Foreigners who want to invest in Costa Rica can do so through stocks, with some difficulty. Or, they can invest in residential or commercial real estate, where there are many opportunities. But they might also consider establishing a business or a branch of a business there, with the help of welcoming and tax-friendly government policies.

Key Takeaways

  • Costa Rica residential real estate has become a popular choice for snowbirds and retirees.
  • Several local firms cater to commercial real estate investors from abroad.
  • A number of geographic "free zones" with special tax breaks and other incentives are luring new job-creating businesses.

Costa Rica offers an attractive proposition for foreign direct investment, due to its establishment of several free zones. These are essentially duty-free geographic areas where some 400 businesses foreign and domestic now operate, tariff-free, sales tax-free, and, in some cases, income tax-free, in return for creating jobs for Costa Ricans.

In addition, the implementation of the Dominican Republic-Central America Free Trade Act (CAFTA-DR) has helped promote stronger trade and stability between Costa Rica and El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic.

Investing in Costa Rican Stocks

This is actually the trickiest of the three options for investing in Costa Rica.

Costa Rica's stock exchange is called the Bolsa Nacional de Valores, or Bolsa for short. The exchange is extremely small with only about 60 companies listing stocks. A range of industries is represented, with a heavy emphasis on financials.

Foreign investors looking for exposure to Costa Rica through this stock market may have a tough time getting access, as there isn’t much liquidity compared to bigger exchanges.

Many other countries offer easier access to foreign stock investors through the use of an American deposit receipt (ADR) or an exchange-traded fund (ETF). However, since Costa Rica has such a small stock market, there did not appear to be any ADRs or Costa Rican-specific ETFs available to the public as of late 2020.

Investing in Real Estate

The most popular way to invest in Costa Rica is through real estate, and there are good reasons for that. The country has become increasingly popular with the baby boomer generation for its choice of vacation and retirement homes. Along with beautiful year-round weather, Costa Rica offers a low cost of living, low taxes, a stable government, and affordable high-quality health care.

Costa Rica has an extremely low property tax rate of 0.25% of the registered property's value. The tax savings, combined with the low cost of living, is a great incentive for retirees who are seeking more value for their dollar.

The Costa Rican Investment Promotion Agency (CINDE) is an online resource for foreign businesses.

Considering that little Costa Rica takes up under 20,000 square miles of land, it offers extraordinarily varied geography. There are options for homebuyers on beaches, lakefronts, and mountainsides. But half the country's population of about 5 million live in and around the nation's capital of San Jose in the Central Valley.

Commercial Real Estate

Several real estate firms located in Costa Rica cater to foreign investors. Rental income properties, farms, hotels, bars, and restaurants all are available.

Land development projects have become popular with investors, with the possibility of purchasing rights that can be used for either residential or commercial construction.

Resources for Doing Business in Costa Rica

The Costa Rican Investment Promotion Agency (CINDE) is a great resource for investors who are looking into any of the growth sectors of Costa Rica.

The site offers information on opportunities in a number of sectors, including:

  • Services including back office, regional office, call center, human resource office, or digital technology office locations.
  • Advanced manufacturing in the metal, automotive, electronics manufacturing, electronic service, and aerospace fields.
  • The life sciences sector, for production of medical devices, biotechnologies, and pharmaceuticals.
  • A light manufacturing sector for companies in plastic, clothing, construction, textiles, and packing materials.
  • The food sector, from farming to processing and distribution.

The Costa Rican government has developed a number of incentives to attract businesses in these sectors. For example, it offers a 100% tax exemption on all import, interest income, withholding, stamp, and sales taxes. There's also a 10-year lock on property transfer taxes.

Investors in the services and manufacturing sectors get even more incentives. For the first eight-year period, these companies get a 100% income tax exemption, followed by a four-year period of a 50% income tax exemption.