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SUGEF and Taxation1

To become a private lender in Costa Rica, you will want access to local banking services to make disbursements to borrowers, receive regular interest payments, and get the loan’s principal paid back to you down the road.

To access local banking services in Costa Rica as a private lender, you first need to register with SUGEF.

 

What is SUGEF?

SUGEF (Superintendencia General de Entidades Financieras) is the primary regulatory body for the Costa Rica financial industry. Its objective is to strive for stability, solidity, and efficient functioning of the national financial system. One of its major concerns is monitoring and identifying potential money laundering and terrorism financing.

Banks, savings and credit cooperatives, financial firms, foreign exchange firms, and other financial institutions are fully regulated and monitored by SUGEF.

Other kinds of persons and businesses, such as private lenders, also need to complete a registration with SUGEF and maintain basic due diligence policies and procedures to access local banking services. The role of SUGEF, in this case, is somewhat similar to FinCEN in the United States or Fintrac in Canada.

 

Who Needs to Register with SUGEF to Access Banking Services?

A variety of activities need to register with SUGEF to access banking services in Costa Rica:

  • Casinos, whether they be physical or online
  • Any person or business dedicated professionally and habitually to buying and selling real estate, such as real estate agents, intermediaries, promoters, and real estate project developers.
  • Dealers in precious metals and stones, or products that contain them.
  • Non-profit organizations that send or receive money from international jurisdictions are considered “high risk” for money laundering and terrorism financing.
  • Any person or business, including lawyers and accountants, who handle 3rd party client funds for purchase and sale of real estate, administration of funds, administration of purchase and sale of corporations or other structures. Regular salaried employees of such a person or business are exempt.
  • Fiduciary service providers, including those who participate in creating, registering, and administering trusts.
  • Any person or business that provides any credit facility (lenders) employs a local financial institution to do so when that activity is done in an organized and customary fashion.
  • Pawn shops.

Doing these activities while not being registered with SUGEF exposes you to the closure of bank accounts and reports suspicious activity to the authorities at the bank’s discretion. So, it’s essential to get this process done before you start lending in Costa Rica and maintain the obligations in the future.

 

Does SUGEF Monitor or Regulate Private Lending Activities?

Aside from the initial registration, updating of your registration, and maintaining basic due diligence policies and procedures, SUGEF doesn’t actively monitor private lending activities in the way they do with financial institutions.

The primary concern is to prevent money laundering and terrorism financing activity by doing basic checks on people who will participate in financial activities in Costa Rica and ensuring they have basic due diligence policies and procedures in place.

 

How Do I Get Started with Registration?

Gap Investments can assist you with each step of the process through an initial consultation, as well as referral to lawyers and notaries specialized in the initial SUGEF registration and ongoing obligations for private lenders. Contact us now for a consultation.

The first step for many lenders is to obtain a Firma Digital (digital signature) card since the entire process with SUGEF is done online. Note that Firma Digital is only available to Costa Rican citizens and residents. If you are a non-resident, you can have a notary public perform the duties on your behalf.

 

What About Taxation in Costa Rica?

SUGEF is not the tax agency in Costa Rica, nor is it connected to local or international taxation. As a private lender in Costa Rica, you will need to register with the Costa Rican tax agency (Tributación) and declare and pay taxes on the earned interest.

For most individual private mortgage lenders in Costa Rica, the interest earned on the loans they make is subject to tax as movable capital gains (Rentas de capital mobiliario), at a rate of 10%, with no deductions. This tax is reported and paid monthly.

Note that interest is NOT subject to Value Added Tax (VAT, known as “IVA”).

Gap Investments can refer you to qualified tax and accounting professionals in Costa Rica that can manage your accounting, invoicing, and tax preparation at a reasonable cost. Don’t hesitate to get in touch with us to find out more.

If you are subject to tax in your home country, you may be able to use paid Costa Rican taxes as a foreign tax credit:

At Gap Investments, we offer lenders assistance in registering with SUGEF, including acquiring their Firma Digital (or setting up alternatives if the lender is a non-resident) and helping with maintaining regulatory and tax obligations in Costa Rica. Contact us now for more information!


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