Mistakes made when purchasing Costa Rica property in a corporation
When purchasing a Costa Rica property in a corporation you can easily make huge mistakes. These mistakes to purchase property in a corporation, are generally made because of the lack of information you receive. That’s because your Costa Rican attorney doesn’t volunteer them, or your Costa Rica real estate agent doesn’t know.
Many properties in Costa Rica are owned by a corporation, called S.A. which stands for Sociedad Anónima. One of the main reasons for buyers to purchase their property through an S.A. is the liability factor.
In an S.A. the ownership depends on who owns the shares. Ownership only shows in the shareholder book, which is private and not public information. For many years, it was easy to hide your money offshore through owning real estate in Costa Rica in S.A.’s and not tell the I.R.S. about this but FATCA and the anti-money laundering laws, make this almost impossible now.
Some buyers do not realize that owning a corporation in Costa Rica carries quite a few responsibilities. Some of those responsibilities are paying corporation tax, updating the shareholder registry annually and the digital signature every two years. If you’re not a citizen or a resident, you won’t be able to do this yourself. But we have all the solutions for you, click on the banner below to learn more.
Mistakes customarily made
You should ask your attorney about any doubts you have on the legal side of real estate in Costa Rica, but make sure you do not commit the following mistakes:
1. Always use your own real estate attorney for closing, never the seller’s or developer’s attorney. One way or another, you will be paying for closing, so take advantage of making sure you hire someone who works for you only.
2. If you use an S.A. to own Costa Rica real estate, don’t do anything else with the S.A. Never use it to start a business.
3. Never register any vehicles within the same S.A.
4. Never register any employees like maid or gardener within the same S.A. that owns your properties or cars.
5. Endorse your shares on the back, so if you pass away, your partner won’t have to jump through legal hoops.
6. Always keep your shares and your S.A.’s documents (constitution, purchase/sale, and corporate ID) in a bank safe
7. Make sure you make a will or testament for you and your partner, your will in the US has no validity in Costa Rican courts
8. When purchasing an existing S.A. or using your attorney’s shelf corporation, make sure the old board of directors resigns, that you become the shareholder (s) and power of attorney.
9. Insist with your attorney that you will get proof after closing that the property was indeed registered in your S.A.’s name as well as an up to date “personería juridica” to show you that the change of board of directors was indeed registered in the National Registry.
10. Since you are taking over the corporation, it won’t show in the deed for how much you are purchasing the S.A. Banks will need a paper trail so make sure you sign an option to purchase – sale agreement.
Taking over an existing S.A.
Most Costa Rica real estate attorneys will tell you that you should not to take over the S.A. from the existing owner, because we don’t have a debt registry, so it is almost impossible to find out if the S.A. has any debt or not. Many realtors do not get involved in making sure you will purchase a clean and clear title, so make sure you use the right Costa Rica real estate agent.
But, to save on closing cost, many buyers of Costa Rica real estate will try to find themselves an attorney who will charge them less for the job. This usually means that all due diligence is just swept under the rug, anything to save money.
Smart buyers listen to their attorney and have a new S.A. set up by their attorney, so at closing, they can transfer the title into the new S.A., which of course will create much higher closing cost.
Do you own a corporation in Costa Rica or taking over an existing one? Then click on the banner below to view the services you will need, offered at very affordable prices.
Not so interesting?
The purchase of property in Costa Rica is not as interesting as it used to be. There are 2 main reasons for that:
In 2015, the Costa Rican and U.S. governments implemented Foreign Tax Compliance Act known as FATCA. FATCA puts a stop to U.S. citizens and residents to be able to hide assets in a Costa Rican corporation.
In 2017, the Costa Rican government created the corporation tax.
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