- Costa Rica Investing
Despite every negative thing that has been mentioned about Costa Rica and its good atmosphere for expats and foreign investors, foreigners still choose to stay here and make their investments because of the belief that, by far, Costa Rica remains to be one of the best retirement destinations in the region.
Fortunately, the Costa Rican government, through its ministries and financial institutions, remain to be pro-American. This means that there will be no socialist leader advocating for the demise of the USA while nationalizing most corporations currently in private hands. This makes the Costa Rican business market favorable for most expats and investors.
Furthermore, the Costa Rican government has long aimed to attract hi-tech corporations in the country through the promotion of its highly educated and computer-literate workforce. A modern production infrastructure that is currently being created is also a plus point. Right now, we are seeing a transition from an economy dependent on agricultural goods to an economy that is service-oriented.
No wonder Costa Rica has already gained the nickname “Silicon Valley of Latin America” after companies like Acer, Microsoft, GE, Abbot Laboratories, and Intel Corporation decided to make huge investments here, both financially and physically, with the establishment of some of their production and distribution facilities set up here.
Costa Rica is one of the proponents of continental free trade, and it has every right to do so after making sure that its local economic and political atmosphere are stable and consistent. Costa Rica is creating a competitive advantage for itself, and the world’s financial authorities are not too slow to not notice this.
All this and a lot more reasons make the country undoubtedly a good place to make an investment in.
A recent study by the Miami Herald rated Costa Rica the 27th safest country for investment of 140 countries surveyed. If you are not impressed by Costa Rica’s ranking, consider that the United States was ranked only 22nd. Another recent study found Costa Rica to be the least corrupt country in Latin America.
In addition, U.S. business magazine Fortune ranked San José Latin America’s fifth best city in which to do business and placed it within the 25 best cities in the world. According to the report, Fortune considered the city’s ability to create opportunity for its residents, its business climate and how well it can satisfy the business needs of companies that invest here. San José ranked tops in the quality of its labor force, its business environment and the lifestyle it offers resident executives and investors.
Let us review a few of the reasons why Costa Rica has such magnetism for qualified foreign investors. First, and perhaps most important, is the enduring political stability. In fact, The World Bank recently selected Costa Rica as the most stable country in Latin America. As you already know, Costa Rica has had a strong, democratic government without interruption since the 1940s and an excellent centralized banking system. The trend towards an open economy and possible trade pacts with such nations as the United States and Mexico are conducive to investment in Costa Rica. Privatization of many state-run institutions will undoubtedly help economic growth in the future. There are also no government expropriations or interference, unlike in many Latin American countries.
Costa Rica is easily accessible from all parts of the world by land, sea or air. Outstanding phone and Internet systems link Costa Rica internationally to other parts of the world. Also, let’s remember that investors in Costa Rica have equal rights and laws to protect them. Regulations for conducting business in Costa Rica are the same for both local and foreign corporations. Both can fully own and control local corporations, as well as real estate without any access limitations or restrictions. Many opportunities await foreigners who start new businesses previously nonexistent in Costa Rica. In addition, the cost of labor is low.
Additional reasons for investing in Costa Rica are: asset protection (creditors, judgments, liens, bankruptcy and divorce), privacy from individuals and governments and fewer taxes (income tax, inheritance tax, estate taxes and probate fees).
Presently Costa Rica boasts one of the five hottest real estate markets in the world. The boom is expected to continue given all the country has to offer investors, its natural beauty, growing popularity and the coming of age of the Baby Boomers.
Many attractive incentives are available to foreigners investing in Costa Rica. Investments of $50,000 or more in an approved project qualify the investor for legal residency. However, it is not necessary to become a resident to own or manage a business. Anyone who owns a business can import some items used to operate it and get a tax break on some of the usual duties. Contact the incentive section of the Costa Rican Tourism Institute (ICT) for more information about incentive programs.
Tourism is now the leading industry in Costa Rica. Numerous opportunities exist in this field. However, sometimes there can be a lot of red tape and competition. Small hotels and bread-and-breakfasts were good investments a few years ago, but there may be a surplus of them now. We have a good friend who refurbished an old building and turned it into a small hotel in 1990. He has done very well only because he has been in the country for a while, knows all the ropes, and was a pioneer in the field.
Foreigners can invest with Costa Rica’s nationalized banking system or private banks. Interest rates are higher than in the United States and there are many attractive savings accounts and time deposit programs from which to choose. There are some degrees of bank secrecy, liberal money transfer regulations, and favorable tax laws for foreigners.
Costa Rica has recently caught many eyes as a hot tourist spot but also as a great place to purchase real estate. With so much public attention and a vast number of tourists visiting Costa Rica every year, the country offers a great investment environment for real estate. Below are seven great reasons to invest in Costa Rica Real Estate.
WHY INVEST IN COSTA RICA?
While the rest of the world is going through a major economic downturn, things are looking good here. The IMF recently gave Costa Rica’s financial institutions and fiscal policies a passing grade.
Fortunately, the government has reserves, they did not make any investments on Wall Street and sub-prime mortgages do not exist here.
We also don’t have the huge commerce and manufacturing sector like the auto industry which is be devastated in larger countries. Once again, the bigger they are, the harder they fall. Small self sufficient countries like Costa Rica are just aren’t hit as hard as the big boys.
During the recent Christmas shopping season the store were packed with people out spending their money. So retail sales were good. On the other hand, the U.S. experienced the opposite.
Costa Rica is still affordable for your retirement dreams. People tend to compare the cost of living with depressed states like Florida to make it same expensive here. Property taxes, hired help, dining out, fruits and vegetables and above all high quality medical are still much cheaper than in the United States.
If you really want to see how affordable Costa Rica is then compare the prices here to Europe. A dinner for four in a good restaurant can cost $500 in Paris. Here the same number of people can eat for one fifth of that.
We will feel the trickledown effect from what’s happening in the U.S. but we will fare well. For example, our tourism doesn’t depend exclusively on the U.S. Market. A large number of European visitors come here every year and Chinese tourists are now interested in Costa Rica.
Stable Government:
Costa Rica is a democratic republic with three branches of government and has enjoyed one of the most democratic governments in Latin America. As of 1948, Costa Rica abolished it’s army and since 1949 has enjoyed its peaceful democratic existence, often being referred to as the “Switzerland of Central America”. The government is one of the people and one that very much sees the value of tourism. Over the past few years the government has incentivized foreigners to come and retire in Costa Rica. Stable government ensures that the money you put into your property is safe. Political turmoil will never be a reason for illiquidity in your Costa Rican investment and also provides reason why Costa Rica is a great place to buy. There are many other locations around the world that investors think of to go and buy, but stability is very important and should play a huge factor in anyone’s investment decisions.
Stable Currency:
Investors want to know if their money is safe in Costa Rica
Stability of the government has helped to maintain a solid and stable currency.
The Costa Rican colon, also denoted as CRC is the official currency of Costa Rica. (Currently $1 USD = 516.245 CRC). Colones come in notes of 1,000 up to 10,000.
US Dollars are also accepted as legal tender in Costa Rica. Both are widely accepted and exchanged throughout the country with approximately 90% of the places of business in the country accepting the US Dollar.
Tax Incentives:
This seems to be the one everyone loves! As mentioned earlier the Costa Rican government has created one of the most attractive investment environments in Latin America.
Capital Gains Tax= 0% in Costa Rica. The capital gains taxes are exempt for a business if the money is derived from an activity that is not the normal course of business for the company (This exemption is established through the use of SA, or Sociedad Anonima). Property Taxes in Costa Rica = .25%. This rate is significantly lower than most places in the world. As a result people are buying in Costa Rica which increases demand and ultimately increases value. There are not many places where you can buy a piece of property that has incredible appreciation potential with such low holding costs.
Corporate Tax: The Sociedad Anonima (S.A.)
These forms of corporate structures allow owners of property to keep their names away from the corporations they own (literally translates as “anonymous society”). Ninety percent of all property in Costa Rica is purchased through these S.A.’s. When a property owner purchases property through these S.A.’s they use a shareholder’s loan to fund the purchase. Rental income generated is taken out of the corporation as dividend income and deducted against the initial investment and thus no taxes are paid.
Income Tax: Only income generated in Costa Rica is subject to income tax
Costa Rica offers large amounts of income to be deductible and free from any tax
**all tax information should be verified by independent tax professionals **
Proximity to Major U.S. Cities:
When investigating vacation destinations and environments for second homes or investment property, it is important to factor travel times to the destination. Costa Rica’s proximity to major US Cities gives even more reason why investors are buying property in Costa Rica. Great tourist destinations need to be close and easily accessible.
Major US Carriers offer direct flights to and from Costa Rica from the following international airports (3-5 hour flight times) -Miami -Houston -Atlanta -Dallas -Chicago -New York -Los Angeles -Toronto
Healthy Local Economy:
For baby boomers and entrepreneurs, spiraling costs of living abroad, oppressive taxes and government regulation in the US have placed Costa Rica high atop the list of places to retire without sacrificing standard of living. This is what savvy investors are looking for!
No Ownership Restrictions:
Foreign Ownership is promoted in the country of Costa Rica. In many foreign countries fee simple title is only available to locals and without titled ownership your investments can be at great risk. All foreigners enjoy the same rights as Costa Ricans when it comes to real estate ownership. Titled, fee simple properties are all registered in the National Registry of Costa Rica properly protecting your ownership rights.
Excellent Lending market:
Prior to 2006, there was no market for lending in Costa Rica and investors bought and sold property on a cash basis. With the recent surge by worldwide and US lenders as well as the strengthening of the Costa Rican market, financing at reasonable rates is now an available option. This addition to the real estate industry has made it possible for many more investors to buy property in Costa Rica and will only increase the demand over time.
As you can see there are many great reasons to invest in Costa Rica. Many people believe that it is too late to make any money. This is not the case! The time is now to invest in this beautiful country and incredible vacation spot.
Be sure to check out Costa Rica’s Gap Investors for more investment ideas
