Can I own a business in Costa Rica with a digital nomad visa? We Explain
Costa Rica has emerged as a haven for digital nomads, with its lush landscapes, pleasant climate, and vibrant culture making it an ideal destination for remote workers. Since the summer of 2022, the country has officially offered a digital nomad visa, known as "estancia," allowing professionals to work legally in the country for up to a year, with the option to extend.
The digital nomad visa has sparked interest among entrepreneurs about the possibility of establishing and owning businesses in Costa Rica. Understanding the legal framework and implications of business ownership is crucial for digital nomads planning to venture into commercial activities in this Central American country.
We will explore the intricacies of owning a business in Costa Rica with a digital nomad visa, including the legal aspects, tax implications, and practical steps involved.
Understanding Costa Rica's Digital Nomad Visa
Costa Rica has taken a significant step in embracing the digital nomad community with its specially designed visa program. This initiative is part of the country's effort to attract remote professionals and offer them a unique lifestyle amidst its stunning natural beauty.
What is the Digital Nomad Visa?
The Digital Nomad Visa, officially known as "Estancia para Trabajadores y Prestadores Remotos de Servicios," allows digital nomads to legally live and work in Costa Rica for up to one year, with the possibility of extending for an additional year if specific requirements are met.
Eligibility Requirements
To qualify for the digital nomad visa, applicants must demonstrate a stable monthly income of at least $3,000 USD for individuals or $4,000 USD for those bringing dependents. Comprehensive health insurance coverage is mandatory for the entire duration of the stay, with a minimum coverage amount of $50,000.
Benefits of the Digital Nomad Visa
The visa offers numerous benefits, including exemption from local income taxes on foreign-earned income, the ability to open local bank accounts, and validation of foreign driver's licenses. Application processing typically takes 15-30 days, and applicants must register their biometrics within three months of arrival to receive their residence permit.
Can I Own a Business in Costa Rica with a Digital Nomad Visa?
For digital nomads considering Costa Rica as their next destination, understanding the nuances of business ownership under the digital nomad visa is crucial. Let's explore the possibilities and limitations.
Legal Limitations and Possibilities
Digital nomad visa holders in Costa Rica can own businesses, but certain conditions apply. The business must be registered abroad and primarily serve clients outside of Costa Rica. This setup allows digital nomads to maintain their foreign-registered businesses while residing in Costa Rica.
Working for Foreign vs. Local Clients
The digital nomad visa explicitly prohibits working with local Costa Rican companies or clients. This means your business cannot offer services directly to the local market. However, you can work with foreign clients and operate your business remotely from Costa Rica.
Tax Implications for Business Owners
One of the significant advantages for digital nomad business owners in Costa Rica is the tax exemption on foreign-earned income. This exemption makes Costa Rica an attractive destination compared to other countries offering digital nomad visas. For more information on the required documents for a Costa Rica digital nomad visa, you can visit this page.
Business Structures Available to Foreigners in Costa Rica
Costa Rica offers a favorable environment for foreign entrepreneurs, with various business structures to choose from. As a foreign national, you can start your own business in Costa Rica, taking advantage of the country's great opportunities for immigrant venture creation and entrepreneurship.
There are two primary business structures available to foreigners: Sociedad Anonima (S.A.) and Sociedad de Responsabilidad Limitada (S.R.L.). Understanding the characteristics of each is essential for making an informed decision.
Sociedad Anonima (S.A.)
The Sociedad Anonima (S.A.) is similar to a corporation, offering limited liability protection and the ability to issue shares to investors. This structure is ideal for larger operations or businesses planning significant growth. For instance, if you're planning to expand your business or attract foreign investment, S.A. might be the more suitable option. To learn more about starting a business in Costa Rica, you can visit this resource for detailed guidance.
Sociedad de Responsabilidad Limitada (S.R.L.)
The Sociedad de Responsabilidad Limitada (S.R.L.) is comparable to a limited liability company (LLC), providing personal asset protection while being simpler to manage and having lower administrative requirements. This makes S.R.L. a more suitable choice for small businesses or foreign immigrants looking to limit their liability without the complexities associated with corporations.
Which Structure is Best for Digital Nomads?
For digital nomads holding a Digital Nomad Visa in Costa Rica, choosing the right business structure is crucial. While both S.A. and S.R.L. are viable options, S.R.L. is often preferred due to its simplicity and lower administrative burden. However, it's essential to ensure that your business primarily serves clients outside Costa Rica to maintain visa compliance. Understanding the tax implications, reporting requirements, and operational limitations of each structure is also vital.
In conclusion, foreigners in Costa Rica, including digital nomad visa holders, have access to several business structures. By carefully considering the characteristics of each and seeking professional advice when necessary, entrepreneurs can make informed decisions that support their business goals and comply with Costa Rican regulations.
Step-by-Step Guide to Starting a Business in Costa Rica
As a digital nomad, establishing a business in Costa Rica requires careful planning and adherence to specific legal procedures. The process involves several key steps, from selecting a unique business name to registering with the relevant authorities.
Required Documentation
To start a business in Costa Rica, you will need to gather several important documents. These include your personal identification (passport), proof of address in Costa Rica, documentation of your digital nomad visa status, and specific forms related to your chosen business structure. Ensuring you have all the necessary documents is crucial for a smooth registration process.
Registration Process
The registration process involves several steps: hiring a notary public to draft the incorporation documents, registering with the National Registry, obtaining a business license from the local municipality, and registering with the tax authorities. It's essential to be prepared for document translation requirements, as all official documents must be submitted in Spanish with certified translations if originally in another language.
Costs and Timeframes
The total cost for registering a business in Costa Rica can range from $240 to $400, including government fees, administrative fees, and other expenses. Additional costs to consider include health insurance, translation of documents, notarization, and accommodation fees. The timeframe for completing business registration generally takes 4-6 weeks, though delays can occur if documentation is incomplete or requires additional verification. Working with a local attorney who specializes in business formation can help navigate Costa Rica's legal requirements efficiently.
Tax Considerations for Digital Nomad Business Owners
As digital nomads consider establishing a business in Costa Rica, understanding the tax implications is crucial for their financial planning. Costa Rica's legislation provides certain tax exemptions that can benefit digital nomad business owners, but there are also specific tax obligations that must be met.
Income Tax Exemptions
One of the most significant advantages for digital nomad business owners in Costa Rica is the exemption from income tax on foreign-earned revenue. This makes Costa Rica a tax-efficient destination for remote entrepreneurs. According to the country's legislation, income earned outside of Costa Rica is not subject to local income tax, providing a substantial benefit for digital nomads who earn their income from foreign sources. For more information on how digital nomads are taxed in Costa Rica, you can visit this resource.
Value Added Tax (VAT) Obligations
Despite the income tax exemptions, digital nomads who establish a local business entity may still face Value Added Tax (VAT) obligations. The current VAT rate in Costa Rica is 13% for most goods and services sold within the country. This means that businesses operated by digital nomads will need to collect and remit VAT on their local sales, necessitating registration for VAT purposes and compliance with VAT filing requirements.
Corporate Tax Responsibilities
In addition to VAT, digital nomad businesses in Costa Rica are subject to corporate taxes on profits earned within the country. Companies are required to pay corporate taxes on their taxable income, and they must also comply with other regulatory requirements such as filing annual financial statements and maintaining proper accounting records. Understanding these corporate tax responsibilities is essential for digital nomads to ensure compliance and avoid any potential penalties.
Transitioning from Digital Nomad to Permanent Residency
Transitioning from a digital nomad visa to permanent residency in Costa Rica offers a pathway to deeper integration into the local economy and community. As digital nomads spend more time in the country, they may find that the benefits of permanent residency, such as the ability to work legally for local companies and establish businesses serving the Costa Rican market, become increasingly appealing.
Benefits for Business Owners
For digital nomads who wish to establish deeper business roots in Costa Rica, transitioning to permanent residency offers significant advantages. Permanent residency removes the restrictions on working with local clients and companies, allowing business owners to fully integrate into the Costa Rican economy and expand their customer base. Additionally, with permanent residency, expats can own a company and receive dividends after three years as temporary residents.
Application Process
The application process for permanent residency typically requires proving financial stability, maintaining a clean criminal record, demonstrating ties to Costa Rica, and completing various administrative procedures through the General Directorate of Immigration. Applicants must submit all required documents within 180 days of initiating the process, with the possibility of a one-time extension that incurs additional fees.
Costa Rica offers several pathways to permanent residency, including the Rentista program for those with stable passive income, the Inversionista program for investors, and family-based options. Understanding these options and the specific requirements for each is crucial for a successful application.
Conclusion
As we conclude our exploration of Costa Rica's digital nomad visa, it's clear that this beautiful country offers a unique blend of work and leisure opportunities. Costa Rica's digital nomad visa program allows remote workers to experience the country's rich culture and stunning landscapes while continuing to work for foreign employers or clients.
While digital nomad visa holders can own businesses, they must operate within specific limitations, primarily serving clients outside Costa Rica and maintaining their business registration abroad. For those looking to establish deeper business roots, transitioning from the digital nomad visa to permanent residency provides greater flexibility and opportunities to fully integrate into the local economy.
For personalized assistance with digital nomad visa applications, business formation, or transitioning to permanent residency, professional guidance is highly recommended. You can visit Jaros CR for more information on the digital nomad visa application process. Contact them at info@jaroscr.com or +(506)7182-8969 for specialized support with your Costa Rican business and residency needs.