3. register employees before the social security administration
  4. obtain workers’ liability insurance
  5. obtain a sanitary permit and
  6. obtain municipal license

Establishing a local presence

Foreign businesses have two basic options to establish a local presence in Costa Rica; they can (a) incorporate a local company or (b) establish a branch office. Each of these possibilities has different advantages and disadvantages as well as different steps that must be followed, as explained below.

Incorporating a local company

Incorporating a local company provides certain advantages to its investors such as:

 Possible disadvantages include:

Under Costa Rican law, companies can be incorporated either as a corporation (sociedad anónima) or as a limited liability company (sociedad de responsabilidad limitada). Although other forms of organizing corporations exist under Costa Rican law, they are generally not apt for businesses and are rarely used in Costa Rica. The main differences between a corporation and a limited liability company are its management structure and the restrictions on transfer of ownership.  A corporation requires the appointment of 3 board members and a comptroller, while a limited liability company requires the appointment of just one manager. In a limited liability company, owners must approve a transfer beforehand, while in a corporation, shareholders can freely transfer their shares.

The steps to incorporate a local company are the following:

  1. Hire Costa Rican legal counsel to help you draft the company’s articles of incorporation according to your needs
  2. Constitute the legal entity before a Costa Rican Notary Public
  3. Have the Notary Public incorporate the company before the Costa Rican National Registry
    1. this can be done online and takes about one day to complete
  4. Prepare the legalization of legal books with the authorization number provided by National Registry
Incorporating a branch office

The other option to establish a local presence is to set up a branch office in Costa Rica. In this case, the company will not have a separate legal entity but rather a recognized branch of the parent company operating in the country.

The steps to incorporate a branch office are the following:

  1. Hire legal counsel to help you draft the branch’s articles of incorporation according to your needs
  2. Have a company representative appear before a Costa Rican Notary Public or an officer at the Costa Rican Consulate in Canada with supporting documentation and sign the official documentation to establish the branch office
  3. Have local counsel incorporate the branch before the National Registry
Registering with the Costa Rican tax authority

In order to register as a taxpayer, an online form must be filed outlining certain company information. Every person and company with economic activities in Costa Rica must be registered. Companies need a legal identification number to complete the form.  This number is obtained once a local entity or local presence is established and registered with the Costa Rican Public Registry according to point I above.

Registration of transparency and ultimate beneficiaries owners

Costa Rica has established an obligation to comply with the Registration of Transparency and Ultimate Beneficiaries Owners to address tax evasion, money laundering and organized crime.

The registration must be filed by a legal representative through an electronic signature issued by the Central Bank. Powers of attorney are typically issued when the legal representatives do not have a Costa Rican electronic signature.

The penalty for failure to register and file is in an amount equal to 2% of the gross income reported by the company in the Income Tax Statement of the previous fiscal year, with a minimum of 3 base salaries (approx. US$2,400) and a maximum of 100 base salaries (approx. US$77,600).

December 31st, 2019 was the dead line to comply with the registration before the Costa Rican Central Bank (BCCR). However, Congress approved the deferral of the penalties set out by the regulations. The deferral consists of a suspension in the application of penalties for failure to comply with the filing of the 2019 ordinary statements by January 31, 2020, for a term of 2 months (March 2020), plus 1 additional month during which penalties will be reduced to 50%.

The approval of the deferral does not excuse obligated entities from complying with the filing of the 2019 ordinary statement prior to filing the 2020 ordinary statement during the month of April 2020.

Obtain workers’ risk insurance at the national insurance institute

Workers’ risk insurance is mandatory by law and employers must obtain a policy from an authorized insurance provider. This procedure can be performed in agencies of the Institute or with an authorized insurance agent. 

Register with the Costa Rican Social Security Administration (CCSS)

Before starting operations in Costa Rica, a foreign company must be registered as an employer with the Costa Rican Social Security Administration and contribute to the social security system on behalf of its employees. In order to register, it is necessary to submit certain documents concerning the company´s activities and employees. This procedure is necessary to start operations and takes about one day to complete.

Within fifteen days after submission of the documents, an inspector will visit the company in order to verify the information provided. 

In addition to employer contributions on employees’ behalf, employees must contribute to the system with 10.50% of their salary. As such, employers should register the employee with the Costa Rican Social Security Administration within eight days after their incorporation to the company.

Obtain a sanitary permit at the ministry of health

All businesses operating in Costa Rica must obtain a sanitary permit from the Costa Rican Ministry of Health. Obtaining a sanitary permit requires:

Depending on the commercial activity being conducted (for example medical services) and number of employees, it may be necessary for the company to submit an emergency plan. Fees to pay for this procedure vary between $30 and $100.

Obtain municipal permit at the municipality where the business will be located

Obtaining a municipal permit requires having a sanitary permit from the Ministry of Health and staying current with municipal tax obligations. To keep this license, it is necessary to pay an annual fee.  


Costa Rica´s tax system has been significantly reformed in the last couple of years, especially in connection with Income Tax Rules, the introduction of a new Capital Gain Tax and changing the old Sales Tax system to a new Value Added Tax.

Income tax

The Costa Rican tax system is based on a territoriality principle, according to which only income received from a source within the Costa Rican territory, or when it involves the use of the country's infrastructure, is taxed.

According to the administrative case law developed by Tax Authorities, not only income generated within Costa Rican borders is subject to tax in Costa Rica, regardless of the nationality, domicile or place of incorporation of the taxpayer, but also such that might be associated to a Costa Rican tax payer infrastructure such as sales, interest and income generated abroad.

Since July, 2019, the ordinary fiscal year extends from January 1st to December 31st (calendar year) this change will apply from January, 2021. It is possible to obtain a different fiscal year under special circumstances.

Income tax on profits

Income tax rates on profits corporations are taxed at a general rate of 30%. Small companies (officially registered as micro or small companies) can apply a progressive scale depending on net income at tax rates that ranges from 5% to 20%.

Individuals income tax rate is based on a progressive scale depending on gross income, it ranges from 10% to 25%.

Deductions include all necessary expenses for the production of taxable income.

Since July, 2019, according to the “Ley de Fortalecimiento a las Fiananzas Públicas” (Tax Reform), the concept of taxpayer for income tax purposes was extended, considering as taxpayers all legally incorporated entities, regardless of whether they perform or not an economic activity, including professional activity entities, Government owned companies, collective entities without legal personality and joint ventures existing in Costa Rica.

According to this modification, any legal entity would be considered a taxpayer for income tax purposes, regardless that they might be considered inactive entities, the formal obligations for such entities consider registration duty and information filing on assets, liabilities and equity on a yearly basis.

Costa Rican income tax returns must be filed within two months and 15 days following the end of the tax year. Failure to file income tax returns on time is penalized by a fine equivalent to half a Costa Rican base salaryFootnote 1, interest and penalty interest.

Under Costa Rican law, taxpayers pay their taxes through three separate income tax payments made during the tax year. These payments must be made in the months of June, September and December of each year. The amount of each partial payment must be a third of either (a) the amount between the last three years’ average annual income tax, or (b) the amount of last year’s tax (whichever is higher).

Capital gains tax

The Tax Reform also established a new Capital Gain Tax, capital gains are now taxed at a 15% general rate.  Capital gains are defined as income derived from the income generated by movable assets, investments or real property assets, as well as the changes on the equity of a tax payer.  In the case of taxpayers whose normal activity is the sale of real property, those gains would be subject to income tax. Also, a taxpayer sells an asset subject to economic activity, the capital gain would be subject to income tax.

Dividends are considered as capital gains. Dividends paid to local and foreign companies or individuals are subject to a 15% withholding tax. However, dividends paid to other Costa Rican entities that have other economic activities different from being a holding company are not subject to the 15% withholding.

There are no profit repatriation provisions currently in force in Costa Rica.

Withholding taxes on remittances abroad

Under section 52 of the Costa Rican Income Tax Law, Costa Rican source income paid to non-resident persons or entities is subject to withholding taxes. This withholding tax applies to the gross amount remitted with no deductions allowed. Even though the non-resident entity or individual receiving the remittance is considered the taxpayer, the local payer is considered the withholding agent, and as such, is jointly liable for paying the withholding tax.

The applicable withholding tax rate varies depending on the type of income that is being remitted abroad, as is indicated in the table below.

Applicable withholding tax rates
Income derived fromTax rate
Transportation and Communications8.5%
Wages, salaries, pensions under labor relationships10.0%
Fees, commissions, professional services, or any other payment made pursuant to a non-labor relationship25.0%
Insurances premiums, reinsurances, and related payments5.5%
Motion pictures, TV programs, soundtracks and related payments20.0%
Soap Operas and similar programs50.0%
Dividends on shares registered and bought through a local stock market5.0%
Interests and other financial payments (if the recipient is a foreign financial institution registered before the Costa Rica Central Bank, they may be exempt from withholding taxes)15.0%
Financial/technical advisory, royalties, trademarks, franchises, formulas, and similar payments25.0%
Any other remittance from a Costa Rican source not listed above30.0%

Salary tax

Under Costa Rican law, a salary tax is applied to the monthly salary paid to all employees. The employer is responsible for withholding and paying the salary tax. Failure to comply with this obligation will result in interest and fines. Two additional tax rates were introduced by the Tax Reform.

The salary tax due is calculated based on the progressive rates below, which are updated every year.

Progressive rates for the 2020 tax period
Costa Rican Colones$ USDTax rate
Up to ₡ 840.000Up to $1.4350%
From  ₡ 840.000 up to ₡ 1.233.000From $1.435 up to $2.10710%
From ₡ 1.233.000 up to ₡ 2.163.000From $2.017 up to $3.69515%
From ₡ 2.163.000 up to ₡4.325.000From $3.695 up to $7.38820%
Over ₡4.325.000Over $7.38825%

Transfer taxes

Under Costa Rican law, transfers of real property are subject to a 1.5% tax. This tax is calculated based on the value between the transfer value of the property and the value of the property registered before the Costa Rican Tax Authority.

Under Costa Rican law, the transfer of movable assets registered with the Costa Rican National Registry is subject to a tax of 2.5%. This tax is calculated based on the value between the transfer value of the property and the value of the property registered before the Costa Rican Tax Authority.

Value added tax

Costa Rican Tax Reform creates a new Value Added Tax (VAT) which replaced the old General Sales Tax since July 1st, 2019, the VAT is charged on the sale, import or transfer of goods and provision of all services (except specific exemptions, such as private education and public transportation).

All individuals and entities which, on a regular basis, sell merchandise or provide services, goods, definition includes tangibles and intangible goods, are VAT payers.

The value added tax rate is 13%.  Nonetheless, there are some specific reduced rates.

Reduced VAT rates
VAT rateProduct or service type
  • Basic products
  • Agricultural supplies
  • Pharmaceutical drugs
  • Private services education
  • Personal insurance
  • Sales and purchases of Public Universities
  • Flight tickets (based on the 10% of the rate in international flights)
  • Private health services

Exports, Free Trade Zones and transactions between Free Trade Zones beneficiaries are exempt from the VAT.

Transfer pricing rules

Costa Rican Tax Reform enacted transfer pricing rules that create an obligation for transactions between entities that are part of the same economic group to meet the “arm’s length” principle. Essentially this principle establishes that all transactions between related parties should be conducted under the same parameters and terms as if they were made with independent third parties.

As part of the transfer pricing obligations, taxpayers performing intercompany transactions considered as National Big Tax Payers and free trade zones will have to file an informative tax return detailing the transactions conducted and the methods used to value the margins on those transactions. Additionally, the tax return should include a transfer pricing study to evidence the fulfillment of the requirements for any tax payers that carries out intercompany transactions.

Other taxes and specific provisions

Education and culture stamp duty

Under Costa Rican law any company registered with the Costa Rican Public Registry, whether active or inactive, must pay an annual “Education and Culture Stamp Duty” (Timbre para la Educacion y Cultura). This duty is paid in the months of February and March of each year, and is calculated in accordance with the following table.

Calculation of education and culture stamp duty
Net CapitalTax Amount
Net Capital less than ¢250,000 (approx. $500 USD)CR 5,000 aprox ($10)
Net Capital between ¢250,000 and ¢2,000,000 (from $500 USD to $4,000 USD)CR 6,000 (Aprox $12)
Net Capital between ¢2,000,000 and ¢4,000,000
(from $4.000 USD to $8,000 USD)

CR 12.000 (Aprox $24)

Net Capital more than ¢4,000,000 ($8,000 USD)CR 18.000 (Aprox $36)

Municipal taxes on real estate and operation permits

Costa Rican Municipal taxes vary according to the regulations of the relevant municipal government. Generally, Costa Rican taxpayers are subject to two municipal taxes, the real estate tax and the operation permit tax.

The real estate tax, which is levied at a 0.25% tax rate, is calculated on a calendar year basis, but is normally paid quarterly. The real estate tax is calculated on the value of the real estate as this is the value that is recorded at the respective municipality. Under Costa Rican law, real estate owners should make a self-valuation of the value of their properties every five years.

Costa Rican operation permit taxes vary depending on the municipality. Normally such rates are applicable to a combination of both the gross and net income of the taxpayer.

Corporate tax

Under Costa Rican law, all legal entities registered at the Costa Rican Public Registry are subject to an annual tax. For active entities, the tax is approximately from $200 USD to $400 USD and for inactive entities it is approximately $150 USD.

Tax on luxury residences

Luxury residential properties valued at more than 121 million colones (approx. $224,000) are subject to the Solidarity Tax for the Strengthening of Housing Programs, a progressive tax that ranges from 0.25% to a maximum tax rate of 0.55% of the property value.

Institutional framework

Government departments and authorities responsible for foreign direct investment management

Foreign direct investment in Costa Rica is propelled by the Executive branch and the Ministry of Foreign Trade (COMEX). COMEX manages foreign direct investment inflows and sets the country’s trade policies to promote, facilitate and strengthen Costa Rica’s participation in the global economy, with aims of improving economic growth and quality of life standards.

COMEX also oversees the Foreign Trade Promotion Institution (PROCOMER), which is in charge of helping local producers access international markets and manage the entrance of foreign enterprises into the free trade zone regime.

Other entities that deal with foreign investment include the following:

  1. Costa Rica Investment Promotion Agency (CINDE): CINDE is a private non-profit, apolitical organization dedicated to promoting and assisting with the establishment of foreign direct investment. They deal directly with foreign companies looking to set up operations in Costa Rica and provide guidance and assistance to help them in this process.
  2. Ministry of Economy, Industry and Commerce (MEIC): Supports economic and social development by creating policies to facilitate the proper functioning of the market, consumer protection and promoting competitiveness.

Legislation and policies that may pertain to investment and describe the level of transparency of the regulatory system

Costa Rica has a solid legal system which protects foreign investors, their property, and contractual rights. The Costa Rican Constitution guarantees equal access to justice for both foreigners and nationals. The legal system also guarantees the right to access alternative dispute resolution mechanisms and allows private parties to freely choose the applicable law and dispute resolution forum.

Both the regulatory and legal systems are transparent. In 2018, the country ranked 48 out of 177 countries in Transparency International’s Corruption Perception Ranking, the third best rating in Latin America. In spite of the favorable transparency ratings, the country lags in efficiency indicators for starting a business, as measured by the World Bank’s Doing Business Ranking which sets Costa Rica as 74 out of 189 economies. Both rankings demonstrate stable improvements from previous years. 

Costa Rica’s Free Trade Zone regime is the central policy used to incentivize foreign investment, and is discussed in section VI of this guide. This Regime offers tax exemptions to qualifying investments.

Membership in international organizations and bilateral agreements related to investment

Costa Rica is an active player in international organizations and has generally favored joining international organizations, and signing bilateral investment and free trade agreements.

Costa Rica and Canada also have an extensive history of friendship and cooperation which is reflected in various treaties, namely the Costa Rica Canada Free Trade Agreement (CCRFTA), the Costa Rica Canada Bilateral Investment Treaty (Foreign Investment Promotion and Protection, FIPA), the Costa Rica Canada Tax Information Exchange Agreement and the Costa Rica Canada Open Skies Agreement.

These agreements provide rights to Canadian investors in Costa Rica and evidence the strong relationship between both countries. In 2011, agreements at a technical level for the texts of the chapters on investment, financial services, telecommunications, services, electronic commerce, public sector purchases, technical barriers to trade, competition, temporary entry, settlement of controversies, customs procedures and institutional provisions were reached.

Costa Rica is a member of the following international organizations:

  1. Central American Common Market
  2. International Centre for Settle of Investment Disputes (ICSID)
  3. International Monetary Fund (IMF)
  4. Latin American Economic Commission (CEPAL)
  5. Multilateral Investment Guarantee Agency of the World Bank (MIGA)
  6. Organization of American States (OAS)
  7. United Nations (UN)
  8. United Nation Conference on Trade and Development (UNCTAD)
  9. World Bank
  10. World Intellectual Property Organization (WIPO)
  11. World Trade Organization (WTO)

In addition, Costa Rica is in the process of joining the following international organizations:

  1. Organization for Economic Cooperation and Development (OECD)
    1. a multilateral organization dedicated to the promotion of free trade and economic progress around the world
    2. Costa Rica is currently in official negotiations for membership status in this organization
  2. Pacific Alliance Organization
    1. an organization formed by Chile, Colombia, México and Peru, that seeks economic growth and improved competitiveness
    2. Costa Rica is undergoing the internal ratification process to fully participate in this organization

Costa Rica has signed Free Trade Agreements with the following countries / regions:

  1. Canada (CCRFTA)
    1. entered into force in 2002 and in 2011 an agreement was to modernize and expand CCRFTA was agreed upon by both countries
  2. CARICOM (Caribbean Countries)
  3. Chile
  4. China
  5. European Union (Association Agreement)
  6. Mexico
  7. Panama
  8. Peru
  9. Singapore
  10. United States – Central America – Dominican Republic (DR-CAFTA)
  11. European Free Trade Association (EFTA)
    1. an organization formed by Iceland, Liechtenstein, Norway and Switzerland, dedicated to promote free 8trade and economic integration
  12. Colombia

Additionally, Costa Rica has signed Bilateral Investment Agreements with the following countries:

  1. Argentina
  2. Netherlands
  3. Canada
  4. Paraguay
  5. Chile
  6. Qatar
  7. Czech Republic
  8. Spain
  9. France
  10. Switzerland
  11. Germany
  12. Taiwan
  13. Korea
  14. Venezuela

Dispute settlement mechanisms

Costa Rica is an excellent location for alternative dispute settlements considering it is a stable democracy, boasts strong pro-arbitration legislation, accommodating and environmentally-friendly infrastructure, is in a strategic geographical location, and allows parties to save on procedural costs.

Costa Rica is pro-alternative dispute settlement jurisdiction, and has approved significant legislation to protect the use of these mechanisms, including the International Commercial Arbitration law and the Alternative Dispute Settlement law. There are currently 15 arbitration centers in the Country. Furthermore, Costa Rica has ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, The Inter-American Arbitration Convention, and agreed to the Convention for the Settlement of Investment Disputes between States and Nationals of Other States (ICSID convention). 

Foreign ownership regulation

Regulation concerning private foreign ownership in Costa Rica

Costa Rica has few regulated areas in which foreigners are prohibited from investing. All of these restrictions must be expressly stated in the law. Currently, only the following sectors place restrictions on foreign investment:

  1. Energy production : Companies with less than 35% national equity ownership may not sell energy, pursuant to the Autonomous Electric Generation Law.
  2. Construction and development of the maritime zone area: Companies with less than 50% national equity ownership may not develop on these zones for tourism purposes, pursuant to the Maritime Zone Law.
  3. Air Travel Services: Local public air transportation companies with less than 51% national equity ownership are restricted from operating, pursuant to the Civil Aviation Act.

There are no further restrictions for foreign investors, and they are free to create companies, own stock, register to operate in municipalities, register as employers and register with the tax authorities. Costa Rican laws also guarantee the free movement of capital for national and foreign investors without restriction on the repatriation of income.

Foreign trade zone, and incentives

General description

The Free Trade Zone Regime entails incentives and benefits granted by the Costa Rican Government to companies that develop certain types of new investment activities. These incentives include tax exemptions from taxes that are generally applicable, including income tax, value added taxes, withholding taxes on foreign remittances, import duties and taxes, local government taxes, among others.  

To fall under the Free Trade Zone Regime, a company must meet several requirements established by the Promoter of Foreign Trade (herein after, “PROCOMER”) and comply with the provisions of the Free Trade Zone Law and its Regulations.

Categories of free trade zone eligible companies

Companies seeking the benefit of the Free Trade Zone (“FTZ”) Regime must fall under one of the following categories:

Processing companies

Companies that repack or redistribute non-traditional goods for export or re-exports.

Services companies

Service companies that comply with the Strategic Eligibility Index for Service Companies (IEES)*. Financial, banking, or insurance companies cannot apply for the benefits granted under the Free Trade Zone Regime. Either natural or legal persons dedicated to provide professional services be eligible for the Regime.

* The IESS is an arithmetic equation that evaluates the level of employment, the level of investment and the percentage of productive chains in Costa Rica to companies in strategic sectors. Additionally, companies wishing to apply for this category must carry out the activities listed by the Government of Costa Rica as a strategic sector.

Park administrators

Companies that manage business parks where companies under the Free Trade Zone are located provided that the parks meet minimum standards of infrastructure and services.

Scientific companies

Companies engaged in scientific research to improve the technological level of industrial or agro-industrial and foreign trade of the Country.

Shipyard companies

Companies that operate shipyards and dry docks for construction, repair, or maintenance of vessels.

Manufacturing companies

Companies that produce, process, or assemble goods, whether exported or not, that meet additional requirements.

Requirements to apply for the free trade zone regime

The Free Trade Zone (FTZ) Regime will be granted only to companies that commit to making initial new investments* in Costa Rica in accordance with the following parameters.

Parameters for the FTZ regime
 Inside GAM**Outside GAM**
Inside FTZ ParkUS$150,000.00US$100,000.00
Outside FTZ ParkUS$2,000,000.00US$500,000.00

*Does not apply for Services Companies
**Greater Metropolitan Area (“GAM”): Term used to refer to the principal cities and counties located in the Alajuela, Cartago, Heredia and San José provinces including the surrounding areas of the Central Valley. 

New investments defined

New investments are defined as those made on fixed assets that meet the following conditions:

Assets acquired before the date of submission of application to join the scheme and used assets acquired in the country, will be considered as part of the total investment level but not of the new initial investment committed by the company.

Deadline to complete the initial investment

The period to complete the initial investment will be established in the resolution granting admission into the FTZ Regime, and will be determined by the nature and characteristics of each project, but shall in no case exceed three years from the notification of the grant agreement.

Fixed assets defined

Fixed Assets includes real property and personal property subject to depreciation. In the case of the park administrating companies, it also includes real estate in trust that is used for its management and development activity and all real estate used in the operation of the business.

Income tax benefits of the free trade zone regime for services, shipyard, scientific, processing companies and park administrators

Table: Income tax benefits of the free trade zone regime for services, shipyard, scientific, processing companies and park administrators
Companies inside the GAM*Companies outside the GAM*

100% exemption for first 8 years

100% exemption for first 12 years

50% exemption for 4 years after50% exemption for 6 years after

Benefits include partial or complete exemption from all taxes on profits, as well as any other tax that is determined in relation to gross or net profits, dividends paid to shareholders or income from sales. The benefits are greater for companies located outside the GAM.

*The duration is measured from the start of operations, but shall not exceed three years from the publication of the grant of FTZ benefits. In all cases, multiple additional 8-year renewals periods may be granted if significant reinvestment is made.

Additional benefits

Companies within the free trade regime may request additional assistance, including: training employees, selection of personnel to be employed in these companies, meeting the housing and educational needs of the employees and their families, and fulfilling the requirements asked of them by the Government and private institutions. Companies within the FTZ Regime located outside the GAM will have the right to receive a bonus of up to a 10% of the sum paid for wages during the year after the legal deductions from the Social Security Administration.

Fiscal exemptions

Limitations on local sales

All goods and services entering the domestic market will be subject to all taxes and customs as of any similar import from abroad.


Manufacturing projects:


If the company intends to invest within the GAM, the project must be classified within one of the following Strategic Sectors.

Strategic sectors of classification when investing within the GAM

However, if the company intends to invest outside the GAM these categorizations do not apply.

Exempt from income tax

The company must be wholly or partially exempt or otherwise not subject to, income tax at the time of applying for access to the FTZ regime. Therefore, application for the FTZ regime is barred to companies that are not wholly or partially exempt from income tax; this restriction also applies to mergers or acquisitions of companies whose activities or assets are or have been subject to income tax in Costa Rica (not exempt).

New investments

The company must be making new investments in the Country. The nature of these investments must be such that they could be made in another country or moved to another country. A company must demonstrate this by either (a) completing a feasibility study showing that the project could be carried out in another country, or (b) showing that the controlling entity of the company already operates a similar project abroad in a country outside of Central America and Panama.


Benefits include partial or complete reduction in taxes on profits, as well as any other tax that is determined in relation to gross or net profits, dividends paid to shareholders or income or sales. The benefits are greater for companies located outside the GAM.

Tax rate and duration of companies inside and outside the GAM

Companies inside the GAM*

Companies outside the GAM*

Tax rate exemption for strategic sectors

If the company belongs in a strategic sector and employs at least 100 persons, it will have the following income tax exemption:

Companies inside the GAM*

Companies outside the GAM*

*The duration is measured from the start of operations, but shall not exceed three years from the publication of the grant of FTZ benefits.

Real estate

Ownership and transfer of property in fee simple

Real property in Costa Rica may be owned and transferred in fee simple title. However, property located in the Maritime Zone, discussed in more detail below, may only be used and occupied pursuant to a concession agreement with the Government.  There are no express or implied limitations on foreign individuals or corporations acquiring fee simple title to property, but there are restrictions on foreign ownership of concessions in the Maritime ZoneFootnote 2.

All transfers of fee simple title must be documented through a public deed issued by a Costa Rican notary public,Footnote 3 and must be recorded in the Registro Nacional (the “Public Registry”) in order to be enforceable against third parties.Footnote 4 Transfer of fee simple title by deed includes statutory warranties of title and against damage or loss caused by willful misconduct or negligence (these warranties are mandatory—Costa Rican law does not recognize an “abandoned-claim” or “non-warranty” deed).  It is customary for sellers to grant additional warranties or further assurances to the buyer in the contract (e.g., clouds in the title, squatters, and utilities availability).  These warranties are not a substitute, however, for the buyer carrying out his own due diligence.

The Public Registry is the sole public registry in Costa Rica.  The Public Registry holds information for all titled properties and concession properties in Costa Rica, including “ad rem” rights in the properties. Footnote 5  The Public Register’s records show the owner’s name, the property acreage and boundaries, cadastral survey number, and all liens and encumbrances affecting the property.

There are no restrictions on public access to the Registry.  The purchaser can obtain all the information he might need regarding liens, encumbrances and other rights affecting real estate.  Through the Costa Rica public registry it is possible to obtain basic real estate information (i.e., owner name, location, liens, cadastral survey numbers, and acreage).  It is not possible at this time, however, to access the underlying deeds, cadastral surveys, or other recorded documents online. A thorough, well-researched, title due diligence will include a detailed review of the totality of documents at the Public Registry.

Title verification at the Public Registry is be very simple; however, current information at the Public Registry (for example, the exact acreage of the property) is often inaccurate.  In some cases, there are inconsistencies among the current and historical information in the Public Registry, the information shown on the cadastral survey, and the reality on the ground.  Some inconsistencies are easily corrected by an attorney or notary public and sometimes with the help of a surveyor.  Other inconsistencies may indicate serious title defects that will require substantial curative work and may result in the termination or substantial alteration of the business transaction.  Proper due diligence, both in the title examination process and in structuring of the transaction documents to protect the buyer’s interests, is of great importance to the transaction.

Typical transaction structure for the purchase and sale of real property

The contractual structure and closing process in Costa Rica is similar to real estate transactions in developed markets.  The parties execute an option agreementFootnote 6 in which the buyer places an earnest money deposit with the seller or an escrow agent. The contract is not typically recorded. The buyer will have an inspection period during which it will conduct due diligence and, if it determines that the property is not suitable for the intended use, during which it may elect to terminate the contract and receive a return of the deposit. After the inspection period the deposit will become non-refundable, meaning that if the buyer does not proceed to closing, then the seller is entitled to keep the deposit as liquidated damages. Closing must be held before a notary public and both seller and buyer must attend in person or be represented at Closing with a proper power of attorney. Closing agents are not very common in Costa Rica, and due to applicable legal formalities, most times the attorneys take care of closing and post-closing matters.  Because specific performance by the Seller under an option agreement may be hard to enforce, it is suggested that the optioned property be placed in a trust or that the option agreement include an arbitration clause.

Concession rights in the maritime zone

The Maritime Zone is a 200 meter (656 feet) wide strip of land running parallel to the coastline, starting at the median high-tide line. Properties in this zone, with a few exceptions, Footnote 7 cannot be privately owned or transferred in fee simple. However, there is a legal procedure to acquire concession rights granted for a set time, but subject to the terms and conditions of Law No.6043 (the “Maritime Zone Law”). The Maritime Zone is divided into:

  1. Public area, a 50 meter (164 foot) strip of land closest to the shore which is public land and cannot be owned or possessed as private property; and
  2. Restricted area composed of the remaining 150 meters (492 feet) further inland, where a party can possess or “lease” the land as the holder of a concession granted by the local municipality (the “Municipality”), for a set period of time between 5 and 20 yearsFootnote 8with a possibility of renewal, so long as the holder meets all applicable legal requirements, including but not limited to:
    1. The area to be granted to an applicant must be plotted with land markers indicating the median high tide line and the line where the 150m restricted area ends. Many beaches in Costa Rica are not landmarked, in which case the applicant must apply to the National Geographic Institute for a survey of the land and establishment of the landmarks (or “mojones”).
    2. A Regulatory Plan (zoning plan) created by the local municipality, which divides the beach into separate land-use areas (i.e., residential, recreational, tourism, commercial, and/or camping) must be approved by the Municipality prior to the granting of any concession. Each zoning category has its own set of requirements.

The concession agreement (“Concession Agreement”) is a type of administrative lease, executed by the Municipality and the private entity or person (the “Concessionaire”). The Government of Costa Rica (the “State”), acting by and through the Municipality, grants to the Concessionaire the use and enjoyment of property located within the restricted area for a period of time not less than five years or more than 20 years; provided that all the requirements established by the Maritime Zone Law are met by the Concessionaire. The concession must be approved first by the local Municipality, second by the Instituto Costarricense de Turismo (“ICT”), and third by the Public Registry. The concession is first submitted to the local Municipality, which will require approval by ICT.  After the concession is granted by both of these entities, it must be filed at the Public Registry.  The concession is valid against the rights of third parties from and after the date the agreement is notarized by a notary public and recorded at the Public Registry under the Concession Section. 

PPPs in infrastructure projects

Costa Rica has a solid legal and institutional framework that supports the traditional government procurement contracts through Law No. 7494, Law for the Administrative Contracting and its Regulation.  Most public infrastructure projects have been developed according to this framework.

Nonetheless, in recent years, the Government has turned the sight to PPPs so that public debt is not enlarged.

Costa Rica enacted legislation to regulate Public Private Partnerships since 1998.  This legislation created the type of PPP called “concession” for public works with public services.  So far we have only 5 projects: 1) Toll road 27; 2) Liberia International Airport; 3) Caldera Port Terminal of Grains in the Pacific; 4) Caldera General Cargo Port Terminal in the Pacific and 5) Atlantic Containers Port Terminal ran since last year by APM Terminals.

Besides the public initiative to plan and structure PPPs, the Law of Concessions has the possibility of the private sector to submit, under their initiative, projects that can satisfy a clear need for a solution by means if this model.

Both, the public and private initiatives are subject to public tender procedures.

The term of the Concession Contracts is up to 50 years.

The compensation to the private partner may be under the mode of “user pays” and/or a combined one of “user pays PPP” and “government pays PPP”.  In the latter case, the government is authorized to contribute when there is a viability gap that needs to be filled up in order to have an attractive project in the PPPs industry.

There is a requirement to incorporate a Special Purpose Vehicle (SPV) to implement the construction from the moment a public tender is awarded to the interested parties, usually grouped in a consortium.

The requirement for capital contribution is at least 20%.

In addition, before the Law of Concessions was approved, Costa Rica had already adopted specific legislation to enable the procurement of power generation projects from renewable sources, through PPPs since 1990 through Law 7200 and 7508.

As of today, Costa Rica, has implemented 28 PPPs of the type Build, Own and Operate (BOO) and 8 of the type Build, Operate and Transfer (BOT).  The main sources of generation are hydro and wind, but there are projects underway regarding biomass as well.

There are recent developments and efforts to approve a special law of the Public Private Partnerships to have one sole body of regulation.  However, the legal framework for PPPs Costa Rica currently has, is well built and has served the purpose of constructing mega projects that without the support and financial aid of the private sector and the multilateral banks, would have not been possible.

Human resources and protection of property rights

Labor regulation

The Costa Rica Labor Code was enacted in 1943. Furthermore, many employment rights are protected in the Costa Rican Constitution, either as basic individual rights or specific rights applicable to employment contexts. 

Local labor laws are mandatory for all employers that are registered in Costa Rica (territoriality principle), and regulate essential elements of the labor relationship such as: minimum wage, work schedule, holidays, and non-negotiable rights of employees such as the thirteenth month (“aguinaldo”) and vacation time.   All employees must receive the latter payments at the end of the relationship, regardless of the cause for termination.

Costa Rican labor legislation is based on the “protective principle”, which seeks to resolve any potential doubt in favor of the employee, given that the employee is. Usually, in a weaker position than the employer. This principle appears throughout labor law policies and is regularly applied by judges in their decisions.

Article 18 of the Labor Code provides a presumption that a labor relationship exists (whether written or oral) between individuals in a labor relationship. This presumed agreement compels both parties to fulfill the obligations and rights set forth in the labor laws.

The Second Chamber of the Supreme Court specializes in labor matters and provides interpretations of ambiguous legal provisions. Costa Rica is also a member of the International Labor Organization (ILO) and often incorporates the recommendations and rulings of such organization.

Recruitment and termination of employment

There are several ways to recruit employees, depending on the education level required. For medium to high-level employees (managerial and executive levels), employers recruit via job-related web sites, recruitment agencies, and job fairs. For rank and file employees, local job fairs and newspaper ads are effective recruiting tools.

Except for very specific cases, either party may terminate the employment relationship at any time. For employers, two main types of dismissals are recognized in Costa Rican law: with cause and without cause. The Labor Code sets forth the reasons that justify terminating a labor contract with cause. Furthermore, there is ample case law establishing when it is justified to terminate a labor relationship with cause.

When dismissing with cause, the employer must only pay the proportional amount of the “aguinaldo” and vacation time. Dismissal without cause will require the employer to pay the latter, plus notice and severance (“cesantía”).  In all cases, the employee being terminated has the right to receive a written document indicating the reasons for the termination.

All employees may present complaints at the Ministry of Labor or in Court during or after the labor relationship. Once the labor relationship has ended, the employee has up to one year to file any claim, counted as of the last day of employment.

Compensation and benefits

There are several benefits that every employer must offer to all of their employees, including: government provided medical insurance, a government provided pension plan, maternity leave, payment of overtime, thirteenth month and vacation time.  Daily rest periods, holidays, and weekly rest days are mandatory as well.

Costa Rica’s Social Security System is financed by contributions from the Government, the employers, and the employees. The System provides beneficiaries medical assistance, maternity assistance, and pensions, and runs most of the hospitals and other healthcare centers throughout the country.

Beyond workplace safety requirements, the Labor Code also sets forth an insurance system to protect workers from accidents during working hours (workers´ compensation). The insurance is provided by the National Insurance Institute, which has a detailed schedule for disability payments, which may be either permanent or temporary.

In addition to holidays and rest days, every employee is entitled to two weeks paid vacation for each fifty continuous weeks worked. If employment ends before 50 weeks, the employee is entitled to a day for each month worked. Vacations can be split, but only in two segments.

Companies must also pay a thirteenth month which amounts to one month’s salary after a year of work, or an amount proportionate to the time worked, if it is less than a year.

Any other benefit that is not mandatory, but is offered to the employees throughout the labor relationship, could be considered an acquired right. This includes, for example, the provision of housing or a company car.

Hiring foreign nationals

In Costa Rica, any foreigner may work as long as he or she has legal residency, a work permit, or is under a legal or refugee condition. The work permit is an authorization granted by the General Immigration Directorate (DGME), and allows the foreign employee to work for a specific company or employer. The approval of a temporary residency permit is more likely if the position is managerial, technical, or highly specialized in nature. However, a temporary residency permit may be issued for a wide variety of positions.

The sponsoring employer must first complete a Temporary Residency Permit (TRP) application on behalf of the foreign national. Sponsoring companies that are accredited by the DGME should submit the application directly to the DGME.   Unaccredited companies may submit the application directly to the DGME, but processing times can take over 12 months. Documentation requirements and processing times for both visa and work permit applications can change frequently and without notice.

After arriving in Costa Rica, the foreign national must have his or her fingerprints taken at the Police Station located at the Ministry of Public Security in San José. In most cases, the sponsoring company must also register the foreign national with the Costa Rican Social Security Administration (CCSS) for the Temporary Residency Permit to be approved.  In addition, foreign nationals applying for residency in Costa Rica must register with the consular post of their country of citizenship in Costa Rica and submit proof of their consular registration as part of their residency application. Nationals of countries that do not have a consular post in Costa Rica are exempt from this requirement.

Temporary residency permits sponsored by companies that are accredited by the Costa Rican authorities are generally valid for an initial period of two years. Foreign nationals must exit the country through a designated port of entry and exit.  The Costa Rican company should also return the local residency ID (“DIMEX”) to the Immigration office, along with a formal notification that the assignment has ended.

Companies that hire foreign nationals without work authorization are subject to fines, audits, and heightened reporting requirements. Foreign nationals who violate Costa Rican immigration laws are subject to fines, deportation, and bars against re-entry. Foreign employees have the same rights as national employees in a labor relationship (e.g., minimum wage, Christmas bonus, vacations, severance, and social security, among the rest).

Regarding the living conditions for expatriates, the Central Valley is by far the most popular place to live in Costa Rica. Some of the favorite destinations are in the province of San José. Many expats living abroad in Costa Rica live in Escazú, Santa Ana, Cariari, Sabana, and Rohrmoser. These towns provide residents with beautiful views of the Central Valley, the provinces of Alajuela and Heredia, and an excellent location.

The Country is also home to a variety of private schools of different cultural backgrounds, including the US, UK, France, Germany and Israel, amongst others. Expat children feel right at home at these bilingual schools, and remain in touch with their native culture. Expats moving to Costa Rica with teenage children could also enroll them in local high schools, as the quality of education in Costa Rica is exceptionally high for the region.

Costa Rica’s rainforests and beaches are all within hours, driving distance, from the central valley, including those areas in the Southern Pacific, Guanacaste, Monteverde, Arenal, and Puerto Viejo.

Intellectual property

General background

Costa Rica boasts a burgeoning, yet complex, IP regulatory framework, which has been shaped by three key international treaties and regulations: World Trade Organization Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), Doha Declaration on TRIPS and Public Health, and US-Central American-Dominican Free Trade Agreement (CAFTA-DR).

Costa Rica is a signatory to the World Trade Organization Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) since it came into force on January 1, 1996, which set the baseline for intellectual property protection for all WTO member countries. 

Costa Rica is also a party to the 2001 Doha Declaration on TRIPS and Public Health, which clarified several TRIPS provisions, enabling countries that cannot make medicines themselves to import pharmaceuticals made under compulsory license (i.e. parallel importation, compulsory licensing).

Finally, on January 1, 2009, the US-Central American-Dominican Free Trade Agreement (CAFTA-DR) came into force. These international trade treaties and regulations have set the legal commercial background for Costa Rica’s intellectual property protection framework.

Author rights and neighboring rights

Author and Related rights are regulated in the Copyright and Related Rights Law, No. 6683, and Executive Decree N°26611-J. Copyrights are given to the author of all kind of artistic, scientific and literary works, including books, music, films, software, and others. Costa Rica is a contracting party of Berne Convention for the Protection and Artistic Works, the WIPO Performance and Phonograms Treaty, the Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms and, the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations

Author rights, differ from copyright since they add to the economic rights, the protection of moral rights. Economic rights include the exclusive right to the reproduction, translation, adaptation, communication to the public, broadcast, performance, distribution and rental-  of the work; all these faculties may be licensed or assigned. Moral rights give the author the right to maintain the work unpublished, defend his/her honor or reputation as an author, prevent or stop the reproduction or communication of the work in case it has been deformed, among others. Moral rights are personal rights and cannot be transferred or sold.

Related or neighboring rights basically consist of exclusive rights afforded to the works of performers, phonogram and video producers, and broadcasting entities.

As a general rule, works are protected under Law 6683 for the life of the author plus 70 years after his/her death. The registration with the Intellectual Property Rights Office is not required or mandatory to obtain legal protection, because of the automatic protection principle enacted by the Berne Convention, but strongly recommended for evidence of ownership and litigation purposes.

Patents & utility models

Costa Rica Law No. 6867 on Patents, Industrial Designs and Utility Models and Executive Decree N° 15222- MIEM- J provides two different types of protection for inventions: Patents and Industrial Design and Models.

Patent protection is granted to any invention – process or product – that fulfils novelty, inventive step and industrial application requirements. Even when patents can be obtained in any field of technology, scientific theories, discoveries, mathematical methods, and software, aesthetics, artistic and literary works, business or economy methods, plans, as well as combination of known products, variations of forms or use, size or materials, are not patentable subject matter. New varieties of plants are protected by Law N°8631.

The patent prosecution procedure includes the following steps: (i) Application, (ii) Formal examination and publication, (iii) Substantive examination, and (iv) Final decision. After the publication, third parties may oppose the patent on the grounds of substantive requirements. 

For a 20 years’ period the patent right holder will have an exclusive right to prevent or stop others from commercially exploiting the patent.

Patent rights belong to the inventor and if assigned or licensed, any related agreement must be registered with the Industrial Property Registry.

Industrial designs are any combination of lines or colors or any three­ dimensional form, whether or not associated with lines or colors, provided that such combination or form gives a special appearance to a product of industry or handicraft and can serve as a pattern for manufacture thereof. Any new arrangement or form obtained or introduced in known tools, work instruments or utensils which allow a better function or a special function for their use shall be deemed to be a utility model. In both cases the protection lasts for 10 years from the filing date.

Owners of protected industrial designs shall have the right to prevent unauthorized third parties, from making, selling or importing articles which bear or incorporate a design or model which is basically a copy of the protected design or model, where such acts are performed for commercial purposes.

Costa Rica is part of the Patent Cooperation Treaty.


A trademark is a sign or combination of signs that identifies a product or service. Tradename identify businesses, and slogans are always linked to a trademark application or registration.

The exclusive rights of the trademark owner last for ten years from the registration date, and can be indefinitely renewed.

The process to obtain a trademark starts by filing an Application at the National Registry of Trademarks, after an initial analysis the Office will order a publication and third parties with a legitimate interest, will have two months to oppose to such registration. Whether there is or not an opposition, the Trademark Office will proceed with a substantive examination in order to refuse or accept the application.

Costa Rica is not part of the Madrid International Trademark System.

Requirements for transferring intellectual property

In Costa Rica, the ownership of any type of intellectual property (trademarks, invention patents, utility models, registered signs, industrial models and copyright) can be transferred to anyone if the owner is willing to, by complying with the requirements stated by the respective intellectual property law. All transfers must be notified to the Industrial Property Registry to ensure it is correctly registered under the name of the current owner of the rights.

All the aforementioned types of intellectual property can be licensed to a third party via a written contract. It is mandatory to have the consent of the owner of the intellectual property to give effect to the license. For the effects of the contract to be valid among third parties, a notification must be send to the Industrial Property Registry for its registration.

Enforcement of IPRs

Costa Rica implemented the procedural requirements of TRIPs, at the national level on October, 2000 with the passing of Law 8039 “Procedures on enforcement of Intellectual Property Rights”.

Administrative measures are limited to Unfair Competition based infringements, border measures through Custom Authorities, and seizure procedures by the Ministry of Health.

Civil procedures can be initiated by the right holder(s), licensee(s) and association(s). The judicial authorities can:

  1. order injunctions
  2. request the opposing party to produce evidence under its control
  3. order the infringer to pay the right holder(s) adequate damage compensation, including the right holder(s) expenses, which may include appropriate attorney's fees; damage compensation may be estimated on the base of recovery of profits, benefits lost by the right holder, or payment of pre-established damages
  4. order the disposal outside the channels of commerce of infringing goods,  materials and implements used in the creation of the infringing goods

The criminal action arising from IP offenses is a public right to action by private application, however the authorities have the right to investigate, preserve evidence and seize ex officio.

Data privacy

Costa Rica, as almost all other Latin-American countries, follows the European model on Data Privacy, designed to protect natural persons´ fundamental rights and freedoms, and in particular their right to the protection of personal data and privacy. Consequently, our legislation will mostly favor the data subject, and will impose active obligations, both to data processors and data controllers.

Costa Rica´s applicable Law regarding data protection are Law N° 8968 “Protection of Individuals with regards to the Processing of Personal Data, and Executive Decree N° 37554-JP, modified by Executive Decree N° 40008-JP; collectively known as “Data Protection Law”.

The Data Protection Law defines personal data as any information concerning an identified or an identifiable person.  The Law applies equally to computer-processed data or hard-copy paper files and records.

The personal data categories are:

The main lawful basis for processing personal data is informed consent, defined as the data subject’s free, specific, informed, unequivocal (requires an affirmative action), and individual consent, collected either in hard copy or by electronic means.

Consent is not required when:

It is mandatory to register the database(s) at the Costa Rican Data Protection Agency (PRODHAB) when there are purposes of distribution, communication, or commercialization, and if the database or its contents are going to be sold, distributed, or shared with any third party, unless they are service providers and companies within the same corporate group.  This registration does not imply transferring the data to the Agency.

Regarding Data Security, data controllers must adopt the technological and organizational measures necessary to guarantee the security of the personal data and avoid its alteration, accidental or illicit destruction, loss, unauthorized treatment or access, as well as any other action in violation of the law. Said measures must include, at least the most adequate physical and logistical security mechanisms according to the current state of technology, to guarantee the protection of the stored information. Minimum data handling protocols must be implemented.

Any data subject has the right to access, rectification, modification, cancellation, and the right to be forgotten, as well as to consent withdrawal. Data subjects are entitled to file complaints against data controllers with PRODHAB, who is empowered to impose administrative fines and conduct investigations.

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