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Licda. Xochilt Quezada López.
If you're buying property in Costa Rica, you've almost certainly been told: 'You must use a corporation.' It's the standard advice for expats. For years, the conventional wisdom, often echoed in online forums and by legal professionals, has been a simple and resounding endorsement of the corporate structure. This advice was typically rooted in the argument that the high cost of probate in Costa Rica made direct personal ownership a financially perilous choice for one's heirs.
However, this long-standing guidance is now dangerously outdated.
Significant legal and fiscal reforms over the past several years have fundamentally altered the calculus. The introduction of a comprehensive capital gains tax, major changes to the structure of legal fees, and a clearer understanding of the true annual obligations of corporate ownership have rendered the old "corporation is always better" argument obsolete. The decision is no longer a straightforward choice but a nuanced strategic analysis that balances long-term costs, tax implications, administrative burdens, and personal liability.This report provides a definitive, data-driven analysis for 2025, moving beyond simplistic conclusions to offer a clear framework for making an informed decision.
Option 1: Owning Through a Corporation
A Costa Rican corporation is more than just a name on a title; it is a distinct legal entity that can serve as a powerful tool for asset protection, liability management, and estate planning. Understanding its structure, costs, and obligations is the first step in any comparative analysis.
1.1. Understanding the Choices: S.A. vs. S.R.L.
For the purpose of holding real estate assets, two types of corporate entities are predominantly used in Costa Rica: the Sociedad Anónima (S.A.) and the Sociedad de Responsabilidad Limitada (S.R.L.), which is functionally equivalent to a Limited Liability Company (LLC). Both structures offer the primary benefit of limited liability, meaning the personal assets of the owners are shielded from the debts and legal liabilities of the company.
The practical differences between them are significant:
Sociedad Anónima (S.A.): This is the more traditional corporate structure. Its governance is managed by a Board of Directors, which legally requires at least three distinct individuals (President, Secretary, Treasurer). It is well-suited for larger business operations or companies with multiple unrelated investors.
Sociedad de Responsabilidad Limitada (S.R.L. or LLC): The S.R.L. is a more modern and streamlined entity. It can be formed by just two people and requires only one General Manager. Due to its simpler administrative requirements, the S.R.L. has become the vehicle of choice for individuals or families whose primary goal is to hold a single asset, like a home.
For the common expat scenario of holding a family home, the administrative simplicity of the S.R.L. often makes it the more practical and cost-effective option.
1.2. The Real Costs of Corporate Ownership
The most significant shift in the ownership debate comes from a realistic assessment of the true costs of keeping a corporation in good standing.
Upfront Setup Cost: The process of legally constituting a corporation involves several one-time expenses, including Notary Public fees, government fees and stamps, and the legalization of corporate books.
Total Estimated Setup Cost: ~$521
The Annual Reality: This is where the old advice fails. Maintaining a corporation involves multiple, distinct filings due each year, with significant penalties for non-compliance.
Annual Corporation Tax: ~$136 per year for an "inactive" corporation.
Beneficial Owner and Transparency Registry (RTBF): Requires professional assistance, typically costing $150 - $400 annually.
Informative Declaration for Inactive Companies (D-195): Often necessitates a CPA, with costs from $350 - $550 per year.
Resident Agent Fees: Required if no owners are residents, typically costing $200 - $300 annually.
Total Estimated Annual Cost: ~$836 - $1,386
Option 2: Owning in Your Personal Name
Opting to hold property directly in one's personal name represents the path of least resistance during the owner's lifetime. However, this simplicity comes with a significant, deferred cost that materializes upon the owner's death: probate.
2.1. The Case for Direct Ownership
The appeal of personal ownership is its straightforwardness. There are zero setup costs, and there are no annual maintenance fees, compliance filings, or administrative burdens to manage during your lifetime.
2.2. The Inevitable Hurdle: Demystifying Probate in Costa Rica
When an individual who owns assets in Costa Rica passes away, their estate must go through a legal process known as proceso sucesorio, or probate. It is a critical misunderstanding that a Costa Rican will allows you to bypass probate. While a will is essential for instructing the court, the proceso sucesorio is still mandatory. For your heirs, this means a lengthy and expensive legal process before they can take ownership of the property.
2.3. Calculating the Cost of Probate: A 2025 Financial Breakdown
For a property valued at $150,000, the costs of probate are multifaceted, including attorney fees, appraisals, and transfer taxes.
Total Estimated Probate & Transfer Cost: ~$19,865
The Game Changer: How Capital Gains Tax Reshapes the Decision
The implementation of a 15% capital gains tax in 2019 was a major legal development affecting this debate.
The Primary Residence Exemption: The Great Equalizer
This is the single most important feature for most expats. The law explicitly exempts the sale of a person's "habitual home" (vivienda habitual) from the 15% capital gains tax.
Crucially, this exemption is available whether the property is held in your personal name or in a corporation. This fact largely neutralizes the capital gains tax as a deciding factor for full-time retirees and refocuses the debate squarely on the trade-off between estate planning costs and ongoing maintenance expenses. For those owning property that is not their primary residence (e.g., vacation homes, rental properties), the capital gains tax remains a major consideration.
The Verdict: A Strategic Analysis for Your Situation
4.1. The Financial Showdown: 20-Year Cost Projection
The core of the debate is whether the accumulated annual costs of a corporation will eventually exceed the large, one-time cost of probate. The surprising result is that over a typical 20-year ownership period, the total costs are remarkably close. This makes the decision less about pure finances and more about your personal priorities regarding liability and convenience.
20-Year Total Cost to Pass Asset:
Personal Name: ~$19,865 (one-time probate cost)
Corporation: ~$17,241 - $28,241 (accumulated annual fees)
4.2. Scenario-Based Recommendations
Scenario A: The Full-Time Retiree (Primary Residence) This is a pure trade-off.
Choose a Personal Name for simplicity and zero lifetime costs if your heirs can handle the one-time probate expense.
Choose a Corporation if asset protection and a seamless, cost-free inheritance are your top priorities, and you see the annual fee as a worthwhile investment.
Scenario B: The Vacation Homeowner / Investor (Non-Primary Residence) The clear winner is a Corporation. The liability shield it provides is crucial for protecting your personal assets from potential lawsuits from renters, guests, or other property-related issues.
4.3. Best Practices for Corporate Estate Planning
Simply creating a corporation does not automatically solve the inheritance issue. To avoid probate of the company shares (which are personal assets), the ownership must be structured carefully from the outset using methods like Joint Share Ownership or a Trust (Fideicomiso).
Conclusion: A Calculated Decision for Your Pura Vida Investment
The landscape of property ownership in Costa Rica has evolved. The once-simple advice to "always use a corporation" no longer holds true. The decision now hinges on a personal calculation involving financials, tax strategy, administrative tolerance, and liability protection.
Ultimately, there is no single "right" answer. The optimal strategy is deeply personal. Therefore, the final and most crucial recommendation is to consult with a qualified Costa Rican attorney and accountant to conduct a personalized analysis before making a final decision.
Editor's Note: The foundation of this warning was first published in an article on AMCostaRica.com on July 6, 2020. Given the time-sensitive nature of property laws, this post has been significantly updated for 2025 with the most current information and guidance.
The information provided is for informational purposes and does not constitute legal or financial advice. Consult a qualified Costa Rican professional for your specific situation. ©2004-2025 Costa Rica Expertise. With credit (CC BY 4.0), you can use it for free. 1120706 ZZ!
