The following FAQs were prepared by our law firm, Lang & Asociados. We have maintained a long professional relationship with Henry Lang, founding partner of this firm, and his team, for more than 15 years, and so we definitely recommend them as a trustworthy and excellent option for your legal needs in Costa Rica. We are also very grateful to Henry for being so supportive in this process and offering these FAQs to our community to make sure the Closing process is as clear as possible. Thank you, Henry!
Henry also answered many more questions from neighbors on a live Zoom call, which is recorded here for anyone who missed it: https://us02web.zoom.us/rec/share/QfVigz1YqOpf6Ps8htHntIGnGsFb0lI3vgZBqJ7f7ULL1dQG1_oSjtJa6K0gbzas.rgkOnVsCCHT58pt_
www.langcr.com info@langcr.com +(506) 2204 7871
Closing on your Lot
What will the closing process entail and include?
Costa Rica has a very formal property transfer system. In order for real estate to be transferred, both seller and buyer must sign, personally and in wet ink, a document before a Costa Rican notary public, to be entered and executed in such notary’s special book, authorized by the government, called “protocolo”.
The concept of notary, in Costa Rica, is very different than the one in countries such as the United States and Canada, as only attorneys can be notaries and they also must have a special recognition by the government, as such.
At closing, the buyer must have also paid the purchase price and a declaration as to the origin of funds for such payment and the means in which it was made (i.e. information on check, wire, etc.) must be disclosed by the purchaser, as it needs to be incorporated into the closing document.
Both parties must be physically present at closing and documents cannot be sent to collect signatures remotely.
If the buyer cannot be physically in Costa Rica at closing, there are a few alternatives that could apply and are explained in another answer further below.
How far in advance of closing will closing documents be available for review?
Costa Rican law requires for all transfer documents to be in Spanish. Therefore, the transfer document, which is what is signed at closing, will be prepared by the Notary, in Spanish and read out loud to the parties at closing. The transfer document is also very straight forward and directly follows the legal requirements for registration in Costa Rica. As long as all information for the seller is available, the Spanish document can be shared a few days prior to closing.
Will my lot be individualized and identified at the moment I purchase it?
Each individual lot unit will have its own, individual registration, at the time of closing, including its own title number and information, entered at the Property Section of the Costa Rican Public Register.
What liens, encumbrances and annotations should I expect to see at closing?
Only usual and customary encumbrances as required in Costa Rica for condominium developments, so all services and utilities can be supported. There will be no personal or financial encumbrances unless you are financing the purchase.
What documents do I need to bring to the closing?
The original and valid identification document for the buyer who will sign the transfer document (Costa Rican cedula, Costa Rican residency card -dimex- or foreign passport). If the purchase will be made via a Costa Rican company, a shareholders meeting for such company, approving the purchase, must also be prepared and must be received by the closing attorney a few days prior to closing.
If I can’t be there in person, can I use a power of attorney?
Closing by the means of a power of attorney is possible but will need to follow specific formalities of Costa Rican Law. If a Costa Rican corporate entity will be used as the means to purchase the lot, we can implement such power of attorney (ideally, at incorporation time, which will make it more cost effective) by the means of shareholders minutes and/or the incorporation by-laws. If the lot will be purchased in an individual’s personal name, the power of attorney will mandatorily need to be granted before a Costa Rican Consul, using specific language approved by the closing notary; as not all Consuls can do this, since they will need to have a “protocolo” book to do so, coordination of this possibility is essential, and implementation will be more complicated. In all cases, the buyer must be able to identify an individual who is willing to be appointed with the power of attorney and sign in Costa Rica, with the understanding that the signatory will have to declare origin of funds and means of payment, on the transfer document.
If I use a power of attorney, can I still participate in closing via a video call?
This is not a legal requirement but if you want to participate via a video call, this is possible.
What are the closing fees and what do they cover?
Closing costs include notary fees, legal stamps and transfer taxes per the minimums established by Costa Rican law; these are calculated per the specific valuation of the transaction. Additional costs, such as powers of attorney, shareholders meetings, incorporation, among others, may apply depending on the structure of the transaction, and need to be discussed and calculated accordingly.
Will I incur any other fees at closing?
None other than the ones identified in the previous answer, unless the transaction has other elements, which will need to be discussed on a case by case scenario.
Do I need to have my own attorney for closing?
Closing is prepared and recorded by the closing notary. As the contents of the actual closing documents, as indicated, are prepared following formalities that are standard, straight forward and conforming to Costa Rican law, you do not need to have your own attorney at closing, although you are welcome to do so if you feel more comfortable. Do note that engaging another attorney will create additional costs for you.
Will I receive a physical title or deed to the property?
Ownership of titled land/real estate in Costa Rica is evidenced and recorded in a centralized computer system, called “folio real”, at the Costa Rican Public Register, located in San Jose. Real time access to such system, with the lot’s individual property (“folio real”) number is what formally and officially confirms title and ownership. Therefore, there is no physical title or deed to the property, although the closing notary can share with you a copy of the document that was sent to the Register to implement the transfer, once it is processed, showing the transfer confirmation; this document is not a title or a deed, but merely a proof of the filing and processing of the property transfer at a specific moment in time.
How can I see that the property is actually registered in my name?
You can review this, real time, at the “folio real” system indicated in the previous answer, available online. You can also obtain a certificate confirming this, at any time, from the Costa Rican Public Register.
What if I want to own the lot in the name of a corporation?
This is fully possible. You should use a Costa Rican corporation for these purposes. We can incorporate for you. Incorporation must take place some time before closing since that process must have been fully completed so the lot transfer can take place.
Can a US or other foreign corporate entity own property or does it need to be a Costa Rican corporate entity?
Although, theoretically, a non-Costa Rican corporate entity may own land in the country, this is strongly not recommended, as you will not only need to meet several prior steps and formalities to do that, but also, each time such foreign entity must act in relationship to the property, additional formalities taking time and complexities, will need to be followed, which makes it very impractical.
How do I set up a corporation in Costa Rica and how much does it cost?
When incorporating in Costa Rica, we suggest to select an S.R.L. (“sociedad de responsabilidad limitada”) type of entity. It offers you all protections needed from a corporate perspective and can be used for any lawful business, while having a simpler structure, allowing you to have it even if only one individual will be involved. When you work with us on the incorporation purposes, you can be certain it will be set up in a way in which the land purchase transaction is fully supported. The law firm will guide you through the process, which will not require your physical presence in Costa Rica, and in which a manager (or as many managers as you want) holding signature capacities will be appointed and the shares will be transferred per your instructions. Costs vary depending on several factors, such as powers of attorney needed and closing structure, but the total can be quoted by the law firm for the specific case. A standard base cost for incorporation, corporate books and registration expenses is approximately US$1,290.00, but this is subject to change without notice and can vary per specific needs on the incorporation process particular to the transaction.
What do you recommend for estate planning purposes? Can my trust own the land directly? If not, what is the best structure?
Ideally, you should own the Alegria lot in the name of a Costa Rican company formed for such purposes. Depending on your needs, heirs and inheritance structure, a combination of power
of attorney positions and/or share ownership structure and/or ownership of shares via foreign structures may be advisable. It is not possible for a foreign trust to own the land directly, and it is not advisable for a foreign trust to own the shares of a Costa Rican company set up to own the land, but a structure can be established so such foreign trust owns the shares of the Costa Rican company that, in turn, owns the land. In most cases, in addition to the above indicated mechanisms, it is also suggested to sign a Costa Rican will, following local formalities; this will can be established so it only applies to assets located in Costa Rica, if you so prefer. All of these structures must be discussed taking into account your individual needs, so the best alternatives are set up specifically for you.
Can a foreign corporation or a foreign individual own a Costa Rican corporation that owns the land?
Yes, the shares of Costa Rican companies can be owned by foreign corporate entities as well as, directly, by foreign individuals.
Can a foreign individual be a member of a Costa Rican company?
Yes, you do not need to be a Costa Rican citizen or legal resident to be a manager, board member or hold powers of attorney for a Costa Rican company.
Are there any regulatory or filing requirements for Costa Rican companies?
All Costa Rican companies, either if they generate income or not, must register with the Costa Rican Tax Authorities and file a yearly declaration. If they generate income, they will also need to pay income tax and, depending on the income source, value added tax (VAT, or “IVA” in Spanish).
They also need to pay, each year, due in January, a corporate operation tax (“impuesto a las personas jurídicas”) which is usually not higher than US$500.00, and need to declare their shareholders (entire shareholder ownership chain, up to individual owners or publicly traded companies) before the Costa Rican Central bank.
Moving to Costa Rica
Do I need to apply for Costa Rican residency?
If you will be staying in the country for extended periods of time, and/or entering and leaving frequently, it is advisable to apply for Costa Rican residency.
What are the options to obtain residency in Costa Rica?
In general terms, you can obtain Costa Rican residency through the following regimes:
Resident Investor: which requires an investment, in real estate, for at least US$200.000.00. Your investment in Alegria will qualify, as long as the purchase value is at least that amount. If the price for the land is lower, but you will reach such valuation once construction of your house has taken place, you can use such added value to reach the required minimum investment threshold, but the residency application must wait until such construction is completed and the property value has been updated, accordingly, at the Municipality. If you buy the lot with financing, what counts to establish the investment value is the purchase price of the lot, regardless of the balance due.
Resident annuitant or “rentista”: which requires a bank letter committing to give you US$2,500.00 per month, for 2 years, in a permanent, constant and irrevocable manner. The letter can come from a foreign or a local bank. Some local banks will issue the letter if the applicant establishes a US$60,000.00 certificate of deposit (CD) with them, provides sufficient “know your customer” and other documentation and is supported by a letter from Lang & Asociados as the law firm handling the application process indicating they have been retained for the process.
Resident pensioner: which requires a document showing a lifetime pension of at least US$1,000.00 per month.
All these alternatives will give you a temporary residency, which require proof of the original status (investment, bank letter, pension letter) each time they are renewed. After 3 years of being a legal temporary resident, you can apply for permanent residency, which does not require proof of the original status.
Regarding minimum stay in Costa Rica to maintain the status, you simply cannot be out of the country for more than one continuous year.
Who may I include in my residency application?
In any of the above residency regimes, the main applicant may also include applications for their spouse (as long as they are legally married) and children younger than 18 years old. There is an “education exemption for older children who are pursuing higher education.
What are the requirements for residency application?
Besides the bank letter, pension letter or proof of investment, per the applicable regimes indicated above, each applicant and its dependents included in the application must provide a certificate of having a clean criminal record, birth certificate and marriage certificate (when applicable). These documents must meet a series of formalities. If you are interested in residency application, we suggest you contact Lang & Asociados so you can go over your particular situation and establish a filing plan.
Does buying a lot and building a home automatically give me residency?
No. You will need to apply for residency using the normal channels and under the alternatives mentioned above. You will only obtain residency if the application meets the legal requirements.
How long does it typically take to obtain residency?
Once filed in a complete and correct form, residencies usually take, approximately, one year to be resolved; however, due to continuous interruptions of services during the COVID 19 pandemic and the consequent back log at Immigration, it is possible that these times will be longer. In order to be able to get your residency application approved in the shortest time possible, it is essential to retain knowledgeable legal counsel to guide you through the process, prepare all documents, file and constantly monitor the application; not doing so, can extend the time lines many years and jeopardize the outcome of the application.
Do I have to leave the country before my tourist visa expires while my residency is in process?
Once you have formally filed your residency application, you are permitted to stay in Costa Rica beyond the expiration date of your tourist visa (for Canadian and US citizens, this visa duration is usually 3 months, but the immigration authorities have the discretion to grant it for a shorter term).
Can I file for residency while out of Costa Rica?
A requirement for the residency filing is for the applicant (this includes the main applicant and all their dependents that are also applying for residency) to be within their tourism visa term. This means that you can enter the country, sign the application papers, get fingerprinted, and then leave, as long as your application is formally filed at Immigration before the term of expiration of your tourist visa.
Can I apply for Costa Rican citizenship/have a Costa Rican passport?
Only after you have been a legal resident for many years (7 years for most nationalities) and complied with a series of other requirements (including but not limited to Spanish and Costa Rican history test, minimum stay in the country) you will be able to apply for Costa Rican citizenship.
Can I work while living in Costa Rica?
Temporary residents under the investor, annuitant or pensioner regime can only work in Costa Rica in their own businesses. In order to work as an employee, you will first need to have attained permanent resident status, for which you can only apply after 3 years of being a legal temporary resident. If you work for a company abroad, you can continue doing so under the temporary residencies.
Should I buy a car when I arrive or bring my current car to Costa Rica?
Both are legally possible, but importing goods is a fairly complex process in Costa Rica and substantial taxes are usually applied. Furthermore, cars acquired abroad, even if they are the same brand and model of cars sold locally, often use different parts, which makes maintenance more complicated.
What are the options to bring personal belongings, furniture, etc. Does it make economic sense?
Before making a decision on this matter, we suggest you consult with a customs broker and calculate how much you will pay in shipping transport and import taxes.
For more information contact:
LANG & ASOCIADOS
www.langcr.com info@langcr.com +(506) 2204-7871
