Costa Rica, with its lovely climate and scenery, has long been a favorite place for expats, many of whom have started businesses, small and large. Located on the Central American Isthmus between Nicaragua and Panama, this little country has excellent air service to the entire region, as well as many daily flights to the USA, Canada, and South America. Ocean freight is available on both coasts, with the Caribbean port in Limon serving ports in the US and Europe and the Pacific port of Puntarenas having connection to the US West Coast, Canada, Panama, South America, and the Far East.
Expats have been in Costa Rica for a very long time, and business opportunities abound, from real estate development to the hospitality industry to name just two of the most popular. Tourism is a powerful economic engine, and the nation welcomes any new businesses that will bring in more tourist dollars and jobs. The population is very well educated, many with high school diplomas and college degrees. English language skills vary by region; however, most of the better-educated locals have a basic command of the English language and on the Caribbean coast, it is the first language spoken. The quality of skilled labor is probably the highest in all of Central America, as attested by the fact that INTEL has a chip making facility near the capital city of San Jose.
In general, Costa Rica is very business friendly, but one should always keep in mind that the legal system is of a completely different origin than English Common Law. Before getting too involved, it is always wise to enlist the services of a professional firm that specializes in assisting foreigners with starting or acquiring a business, as the bureaucracy can be quite daunting.
When forming a business, networking with expats that have already been down that road is a good preliminary step. By getting to know and trust people in the business community, recommendations for a good abogado (attorney) and a reliable accountant will come easy. Having those two positions filled by known and trusted individuals or firms is very important. Between the two of them, they should be able to complete all the necessary prerequisites with minimal headaches. However, remaining involved in every step of the process, asking all the right questions, and keeping a diligent paper trail is highly recommended. If more than a few employees are required for a business, the hiring of a local supervisor is recommended.
Of course, there are rules and regulations involved with the hiring of employees. One temptation that an employer should always avoid is hiring employees “under the table.” The hazards of doing so are manifold. Fines are severe for those who get caught, and they will have to make up for all the various payroll taxes due the government.
The 13th month’s salary, or aguinaldo, is a requirement, to be paid to employees at the end of November or the first part of December. Other employer responsibilities include registering paying the employee’s social security and benefits, carrying personal injury insurance, and providing paid vacation time, among others.
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As far as taxes go, Costa Rica has a pretty straightforward system of taxation, consisting of State Tax (similar to Federal Tax in the USA) which is broken down into Income Taxes, Value Added Tax, Import Taxes, and excise taxes. Each canton in the country has a certain amount of autonomy with their taxing powers, which vary from canton to canton, and again it is very important, particularly as a newcomer, to adhere to the laws. The services of a bookkeeper and accountant are suggested, as they know their way around the maze of rules and regulations, which are in constant flux.
Unless the business is tourist related, chances are that the location will be somewhere in the Central Valley around San Jose. Business infrastructure there is very well developed, with broadband internet widely available, as well as FedEx, UPS and DHL serving the region. Electricity is 110V 60Hz, (American plugs) and is very reliable as are landline phones and mobile phones. Because the state telephone monopoly requires all mobile phone customers to have a cedula de identitad, the official identification of all legal residents, options for non-residents include renting or having a resident be the one to sign up.
When engaging in business Costa Ricans are very formal and polite, dressing the part, networking, and enjoying their power lunches. It is not the informal business atmosphere one would find in the Caribbean. However, if the enterprise is related to the tourist sector, and it is not a high-class resort, it may be perfectly acceptable to have a more casual workplace setting.
All along the Pacific Coast from Nicaragua to Panama, there exists a series of accommodations and eating establishments that cater to everyone from backpackers to the Hollywood glitterati, and for the person looking to get into business in this region, many opportunities await. As always, before making a substantial investment, the common advice, “look before you leap” applies. A wise businessperson will visit potential locations at different times, perhaps stay for a while, keeping in mind that on both coasts, the rainy season starts in late April and last until the end of November. Then, after checking into their suitability and carefully researching the viability of the project, all the time keeping an open mind, take that giant leap and become an entrepreneur in Costa Rica!