How to Open a Foreign Company Branch for Real Estate in Costa Rica: Documents, Pros, and Cons

Opening a branch of a foreign company in Costa Rica can be part of estate planning or tax strategy for a foreign real estate investor looking to take advantage of the market opportunities in Costa Rica. Here, we outline the requirements, process, as well as the pros and cons of this decision.

A. What is Understood for a Foreign Company Branch?

A Foreign Company Branch in Costa Rica is an extension of an international company that operates in the country without creating a new local entity. The branch is legally dependent on the parent company, which is responsible for its obligations. It must register with the Public Registry, appoint a local representative, and comply with Costa Rican taxes and regulations.

B. Documents and Requirements for Opening a Foreign Branch in Costa Rica

1. Public Deed: Opening a branch in Costa Rica must be completed through a public deed, which can be issued by a foreign notary or consul; however, it must undergo a process of legalization and protocolization in Costa Rica for legal validation. The protocolization must be specifically carried out by a Costa Rican notary. Documents issued abroad must be authenticated by a consulate or apostilled to be legally recognized in Costa Rica (Art. 226, Commercial Code) and to serve as reference within the public deed.

2. Registration and Legal Stamps: The necessary registration fees and legal stamps must be covered in accordance with Costa Rican regulations. Fees are generally set by attorneys based on the complexity of the process, while legal stamps and additional expenses are approximately USD $250 – $300. This includes mandatory stamps such as the Colegio de Abogados stamp, Fiscal stamp, and others as required by Costa Rican law for document registration and legalization.

3. Public Deed Specifications: The public deed required to open a foreign branch must include the following information:

• Representative Details: Full names, marital status, address, profession or occupation, and positions of the parent company’s representative and the branch administrators.
• Branch Purpose and Capital: Specify the assigned capital and purpose of the branch.
• Legal Representative in Costa Rica: Appoint a legal representative who will manage the branch in the country. This representative must accept the power in the incorporation deed or an additional authenticated document. The legal representative must be fully identified by name, marital status, address, profession or occupation.
• Waiver of Foreign Laws: Both the branch and its representative must expressly waive their home country’s laws and accept Costa Rican jurisdiction for all contracts and activities in the country.
• Validation of Legal Authority: Evidence must be presented that the grantor representing the parent company has sufficient power to open the branch and that the parent company is legally established in its home country.
• Resident Agent: If the branch’s representative is not a resident of Costa Rica, a Resident Agent must be appointed to receive judicial or administrative notices on behalf of the company.

4. Re-registration and Transfer: According to Article 230 of the Commercial Code, companies that decide to move their main office to Costa Rica can later transfer it to another country.

C. Timeframe and Registration Process.

The registration process for a foreign company branch in Costa Rica typically takes between one and three months, depending on how quickly the documentation requirements and legal validations are completed. Normally most of the time to incorporate a foreign company branch is invested producing the documents abroad and making sure they are legalized to comply with Costa Rica requirements.

Review by the National Registry and stamp and registration procedures may extend the timeframe if the documents do not meet all initial requirements. The National Registry will take five to eight days to respond.

Pros and Cons of Creating a Foreign Branch in Costa Rica for Real Estate Transactions.

Pros:

• Ease of Operating in the Local Market: Opening a branch allows the foreign company to conduct transactions directly in Costa Rica without needing to create a new Costa Rican entity. It will be identified and incorporated exactly like Costa Rican companies are incorporated.
• Access to Local Financing and Opportunities: Branches can participate in the local real estate market and, in some cases, access bank financing in Costa Rica.
• Flexible Jurisdiction: The legal framework allows for branch re-registration if tax payments and other legal obligations are met.

Cons:

• Legal Procedures and Documentation Costs: Establishing a branch requires documentation to be apostilled or authenticated, which may involve additional costs and wait times. Also, the fees and time to incorporate a branch are higher than incorporating a Costa Rican company.
• Tax Implications: Foreign branches in Costa Rica are subject to the same tax regulations as a local company, which could result in a significant tax burden for high-value transactions.
• Commitment to Costa Rican Law: Establishing a branch requires the company to submit to Costa Rican laws and courts, which may not be favorable in certain situations.

Final Considerations

Opening a foreign branch in Costa Rica is an appealing option for real estate companies but requires a careful assessment of the time, legal requirements, and costs involved. Seeking specialized legal advice can streamline the process and ensure all legal requirements are met at each stage of establishing the branch.

For more information, please contact Victoria Gomez at vga@quatro.legal who will be happy to respond on this subject.

Disclaimer: The information provided in this blog post is for general informational purposes only and is not intended to constitute legal advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change. For the most accurate and up-to-date information, please contact our office directly. Some images may be AI generated.