Costa Rica Corporation Clarity

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Categorized | Golf, Info & How To's, Taxes

Posted on 06 August 2008.

I think that in every real estate transaction that I have been involved in here in Costa Rica, the buyer has opted to use a Costa Rica corporation to purchase the property. I have explained the pros and cons various ways when asked, but I don’t think that I have ever put it as well as an e-mail that I was just copied on from one of the San Buenas Golf Resort partners. I include it here for the benefit of readers of this blog.

The bottom line is you should always conduct business in CR via a corporation. There are definite tax and liability implications. Canadian residents are lucky…any income earned outside of Canada is not taxed by Canada. The US is different, all income, regardless of where it is earned, is taxed. CR and the US do not have a tax treaty, so you will pay the CR government 30% and the US government 35% if the shares are in your name.
If they are in a corporation, not only do you have anonymity from the IRS perspective, but there are some tax strategies that can be implemented through countries that do have tax treaties with the US. And by that I mean if it is taxed in these countries at, say 15%, the US will not tax the income when you bring it home. It’s all very complicated, which is why the world needs tax attorneys. Also, there are some strategies the attorneys can use by treating some of the income as capital gains, etc. to reduce the CR tax to 15 or 20%. We could potentially see a reduction in our tax bill from 65% to 30% by listening to the guys that know how to do this. It’s all legal, but we need the experts to tell us how to do it. This is what rich people do…I’d like to be rich, wouldn’t you?

This is why it is prudent to wait for the tax attorney’s recommendation.

Also, if you buy personal property in CR like a car, you should buy it under a separate corporation. If you get in an accident and you are sued, they sue the corporation. If the corporation has no assets, you lose nothing personally.