Should I use a company to buy the car ?

A lot of people have been told to use an S.A. to buy the car, for the purpose of asset protection. This may or may not be good advice. Some lawyers charge $750 and more to set up the company and there are some disadvantages you will encounter:

  • You will always need an up to date “personería juridica” when you do something with the car (RTV inspection, insure it, pay the annual marchamo – property tax, base insurance)
  • The company has to file a tax return each year in December and pay a stamp in March. This is obligatory, whether or not you have economic activity in the company.
  • There is an annual tax on companies, up to $200 paid each January.
  • Being in an S.A. protects the car in case you are sued, but the vehicle is more likely a source of liability (due to accidents) so in most cases the protection is limited.
  • Board members – you need to have different members of the board and a legal representative. This can cause problems later, for example if the lawyer fires his secretary and she is on your board, then you will have to replace her. An unscrupulous or careless attorney can cause you to lose control of the company that will own the vehicle if people are granted powers in the incorporation that they should not have. Ask your attorney about making a Sociedad Responsibilidad Limitada (partnership or sole proprietor) rather than a Sociedad Anónima (S.A.) to avoid this.

In Case of an Accident

In case of an accident, the company won’t protect the driver

If you have an accident with the car, the car would be placed under an embargo as a part of the procedure arising from the accident, if the traffic police are called and write tickets to the parties involved. The car is involved in the accident, so having it under the umbrella of a company doesn’t necessarily protect it.   (Suppose a case where the vehicle strikes a pedestrian, the car isn’t necessarily damaged, so would be a valuable asset in recovering damages for medical expenses, or civil liability)  If you carry insurance, that will protect you as the driver, and claims on the vehicle as well, no matter what name the car is registered under.  So it’s not any advantage one way or the other.

Advantages

Are there advantages to having the company own a car? You may want to have the car in a company name if it will mean you can declare it for local taxes or you are using it for a business. It does protect the vehicle if you are faced with a civil suit for some reason not related to the car, so if it is a very expensive car and this is a consideration, you may want to have it in a company. If you are arrested for some reason having the car in a company name could protect it.

If you do decide to use a company, make sure:

  • The company should not own bank accounts or real estate, only the vehicle. (unless it is a related business enterprise)
  • Consult with your lawyer or CPA about what documents you must file for the company and when.
  • Get a personería jurídica from your lawyer. This can also be obtained when necessary from the service window at the Registro Nacional, it is pretty straightforward process that anyone can do.

If you are looking to purchase a used or new car in Costa Rica, wheelsCR.com can help you with our PASS service. Click here, used car buying assistance in Costa Rica for details. Click here, New Cars in Costa Rica for information on the peculiar process.

If you would like to see information about other vehicle types and models, click here — Vehicle Makes and Models in Costa Rica — for a list of articles on our site.

Click here, General Information, for answers to the most common questions on a variety of topics regarding vehicles in Costa Rica.

Published by Russ Martin

Helping expats locate reliable used vehicles since 2006. I have lived in Costa Rica since 1994.

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