Costa Rica Offshore Corporation

Best Offshore Corporation Structure in Latin America

Have you ever given some thought to forming your own offshore structure or IBC (International Business Corporation)? Don't know where to start, much less how to go about it? Why would you want an offshore corporation?

In this article, Lee Harrison sheds some light on those and other questions you might have, giving you a place to start, especially if you live in North America. Although, having an offshore corporation is a useful vehicle for managing your business and financial affairs no matter where you might live.

San José, Costa Rica

There's more to Costa Rica than rainforests, beaches, mountains, and canopy tours. This trip, I'm visiting Costa Rica to tend to some business with respect to my Costa Rican offshore corporation.

Why might you need an offshore corporation?

Well, there are many different reasons, but I'll outline here the most important ones

1. Privacy, for one. Countries that have secrecy laws protect the identities of those who own private corporations -- this can keep prying eyes from your business and activities.

2. You also need to consider inheritance laws if you buy real estate overseas. Some countries have strict laws that dictate who gets your assets when you pass away. But the assets of a corporation can often be transferred independently of these laws, allowing you to leave your property to whoever you choose.

3. Plus, there can be tax and financial advantages. Depending on the laws in your country of citizenship and in the countries where you do business -- such as how corporations are taxed on income, inheritance, and capital gains relative to private individuals -- it may be to your tax advantage to conduct business via a private corporation.

Costa Rica Offshore Corporation advantages

But why Costa Rica? Other than providing an excuse to visit here once in a while, there are a few things that appealed to me about setting up a corporation here:

It's easy to set up: I set up everything via e-mail in a matter of weeks, including the registration of the corporation, creation of the by-laws, naming of the officers and shareholders, and the creation of the required accounting books.

Real Estate advantage: A corporation in Costa Rica can legally own real estate outside of the country, so I can use my corporation for property transactions far and wide. Use caution here however, and check with an attorney in the country where you're buying the property to make sure that there are no adverse tax or legal consequences on that end. In Ecuador, for example, there is no problem buying property via a foreign corporation, while in Honduras, it's prohibited.

Tax advantage: The tax situation also worked well for me, since Costa Rican corporations only pay tax on Costa Rica-sourced income. This, when combined with the tax laws of some other countries, can be an advantage. Also, I find the corporate privacy laws in Costa Rica well-suited to my needs.

Low set up cost: You can have the whole thing set up "turnkey" for $900. By comparison, I was quoted $3,500 in the Cayman Islands, and $2,000 in Honduras for setting up a similar structure. (My additional expenses are currently: $100 per year for my resident agent -- required by Costa Rican law; and $100 to have my tax return prepared and filed -- if the corporation were generating income in Costa Rica, this would be higher.)

Choose a recommended attorney

Costa Rican law doesn't permit attorneys to advertise, so it's difficult to "window shop" in the San José papers or the Internet. When choosing an attorney in Costa Rica, be sure to get a recommendation from a trusted source.

I recommend attorney Carlos Umaña (e-mail: tacuma@racsa.co.cr) of Tacsan y Umaña in San José. Everyone on his knowledgeable staff speaks excellent English, and they've been helpful and reliable. I've used this firm for almost 10 years, and continue to be satisfied.

If you plan to set up an offshore corporation, you'll need to choose the country in which it's located in accordance with your personal needs, tax situation, and in-country legal requirements. But once you've checked all those boxes, you may find that Costa Rica is the best choice for you, too.

Carlos has set up a web page with specific information on starting a corporation in Costa Rica at: http://www.discoverypress.com/crinet/carlos3.html.

Finally, a caveat: for U.S. persons (citizens and resident aliens), there can be serious and costly tax implications in creating and operating an offshore IBC. Check with your tax expert before you proceed.

Lee Harrison
Roving Latin America Editor, International Living

P.S. If you'd like to try a down-home Italian restaurant for lunch or dinner while in Costa Rica, try Mama's Place on Avenida Segunda near Calle Central. An excellent gnocchi dinner with garlic bread, wine, dessert, and cappuccino set me back a mere $8.70.

NOTE: All above quoted prices and contact information were correct at the time of writing this article in 2006. Please get updated quotes before proceeding with your offshore structure plans.

About the Author
This article previously appeared in International Living. http://www.internationalliving.com/costa_rica/free/02-28-06.html . Subscribe to International Living’s free daily e-letter here. ( http://www.internationalliving.com/opt/syndicate )