Costa Rica - United States Department of State (2024)

Policies Towards Foreign Direct Investment

Costa Rica actively courts FDI, placing a high priority on attracting and retaining high-quality foreign investment. The Ministry of Foreign Trade (COMEX) leads Costa Rica’s investment promotion efforts, which are executed through PROCOMER. Costa Rica has had great success over the last several decades in attracting and retaining investment in specific areas, currently services, advanced manufacturing, life sciences, light manufacturing, and the food industry. In addition, the Tourism Institute (ICT) attends to potential investors in the tourism sector. Costa Rican institutions are strong and effective guides and advocates for their client companies, prioritizing investment retention and maintaining an ongoing dialogue with investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

Costa Rica recognizes and encourages the right of foreign and domestic private entities to establish and own business enterprises and engage in most forms of remunerative activity. The exceptions are in sectors that are reserved for the state (legal monopolies – see #7 below “State Owned Enterprises, first paragraph) or that require participation of at least a certain percentage of Costa Rican citizens or residents (electrical power generation, transport services, public accounting, private security services). Costa Rica’s general prohibition of open-cast mining in contrast to the legal operation of artisanal mining cooperatives of Costa Rican citizens is a de-facto restriction against foreign-owned large-scale mining operations. Properties in the Maritime Zone (from 50 to 200 meters above the mean high-tide mark) may only be leased from the state and with residency requirements. In the areas of medical services, telecommunications, finance and insurance, state-owned entities dominate, but that does not preclude private sector competition. Costa Rica does not have an investment screening mechanism for inbound foreign investment, beyond those applied under anti-money laundering procedures. U.S. investors are not disadvantaged or singled out by any control mechanism or sector restrictions; to the contrary, U.S. investors figure prominently among the various major categories of FDI.

Other Investment Policy Reviews

On May 25, 2021, Costa Rica officially became the 38th OECD member, which entails regular economic reporting including most recently the “OECD Economic Surveys – Costa Rica 2023” published February 2023: https://read.oecd-ilibrary.org/economics/oecd-economic-surveys-costa-rica-2023_8e8171b0-en#page1. See also the “OECD Review of International Investment Policies in Costa Rica” published March 2020 https://www.oecd.org/investment/OECD-Review-of-international-investment-in-Costa-Rica.pdf . For the full index of OECD reports on Costa Rica, go to https://www.oecd.org/costarica/

The World Trade Organization (WTO) conducted its 2019 “Trade Policy Review” of Costa Rica in September of that year. Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member countries’ trade and related policies are examined and evaluated at regular intervals: https://www.wto.org/english/tratop_e/tpr_e/tp492_e.htm.

The United Nations Conference on Trade and Development (UNCTAD) produced in 2019 the report Overview of Economic and Trade Aspects of Fisheries and Seafood Sectors in Costa Rica:
https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2583 , followed by a 2020 study focused on the tuna, mahi-mahi, swordfish and coastal fish sectors.
The Environmental Justice Atlas – https://ejatlas.org/country/costa-rica – highlights a number of environmental disputes involving foreign investors, some moribund and some ongoing.

Business Facilitation

The single window website for business registration and establishment, “Ventanilla Unica de Inversion” sponsored by the trade promotion agency PROCOMER, is clear and complete for basic processes although it does not encompass all municipalities. A new company in Costa Rica must typically register with the National Registry (company and capital registry), Internal Revenue Directorate of the Finance Ministry (taxpayer registration), National Insurance Institute (INS) (basic workers’ comp), Ministry of Health (sanitary permit), Social Security Administration (CCSS) (registry as employer), and the local Municipality (business permit). Other permits may include those associated with specific business activities such as Free-Trade-Zone operation, development and build-out of properties, and marine boat operation. Legal fees may be the biggest single business start-up cost, as all firms registered to individuals must hire a lawyer for a portion of the necessary paperwork.

Outward Investment

The Costa Rican government does not promote or incentivize outward investment, nor does it discourage or restrict domestic investors from investing abroad.

Transparency of the Regulatory System

Costa Rican laws, regulations, and practices are generally transparent and meant to foster competition in a manner consistent with international norms, except in the sectors controlled by a state monopoly, where competition is explicitly excluded. Rule-making and regulatory authority is housed in agencies specialized by function (telecom, financial, personal data, health, environmental) or location (municipalities, port authorities). Tax, labor, health, and safety laws, though highly bureaucratic, are not seen as unfairly interfering with foreign investment. It is common for professional associations that play a role in policing or guiding their members.

The Ministry of Economy compiled the procedures needed to do business in Costa Rica: https://tramitescr.meic.go.cr/. Accounting, legal, and regulatory procedures are transparent and consistent with international norms. The stock and bond market regulator, SUGEVAL, requires International Accounting Standards Board for public companies, while the Costa Rican College of Public Accountants (Colegio de Contadores Publicos de Costa Rica -CCPA) has adopted full International Financial Reporting Standards for non-regulated companies in Costa Rica; for more information, see the international federation of accountants IFAC: Homepage | IFAC

The government does not require companies’ environmental, social, and governance (ESG) disclosure, but to facilitate transparency and better inform investors, government entities do regularly encourage commitments to environmental and social standards (e.g.,within the coffee and tourism industries) beyond or complementary to purely legal requirements. Certifications with Responsible Business Conduct (RBC) components used by the Costa Rican private sector include an array of agricultural certifications, the B Corporation Certificate,theLEED Certification from the Green Building Council,and the ISO 26000 Social Responsibility standard.In the banking sector, entities under the supervision of the Superintendencia General de Entidades Financieras (Financial Regulator) must comply with corporate governance regulations such as transparency and accountability to shareholders.

Regulations must go through a public hearing process when the authorities are drafting them. Draft bills and regulations are made available for public comment through public consultation processes that vary in their details according to the public entity and procedure in question, generally giving interested parties sufficient time to respond. The standard period for public comment on technical regulations is 10 days. As appropriate, this process is underpinned by scientific or data-driven assessments. A similarly transparent process applies to proposed laws. The Legislative Assembly generally provides sufficient opportunity for supporters and opponents of a law to understand and comment on proposals. To become law, a proposal must be approved by the Assembly by two plenary votes. The signature of 10 legislators (out of 57) is sufficient after the first vote to send the bill to the Supreme Court for constitutional review within one month, although the court may take longer.

Regulations and laws, both proposed and final, for all branches of government are published digitally in the government registry, “La Gaceta”: https://www.imprentanacional.go.cr/gaceta/. The Costa Rican American Chamber of Commerce (AmCham – https://www.amcham.cr/en/ ) and other business chambers closely monitor these processes and often coordinate responses.

The government has mechanisms to ensure stakeholders follow laws and regulations. The Comptroller General’s Office conducts operational as well as financial audits and as such provides the primary oversight and enforcement mechanism within the Costa Rican government to ensure that government bodies follow administrative processes. Each government body’s internal audit office and, in many cases, the customer-service comptroller (Contraloria de Servicios) provide additional support.

Several independent avenues exist for appealing regulatory decisions, and these are frequently pursued by persons or organizations opposed to a public sector contract or regulatory decision. The avenues include the Comptroller General (Contraloria General de la Republica), the Ombudsman (Defensor de los Habitantes), the public services regulatory agency (ARESEP), and the constitutional review chamber of the Supreme Court. The State Litigator’s office (Procuraduria General) is frequently a participant in its role as the government’s attorney.

Costa Rica is transparent in reporting its public finances and debt obligations, including explicit and contingent liabilities. Debt obligations are transparent; the Ministry of Finance provides updates on Central Government public debt. https://www.hacienda.go.cr/docs/PresentacionMinisterioHaciendaRevPlanFinanciamiento2022.pdf

The following chart covers contingent debt as of January 31, 2023:
https://www.hacienda.go.cr/docs/DeudaContingente.pdf

The review and enforcement mechanisms described above have kept Costa Rica’s regulatory system relatively transparent and free of abuse but have also rendered the system for public sector contract approval exceptionally slow and litigious. There have been several cases in which these review bodies have overturned already-executed contracts, thereby interjecting uncertainty into the process. Bureaucratic procedures are frequently long, involved and can be discouraging to new investors.

Furthermore, Costa Rica’s product market regulations are more stringent than in any other OECD country, according to the OECD’s 2020 Product Market Regulations Indicator, leading to market inefficiencies. Find this explanation as well as a detailed review of the regulatory challenges Costa Rica faces in the September 2020 OECD report on regulatory reform: https://www.oecd.org/countries/costarica/enhancing-business-dynamism-and-consumer-welfare-in-costa-rica-with-regulatory-reform-53250d35-en.htm

International Regulatory Considerations

While Costa Rica does consult with its neighbors on some regulations through participation in the Central American Integration System (SICA) ( https://www.sica.int/breve), Costa Rica’s lawmakers and regulatory bodies habitually refer to sample regulations or legislation from OECD members and others. Costa Rica’s commitment to OECD standards as an OECD member has accentuated this traditional use of best-practices and model legislation. Costa Rica regularly notifies all draft technical regulations to the WTO Committee on Technical Barriers in Trade (TBT).

Legal System and Judicial Independence

Costa Rica uses the civil law system. The fundamental law is the country’s political constitution of 1949, which grants the unicameral legislature a particularly strong role. Jurisprudence or case law does not constitute legal precedent but can be persuasive if used in legal proceedings, as they constitute authoritative interpretation of obscure parts of the law. For example, the lower courts and Chambers of the Supreme Court regularly cite Supreme Court precedents and such decisions are widely used in Law schools and legal texts. The civil and commercial codes govern commercial transactions. The courts are independent, and their authority is respected. The roles of public prosecutor and government attorney are distinct: the Chief Prosecuting Attorney or Attorney General (Fiscal General) operates a semi-autonomous department within the judicial branch while the government attorney or State Litigator (Procuraduria General) works within the Ministry of Justice and Peace in the Executive branch. The primary criminal investigative body “Organismo de Investigacion Judicial” OIJ, is a semi-autonomous department within the Judicial Branch. Judgments and awards of foreign courts and arbitration panels may be accepted and enforced in Costa Rica through the exequatur process. The Constitution specifically prohibits discriminatory treatment of foreign nationals. The Costa Rican Judicial System addresses the full range of civil, administrative, and criminal cases with a number of specialized courts. The judicial system generally upholds contracts, but caution should be exercised when making investments in sectors reserved or protected by the Constitution or by laws for public operation. Regulations and enforcement actions may be, and often are, appealed to the courts.

Costa Rica’s commercial code details all business requirements necessary to operate in Costa Rica. The laws of public administration and public finance contain most requirements for contracting with the state.

The legal process to resolve cases involving squatting on land can be especially cumbersome. Land registries are at times incomplete or even contradictory, mainly in rural and coastal areas. Buyers should retain experienced legal counsel to help them determine the necessary due diligence regarding the purchase of property.

Laws and Regulations on Foreign Direct Investment

Costa Rican websites are useful to help navigate laws, rules, and procedures including that of the Ministry of Foreign Trade (https://www.comex.go.cr/), the export and investment promotion authority PROCOMER, http://www.procomer.com , the private non-profit investment promotion entity CINDE (http://www.cinde.org/en) and the Health Ministry, https://www.ministeriodesalud.go.cr/ (product registration and import/export). In addition, the State Litigator’s office ( www.pgr.go.cr, the “SCIJ” tab) compiles relevant laws.product registration and import/export). In addition, the State Litigator’s office ( www.pgr.go.cr, the “SCIJ” tab) compiles relevant laws.

Competition and Antitrust Laws

Two public institutions are responsible for consumer protection as it relates to monopolistic and anti-competitive practices. The “Commission for the Promotion of Competition” (COPROCOM), an autonomous agency housed in the Ministry of Economy, Industry and Commerce, is charged with investigating and correcting anti-competitive behavior across the economy. The Telecommunications Superintendence (SUTEL) shares that responsibility with COPROCOM in the telecommunications sector. Both agencies are charged with defense of competition, deregulation of economic activity, and consumer protection. Parties may appeal the decisions judicially. For the OECD assessment of competition law and policy in Costa Rica, see this July 2020 report: https://www.oecd.org/costarica/costarica-competition.htm

Expropriation and Compensation

The three principal expropriating government agencies in recent years have been the Ministry of Public Works – MOPT (highway rights-of-way), the state-owned Costa Rican Electrical Institute – ICE (energy infrastructure), and the Ministry of Environment and Energy – MINAE (National Parks and protected areas). Expropriations generally conform to Costa Rica’s laws and treaty obligations.

Article 45 of Costa Rica’s constitution stipulates that private property can be expropriated without proof that it is done for public interest. The 1995 Law 7495 on expropriations further stipulates that expropriations require full and prior payment, and upon full deposit of the calculated amount the government may take possession of land despite the former owner’s dispute of the price. The law makes no distinction between foreigners and nationals. The expropriations law was subsequently amended most recently in 2015 to clarify and expedite some procedures, including those necessary to expropriate land for the construction of new roads. (For full detail go to https://PGRweb.go.cr/SCIJ. When reviewing the articles of the law go to the most recent version of each article.)

Judicial rulings in recent years have highlighted the public policy issues that must be tackled by the government to protect the status of private properties registered in the national registry, yet also located within one of Costa Rica’s 24 indigenous territories. By law, non-indigenous individuals cannot own properties within an indigenous territory. Over 1,000 properties have been identified to be in these circ*mstances, including properties belonging to a number of U.S. citizens. The Chaves administration has stated it is currently addressing the problem.

There is no discernible bias against U.S. investments, companies, or representatives during the expropriations process. Costa Rican public institutions follow the law as outlined above and generally act in a way acceptable to the affected landowners. However, when landowners and government differ significantly in their appraisal of the expropriated lands’ value, the resultant judicial processes generally take years to resolve. In addition, landowners have, on occasion, been prevented from developing land not yet formally expropriated for parks, protected areas, or indigenous reserves; the courts will eventually order the government to proceed with the expropriations, but the process can take time.

Dispute Settlement

ICSID Convention and New York Convention

Costa Rica became in 1993 a member state to the convention on International Center for Settlement of Investment Disputes (ICSID Convention). Costa Rica paid the awards resulting from unfavorable ICSID rulings, most recently in 2012 regarding private property belonging to a German national within National Park boundaries.

Costa Rica is part of the convention on the Recognition and Enforcement of Arbitral Awards (1958 New York Convention), since 1987. Consequently, within the Costa Rican legal hierarchy the Convention ranks higher than local laws although still subordinate to the constitution. Costa Rican courts recognize and enforce foreign arbitral awards, including arbitral awards issued against the government. Judgments of foreign courts are likewise recognized and enforceable under the local courts and the Supreme Court. Section 99 of the Civil Procedural Code (Law 9342) regulates the procedure to enforce foreign awards and court decisions.

Investor-State Dispute Settlement

Parties to disputes between foreign investors and the government grounded in the government’s alleged actions or failure to act – termed investment disputes ‒ may resolve them administratively or through the legal system. Costa Rica is also party to several bilateral and multilateral investment treaties with binding arbitration ( https://www–comex–go–cr.insuit.net/tratados/).

Under Chapter 10 of the CAFTA-DR agreement, Costa Rica is legally obligated to answer investor arbitration claims submitted under ICSID or the United Nations Commission on International Trade Law (UNCITRAL) and to accept the arbitration verdict. To date two U.S. citizen investors have made claims under the provisions of CAFTA-DR. Extensive documentation for both cases is filed on the Foreign Trade Ministry (COMEX) website: http://www.comex.go.cr/tratados/cafta-dr/, under “documentos relevantes.”

In some coastal areas of Costa Rica, there is a history of invasion and occupation of private property by squatters who are often organized and sometimes violent. Squatters have returned to the parcels of land from which they were evicted, requiring expensive and potentially dangerous security. Nevertheless, in recent years the Supreme Court has refused title to squatters on land already titled, thus removing some incentive for persistent squatters.

International Commercial Arbitration and Foreign Courts

The right to solve disputes through arbitration is guaranteed in the Costa Rican Constitution. For years, the practical application was regulated by the Civil Procedural Code, which made it ineffective with no arbitration cases until 1998, the year the local arbitration law #7727 was enacted. A 2011 law on International Commercial Arbitration (Law 8937), drafted from the UNCITRAL model law (version 2006), brought Costa Rica to a dual arbitration system, with two valid laws, one law for local arbitration and one for international arbitration. Under the local act, arbitration must proceed in Spanish and only attorneys admitted to the local Bar Association may serve as arbitrators.All cases brought before an arbitration panel, under the rules oflocal arbitration centers, normally reach resolution within two months of the closing arguments hearing. Parties can withdraw their case or reach an out-of-court settlement before the arbitral tribunal delivers an award.If the award meets the review criteria, the losing party has the option to request that the Costa Rican Supreme Court examine the award, but only on procedural matters and never on the merits. Under the local Law for International Arbitration, proceedings may take place in English and foreign attorneys can serve as arbitrators. The following arbitration centers are in operation in Costa Rica:

• Centro de Conciliacion y Arbitraje
• Costa Rican Chamber of Commerce (CCA)
• Centro de Resolución de Controversias
• Costa Rican Association of Engineers and Architects (CFIA)
• Centro Internacional de Conciliacion y Arbitraje (CICA)
• Costa Rican American Chamber of Commerce (AMCHAM)
• Centro de Arbitraje y Mediacion/Centro Iberoamericano de Arbitraje (CAM-CIAR)
• Costa Rican Bar Association.

Beyond such arbitration options, law #7727 also facilitates courts’ enforcement of conciliation agreements reached under the law. Some universities and municipalities operate“Casas de Justicia” (Justice Houses) open to the public and offering mediation and conciliation at no cost. Law #8937 empowered local arbitration centers,beginning with that pertaining to theEngineers and Architects’ Association, to implement Dispute Board regulations, as a method to address construction disputes. Dispute Boards have acquired importance lately in construction contracts; with CFIA implementing new by-laws favoring the use of Dispute Boards in such contracts.

Outcomes in local courts do not appear to favor state-owned enterprises (SOEs).SOEs can sign arbitral agreements but must follow strict public laws to obtainthe permissions necessary and follow correct procedures, otherwise the agreement could be voided. Once SOEs find themselves in arbitration, they are subject to the same standards and treatment as any other actor.

U.S. companies cite the unpredictability of outcomes as a source of rising judicial insecurity in Costa Rica. The legal system faces significant backlogs, and civil suits may take several years from start to finish. The delays are particularly acute in the collection courts which bear about 60% of the overall case load of the court system. In the tax arena, several U.S. businesses have objected to the Ministry of Finance’s aggressive stance in interpreting transfer pricing principles, compounded by what the businesses perceive as a lack of specialized judges to competently address such cases. Some U.S. firms and citizens satisfactorily resolved their cases through the courts, while others see proceedings drawn out over a decade without a final resolution. Commercial arbitration has become an increasingly common dispute resolution mechanism.

Bankruptcy Regulations

The Costa Rican bankruptcy law, addressed in both the commercial code and the civil procedures code, is similar to corresponding U.S. law. In February 2021, Costa Rica’s National Assembly approved a comprehensive bankruptcy law #9957 “Ley Concursal”, in effect since December 1, 2021. The new law eases bankruptcy processes and help companies in financial distress to move through the “administrative intervention” intended to save the companies. The previous law too often ended with otherwise viable companies ceasing operations, rather than allowing them to recover, due to a bias towards dissolution of companies in distress. As in the United States, penal law will also apply to criminal malfeasance in some bankruptcy cases.

Investment Incentives

Four investment incentive programs operate in Costa Rica: the free trade zone system, an inward-processing regime, a duty drawback procedure, and the tourism development incentives regime. These incentives are available equally to foreign and domestic investors, and include tax holidays, training of specialized labor force, and facilitation of bureaucratic procedures. PROCOMER manages the first three programs, and companies may choose only one of the three. As of early 2023,630 companies are in the free trade zone regime, 90 in the inward processing regime, and 10 in duty drawback.

ICT administers the tourism incentives; through early 2023, 1,141 tourism firms are declared as such with access to incentives of various types depending on the firm’s operations (e.g., hotels, rent-a-car, travel agencies, airlines, and aquatic transport). Sustainable adventure parks may opt for the free trade regime dedicated to recreational activities, conservation activities, and/or scientific research. The free trade zone regime is based on the 1990 law #7210, updated in 2010 by law #8794 and attendant regulations, and now most recently through the 2022 legislation #10234 “Law for the Strengthening of Territorial Competitiveness to Promote the Attraction of Investments Outside the Greater Metropolitan Area (GAM).” Inward processing and duty drawback derive from the General Customs Law #7557. Tourism incentives are based on the 1985 law #6990, most recently amended in 2001.

The inward-processing regime suspends duties on imported raw materials of qualifying companies and then exempts the inputs from those taxes when the finished goods are exported. The goods must be re-exported within a non-renewable period of one year. Companies within this regime may sell to the domestic market if they have registered to do so and pay applicable local taxes. The drawback procedure provides for rebates of duties or other taxes that were paid by an importer for goods subsequently incorporated into an exported good. Finally, the tourism development incentives regime provides a set of advantages, including duty exemption – local and customs taxes – for construction and equipment to tourism companies, especially hotels and marinas, which sign a tourism agreement with ICT.

Costa Rica has not established distinct incentives for under-represented investors, for example, women. Incentives for environmentally “green” investment tend towards structural or institutional facilitation rather than subsidy. Electricity tariffs, including net-metering and access tariffs for rooftop solar installation, are designed to encourage renewable energy generation and use without creating a clear subsidy of those activities. Green hydrogen production is encouraged through several executive decrees that provide import tariff exemptions for equipment and seek to establish a flexible and enabling regulatory framework for the use of national grid surpluses in the development of a green hydrogen economy in Costa Rica.

Foreign Trade Zones/Free Ports/Trade Facilitation

Individual companies can create industrial parks that qualify for free trade zone (FTZ) status by meeting specific criteria and applying for such status with PROCOMER. Companies in FTZs receive exemption from virtually all taxes for eight years and at a reduced rate for some years to follow. Established companies may be able to renew this exemption through additional investment. In addition to the tax benefits, companies operating in FTZs enjoy simplified investment, trade, and customs procedures, which provide a convenient way to avoid Costa Rica’s burdensome business licensing process. Call centers, logistics providers, and software developers are among the companies that may benefit from FTZ status but do not physically export goods. Such service providers have become increasingly important participants in the free trade zone regime. Costa Rican authorities aretraditionally proactive in working with FTZ companies to streamline and improve law, regulation and procedures touching upon the FTZ regime. A study of the benefits of FTZ regime for the broader economy is available on PROCOMER’s website https://www.procomer.com/.

Performance and Data Localization Requirements

Costa Rica does not impose requirements that foreign investors transfer technology or proprietary business information or purchase a certain percentage of inputs from local sources. However, the Costa Rican agencies involved in investment and export promotion do explicitly focus on categories of foreign investor who are likely to encourage technology transfer, local supply chain development, employment of local residents, and cooperation with local universities. The export promotion agency PROCOMER operates an export linkages department focused on increasing the percentage of local content inputs used by large multinational enterprises.

Costa Rica does not have excessively onerous visa, residence, work permit, or similar requirements designed to inhibit the mobility of foreign investors and their employees, although the procedures necessary to obtain residency in Costa Rica are often perceived to be long and bureaucratic. Existing immigration measures do not appear to have inhibited foreign investors’ and their employees’ mobility to the extent that they affect foreign direct investment in the country. The government is responsible for monitoring so that foreign nationals do not displace local employees in employment, and the Immigration Law and Labor Ministry regulations establish a mechanism to determine in which cases the national labor force would need protection. However, investors in the country do not generally perceive Costa Rica as unfairly mandating local employment. The Labor Ministry prepares a list of recommended and not recommended jobs to be filled by foreign nationals. Costa Rica does not have government/authority-imposed conditions on any permission to invest.

Costa Rica does not require Costa Rican data to be stored on Costa Rican soil. Under law #8968 ‒ Personal Data Protection Law ‒ and its corresponding regulation, companies must notify the Data Protection Agency (PRODHAB) of all existing databases from which personal information is sold or traded. Costa Rica does not impose measures that unduly impede companies from securing and freely transmitting customer or other business-related data. While Costa Rica in the next several years is looking to modernize its law pertaining to data privacy and cross border data transfer, Costa Rica’s vibrant digital services industry will likely ensure that the new regulations do not interfere unduly with legitimate digital services business.

Real Property

The laws governing investments in land, buildings, and mortgages are generally transparent. Secured interests in both chattel and real property are recognized and enforced. Mortgage and title recording are mandatory and the vast majority of land in Costa Rica has clear title. However, the National Registry, the government entity that records property titles, has been successfully targeted on occasion with fraudulent filing, which has led in some cases to overlapping title to real property. Costa Rican law allows long-time occupants of a property belonging to someone else (i.e., squatters) to eventually take legal possession of that property if unopposed by the property owner. Potential investors in Costa Rican real estate should also be aware that the right to use traditional paths is enshrined in law and can be used to obtain court-ordered easem*nts on land bearing private title; disputes over easem*nts are particularly common when access to a beach is an issue.

Foreigners are subject to the same land lease and acquisition laws and regulations as Costa Ricans with the exception of concessions within the Maritime Zone (Zona Maritima Terrestre – ZMT). Almost all beachfront is public property for a distance of 200 meters from the mean high tide line, with an exception for long-established port cities and a few beaches such as Jaco. The first 50 meters from the mean high tide line is severely restricted. The next 150 meters, also owned by the state, is the Maritime Zone and can only be leased from the local municipalities or the Costa Rican Tourism Institute (ICT) for specified periods and particular uses, such as tourism installation or vacation homes. Concessions in this zone cannot be given to foreigners or foreign-owned companies.

Intellectual Property Rights

Costa Rica’s legal structure for protecting intellectual property rights (IPR) is quite strong, but enforcement is sporadic and does not always get the attention and resources required to be effective. In the 2019 United States Trade Representative (USTR) Special 301 Report, USTR noted the substantial progress made by Costa Rica in protecting IPR. As a result, USTR has not included Costa Rica in Special 301 reports since 2019. Costa Rica was not listed in USTR’s 2022 Review of Notorious Markets for Counterfeiting and Piracy.

Costa Rica is a signatory of many major international agreements and conventions regarding intellectual property. Building on the existent regulatory and legal framework, the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) required Costa Rica to strengthen and clarify its IPR regime further, with several new IPR laws added in 2008. Prior to that, the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) took effect in Costa Rica on January 1, 2000. In 2002, Costa Rica ratified the World Intellectual Property Organization (WIPO) Performances and Phonograms Treaty and the WIPO Copyright Treaty.

The Intellectual Property (IP) Registry has been working to streamline the registration process, reducing backlogs, and issuing resolutions in a more efficient manner. In June 2022, the IP Registry launched the WIPO Publish platform, which allows free online consultation for trademarks and other distinctive signs, patents, utility models and industrial designs. On August 30,2021,the U.S. Patent and Trademark Office (USPTO) and the National Registry signed a Memorandum of Understanding to encourage information sharing and capacity building.
The Costa Rican government does not release official statistics on the seizure of counterfeit goods. In 2022, Costa Rica’s Economic Crimes Prosecutor investigated 50 IPR cases, up from the total of 26 cases in 2021. As in prior years, prosecutors ultimately dismissed several cases due to lack of interest, collaboration, and follow-up by the representatives of trademark rights holders. Government authorities complained that the lack of response by trademark representatives is a recurring behavior dating back to at least 2016 and may explain the drop in IPR cases. In 2020, the Prosecutor’s Office established a specialized cybercrime unit with the purpose of improving the country’s response toward computer-oriented crimes, including copyrights infringements.

On September 4, 2019, Costa Rican Customs issued an executive decree titled “Contact of the Representatives of Intellectual Property Rights for Enforcement Issues” establishing a formal customs recordation system for trademarks that allows customs officers to make full use of their ex officio authority to inspect and detain goods. Under the decree, customs offices have the power to include new trademark rights holders in a formal database for use by customs officials in the field. As of 2022, 182 trademarks are included in this database.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Resources for Rights Holders
Contact at the U.S. Embassy in Costa Rica:
Attention: Investment Climate Statement
Economic Section
Embassy San Jose, Costa Rica
+506 2519-2000
SanJoseEcon@state.gov

Capital Markets and Portfolio Investment

The Costa Rican government’s general attitude towards foreign portfolio investment is prudently welcoming, seeking to facilitate the free flow of financial resources into the economy while minimizing the instability that might be caused by the sudden entry or exit of funds. The securities exchange (Bolsa Nacional de Valores) is small and is dominated by trading in bonds. Stock trading is of limited significance and involves less than 10 of the country’s larger companies, resulting in an illiquid secondary market. There is a small secondary market in commercial paper and repurchase agreements. The Costa Rican government has in recent years explicitly welcomed foreign institutional investors purchasing significant volumes of Costa Rican dollar-denominated government debt in the local market. The securities exchange regulator (SUGEVAL) is generally perceived to be effective.

Costa Rica accepted the obligations of IMF Article VIII, agreeing not to impose restrictions on payments and transfers for current international transactions or engage in discriminatory currency arrangements, except with IMF approval. There are no controls on capital flows in or out of Costa Rica or on portfolio investment in publicly traded companies. Some capital flows are subject to a withholding tax (see section on Foreign Exchange and Remittances). Within Costa Rica, credit is largely allocated on market terms, although long-term capital is scarce. Favorable lending terms for USD-denominated loans compared to colon-denominated loans have made USD-denominated mortgage financing popular and common. Foreign investors can borrow in the local market; they are also free to borrow from abroad, although a 15% withholding tax on interest paid applies when the creditor is a non-tax resident in the country, under the reasoning that the interest payment constitutes income from a Costa Rican source. Potential overseas borrowers must also consider Costa Rica’s limitation on the deductibility of financial expenses by the debtor when the creditor is not an entity regulated in its country of origin by a body like the Costa Rican financial supervisory authority (SUGEF). In such cases, deductible interest for the current fiscal year is around 30% of EBITDA (Earnings Before Interest Taxes Depreciation and Amortization).

Money and Banking System

Costa Rica’s financial system boasts a relatively high financial inclusion rate, (the percentage of adults over the age of 15 holding a bank account), calculated by the Central Bank through December 2022 at over 80 percent. Non-resident foreigners may open what are termed “simplified accounts” in Costa Rican financial institutions, while resident foreigners have full access to all banking services.

The banking sector is healthy and well-regulated, with a non-performing loan ratio of 2.4 percent of active loans as of December 2022 (2.7 percent in state-owned banks). The country hosts many smaller private banks, credit unions, and factoring houses, although the four state-owned banks (two commercial, one mortgage, and one workers’) are still dominant, accounting for 46 percent of banks’ total assets. Consolidated total assets of those state-owned banks were USD 30.3 billion, while combined assets of the regulated financial sector (public banks, private banks, savings-and-loans, and others) were over USD 66 billion as of December 2022.

Costa Rica’s central bank performs the functions of a central bank while also providing support to the four autonomous financial superintendencies (banking, securities, pensions and insurance) under the supervision of the national council for the supervision of the financial system (CONASSIF). The central bank developed and operates the financial system’s transaction settlement and direct transfer mechanism “SINPE” and “SINPEMobil,” through which clients transfer money to and from accounts with any other account in the financial system. The central bank’s governance structure is strong, with a significant degree of autonomy from the executive branch.

Foreign banks may establish both full operations and branch operations in the country under the supervision of the banking regulator SUGEF. The central bank has a good reputation and has had no problem maintaining sufficient correspondent relationships. Costa Rica is steadily improving its ability to ensure the efficacy of anti-money laundering and anti-terrorism finance. The Costa Rican financial sector in broad terms appears to be satisfied to date with the available correspondent banking services.

The OECD 2020 report “review of the financial system” for Costa Rica is a resource for those seeking more detail on the current state of Costa Rica’s financial system: https://www.oecd.org/countries/costarica/Costa-Rica-Review-of-Financial-System-2020.pdf .

Foreign Exchange and Remittances

Foreign Exchange

Costa Rica does not impose restrictions on expatriation of royalties or capital, except when these rights are otherwise stipulated in contractual agreements with the government of Costa Rica. However, Costa Rican sourced rents and benefits remitted overseas, including royalties, are subject to a withholding tax (see below). When such remittances are paid to a parent company or related legal entity, transfer pricing rules and certain limitations apply.

Costa Rica imposes no restrictions on receiving, holding, or transferring foreign exchange. Traders face no delays for foreign exchange, which is readily available at market clearing rates and readily transferable through the banking system. Investors can legally trade dollar bonds and other dollar instruments. Euros are increasingly available in the market. Costa Rica has a floating exchange rate regime in which the central bank is ready to intervene, if necessary, to smooth exchange rate volatility.

Remittance Policies

Costa Rica does not have restrictions on remittances of funds to any foreign country; however, when the remittance constitutes a payment of income from a Costa Rican source to the non-resident, the funds remitted are subject to applicable withholding taxes that are paid to the country’s tax administration. The default level of withholding tax is 30 percent with royalties capped at 25 percent, dividends at 15 percent, professional services at 25 percent, transportation and communication services at 8.5 percent, and reinsurance at 5.5 percent. Different withholding taxes also apply for other types of services. By Costa Rican law, to pay dividends, firms must follow procedures that include being in business in the corresponding fiscal year and paying all applicable local taxes. Those procedures for declaring dividends in effect put a timing restriction on them. As exceptions to the above, withholding tax does not apply to payment of interest to multilateral and bilateral banks that promote economic and social growth, and companies located in free trade zones pay no dividend withholding tax. Double-taxation tax treaties with Costa Rica, (see Bilateral Investment and Taxation Treaties above). lower the withholding tax on dividends and a few other income items paid by companies from those countries.

Sovereign Wealth Funds

Costa Rica does not have a Sovereign Wealth Fund.

Privatization Program

Costa Rica does not have a privatization program, and the markets it has opened to competition in recent decades – banking, telecommunications, insurance and Atlantic Coast container port operations – continue to have their corresponding SOEs. The Costa Rican government has proposed privatization of state bank BCR, the International Bank of Costa Rica (Bicsa), and a minority portion of the stated-owned insurance provider INS. These actions would require legislative approval. Analysts expect any such privatization efforts to occur through a transparent public bidding process, but Costa Rica has no recent precedent for such a process.

Climate Issues

Costa Rica has a national climate strategy and a sophisticated system for monitoring natural capital, biodiversity, and ecosystem services. While the central bank compiles environmental accounts ( https://www.bccr.fi.cr/en/Economic-Indicators/environmental-accounts), the ministry of environment and energy oversees policies on environmental impact assessments and emissions. As part of Costa Rica’s nationally determined contribution under the United Nations Framework Convention on Climate Change, Costa Rica targets maximum national net emissions in 2030 of 9.11 million tons of CO2. This number is consistent with the targeted trajectory of their national decarbonization plan, which seeks to achieve net-zero emissions by 2050. Within the transportation sector Costa Rica aims to adopt standards to migrate towards a zero-emission motorcycle fleet by 2025, have 8% of their fleet of small vehicles be electric, and by 2030 have 8% of the public transportation fleet fully electric. There are currently no regulatory incentives or rebates for private sector contributions to achieve these goals. Costa Rican government efforts to reach net-zero emissions are largely limited to encouraging purchase and use of electric vehicles through tax reduction. In the absence of any significant budget for climate change response, the Costa Rican government relies on the private sector and international donors to implement its ambitions to be net zero by 2050. Costa Rica supports labels or designations meant to encourage good behavior with some considerable success: the blue flag program at beaches and the Costa Rican country brand “Essential Costa Rica.” Official procurement policies do not include environmental or green growth considerations beyond those otherwise mandated by law.

Resources to Report Corruption

Name: José Armando López Baltodano
Title: ProcuradorDirector,Procuraduría de laÉticaPública.
Organization:ProcuraduríaGeneral de laRepública(PGR)
Address: Avenida 2 y 6, Calle 13. SanJosé, Costa Rica.
Telephone Number: 2243-8330, 2243-8321
Email Address: armandolb@pgr.go.cr, evelynhk@pgr.go.cr

Contact at “watchdog” organization:
Evelyn Villarreal F.
Asociación Costa Rica Íntegra
Tel:. (506) 8355 3762
Email: evelyn.villarreal@cr.transparency.org