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Costa Rica, officially the Republic of Costa Rica (Spanish: Repblica de Costa Rica), is a Central American country bordered to the north by Nicaragua, to the northeast by the Caribbean Sea, to the southeast by Panama, to the southwest by the Pacific Ocean, and to the south by the Cocos Island maritime border with Ecuador. It has a population of around 5 million people and a land area of 51,060 km2 (19,710 sq mi). San José, the capital and main city, is home to an estimated 333,980 inhabitants, with a population of about two million in the surrounding metropolitan region.
A unitary presidential constitutional republic is the sovereign state. It is well-known for its long-standing and stable democracy, as well as its well-educated workforce. The government spends around 6.9 percent of its budget (2016) on education, compared to 4.4 percent globally. Its economy, which was historically highly reliant on agriculture, has now expanded to include industries like banking, corporate services for international corporations, medicines, and ecotourism. Many international industrial and service businesses operate in Costa Rica's Free Trade Zones (FTZs), where they may take advantage of investment and tax breaks.
Costa Rica was inhabited by indigenous peoples prior to Spanish colonization in the 16th century. It remained a peripheral province of the empire until independence as part of the First Mexican Empire, after which it joined the Federal Republic of Central America, from which it proclaimed independence in 1847. After a short civil war in 1948, Costa Rica completely dissolved its army in 1949, becoming one of just a few sovereign states without a standing force.
The nation has regularly fared well in the Human Development Index (HDI), ranking 62nd in the world and sixth in Latin America as of 2020. The United Nations Development Programme (UNDP) has also identified it as having achieved substantially greater human development than other nations at comparable economic levels, with a better record of human development and inequality than the region's median. It also compares well to the condition of democracy, press freedom, and subjective pleasure. It boasts the seventh freest press in the world, according to the Press Freedom Index, the 37th most democratic nation in the world, and the 12th happiest country in the World Happiness Report.
After 50 weeks of continuous work, all workers are entitled to two weeks of leave (12 days) and two days of rest.
Costa Rica recognizes 11 public holidays.
For the first three days of maternity leave, the boss and social security must each pay the person half of their wages. The employee receives 60% of their wages from the 4th day forward, and the contractor is no longer obliged to compensate.
Employees who are pregnant are entitled to four months of paid maternity leave, one month of prenatal leave, and three months of postpartum leave. The boss is responsible for half of the fees, while the CCSS is responsible for the other half (Costa Rican Social Security Fund).
Employees in the private sector are not entitled to any compensation under paternity leave.
Employees in the private sector are not entitled to any compensation under parental leave.
To dismiss an employee for cause in Costa Rica, the cause must be one of the grounds specified in Article 81 of the Labor Code. The termination must be adequately documented, since the employer bears the burden of establishing that the termination was justified. Employers are only responsible for paying salaries, proportionate vacation time, and the Christmas Bonus. Severance pay is payable to employees who are dismissed or laid off without reason. Severance pay is provided on the final day of work. If an employer dismisses an employee without cause, the employee is entitled to severance pay, locally known to as "Prestaciones Laborales."
The legislation requires that a 30 day notice of impending termination be given. The employee is entitled to 30 days' pay if no advance warning is given. Regular pay continues for 30 days if the required number of days' notice is given, albeit the employee is entitled to one paid day each week to look for job.
The Costa Rican Labor Code has a specific provision that covers “Domestic Employees”. It provides a 30 day probationary period where either party may terminate the relationship without and severance responsibility. After the 30 day period the termination provision discussed above apply as well.
When an employer dismisses an employee without cause or when an employee resigns for legitimate reason, the employee is entitled to severance pay. If an employee has worked for the company for more than three months but less than six months, he or she is entitled to seven days' salary. Employees who have worked between six and twelve months are entitled to fourteen days' salary.
If an employee has more than one year of service with the company, the following schedule applies for each year of service. A year of service will be worth 19.50 days in compensation. Every two to three years of service will be paid with twenty days. For four years of service, 21 days will be compensated. For five years of service, 21.24 days will be paid. For six years of service, 21.50 days will be compensated. Seven years of service will entitle the employee to 22 days of pay.
The maximum number of working hours per day in Costa Rica varies according to the type of workday. Normal Working Days (Jornadas Ordinarias Normales) and Special Working Days (Jornadas Especiales o de Excepción) exist in Costa Rica. Both types of workdays can be classified as dayshifts or nightshifts. The maximum number of hours that can be worked in a week is 48.
Normal working hours are between 5 a.m. and 7 p.m. during the day. Nighttime jobs are those that occur between the hours of 7 p.m. and 5 a.m. Employees working nights may not work more than 36 hours per week. The maximum number of hours permitted per week for mixed shifts of day and night work is 42.
Saturdays are considered Special Working Days. Special Working Days are applicable to a variety of occupations, including domestic servants, who can work up to 12 hours per day.
Overtime is compensated at time and a half, or the hourly wage plus 50%. Employers are permitted to require no more than four hours of overtime per day, for a total of 12 working hours.
Costa Rica's minimum wage is determined by the job and skill level of an employee. For instance, a house cleaner earns approximately 205,047 colones per month in 2021, while those with a licentiate degree earn at least 682,607 colones per month.
Costa Rican compensation laws require employees to receive two bonuses per year: a Christmas bonus and an Aguinaldo bonus. The Christmas bonus must be paid between December 1 and December 20 and is equal to one month's wages. Additionally, the Aguinaldo is equivalent to one month's wages and is paid in two installments, one in June and another in December.
Costa Rica has some of the greatest healthcare in Latin America. The health system consists of Medical Treatment (disease and pregnancy) and Compulsory Pension (disability, old age and death).
In Costa Rica, private insurance or a health plan are available. Additionally, private insurance policies are offered through the state-owned insurance business (INS). Dental work, optometry, well-visits, and yearly check-ups are all covered under private policies. Prescription medicines, some medical examinations, sick visits, and hospitalization are reimbursed at 80% of the cost. Costs associated with the surgeon and aesthetician are fully covered. Private medical insurance now costs between $60 and $130 per month per individual, depending on gender, age, and other factors.
Companies in the Costa Rica are subject to a corporate tax rate of 30 percent.
Individuals in the Costa Rica are imposed an income tax rate that ranges from 0 percent to 25 percent. The actual percentage varies depending on the income tax bracket the individual belongs to.
The standard rate for the value-added tax (VAT) or goods and sales tax (GST) in the Costa Rica is 13 percent.
For medicines and private education, the rate is 2 percent.
For essential food and agriculture, the rate is 1 percent.
For private healthcare and plane tickets, the rate is 4 percent.
Employers of foreign nationals in Costa Rica have numerous alternatives, including systems for business trips, short-term assignments or employment, long-term temporary employment, and change of status to permanent residency.
A business entrance authorization permits foreign people to conduct a broad variety of commercial and professional activities in Costa Rica for up to 30 or 90 days (depending on nationality), as long as they are not paid locally. Visa-exempt nations may be granted business entrance authorization upon arrival, while visa-holders must get either a Consular or a Restricted Entry Visa, depending on their country. In Costa Rica, a Restricted Entry Visa must be approved by the Restricted Visa Commission before it may be issued by a consulate.
Foreign nationals wishing to undertake business or work activities in Costa Rica for more than 30 or 90 days (depending on nationality) or want to engage in any locally remunerated activity must get work permission. Skilled foreign people intending to undertake commercial or professional activities in Costa Rica for more than 30 or 90 days (depending on nationality) or short-term remunerated labor need the Short-Stay Visa. It allows you to work for six months to a year at first.
The most common kind of work authorization is Temporary Residence (for accredited or non-accredited enterprises), which is normally issued for two years. Companies authorized by Costa Rican immigration authorities obtain perks such as a specific processing desk for immigration applications with quicker processing periods and the freedom to operate while their immigration petitions are being processed.
Companies may register with the General Directorate of Migration and Foreigners to gain preferential treatment, including shorter deadlines for completing residency applications.
To work in Costa Rica, foreign workers must have both a work permit and a residence permit. Employers are in charge of obtaining the permissions. Once the application for the permission has been filed to the General Directorate of Migration and Foreigners and their conclusion is pending, the employee may begin working.
Employment contracts may be either written or verbal. Furthermore, employment contracts might be for an indefinite or a specified period of time. Fixed-term contracts are limited to one year.
Costa Rica Colon (CRC)
United States Dollar (USD)
If you're wondering how to establish up a subsidiary in Costa Rica, you need first address a few main areas of your growth. The procedure varies depending on whatever area of Costa Rica you incorporate in. Different locations have different rules, as well as cultural elements, which may have an influence on your company. Before establishing your subsidiary, always do research on the area around your actual office site.
You also have options for the style of structure you want to include. The two most frequent entities in Costa Rica are the Sociedad Anónima (SA) and the Sociedad de Responsabilidad Limitada (SRL) (SRL). An SRL is similar to a limited liability corporation (LLC) and has several advantages for businesses wishing to grow.
The following steps are involved in establishing a Costa Rica subsidiary as an LLC:
(1) Obtaining a company identity number by submitting a notarized document to the Mercantile Registry
(2) Verifying your company's intended trade or commercial name with the Public Registry through a notary public
(3) Prepare a registration study if your company's capital stock contains personal property or real estate.
(4) Publication of your formation notification in La Gaceta, the country's legal newspaper
(5) Paying the required revenue stamps and registration rights at any Banco de Costa Rica branch office
The appropriate subsidiary laws in Costa Rica are determined on the kind of entity selected. An LLC requires at least one director and two stockholders of any nationality. To complete the incorporation procedure, you will also require at least $1 in paid-up share capital.
The bulk of commerce in Costa Rica is done in person or over the phone. As a result, knowing Spanish or working with a consultant, lawyer, or global PEO who speaks Spanish is essential. Your LLC must also have a physical location in Costa Rica where you may preserve statutory and accounting documents. You must designate a registered agent if none of your directors reside in Costa Rica.
You must first open in-country bank accounts with a public or private bank before you can operate payroll. Opening a bank account in Costa Rica is notoriously difficult, so be prepared for delays. Customer service is another hurdle, but perseverance will pay dividends.
