Doing Business 2020 Costa Rica Economy Profile Costa Rica Page 1 Doing Business 2020 Costa Rica Economy Profile of Costa Rica Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation and redundancy cost Page 2 Doing Business 2020 Costa Rica About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankings of economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. To learn more about Doing Business please visit doingbusiness.org Page 3 Doing Business 2020 Costa Rica Ease of Doing Business in DB RANK DB SCORE Region Latin America & Caribbean Costa Rica Income Category Upper middle income 74 69.2 Population 4,999,441 City Covered San José Rankings on Doing Business topics - Costa Rica 15 25 49 66 78 80 110 111 137 144 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Topic Scores 79.9 70.8 88.9 74.4 85.0 48.0 78.0 77.6 55.2 34.6 Starting a Business (rank) 144 Getting Credit (rank) 15 Trading across Borders (rank) 80 Score of starting a business (0-100) 79.9 Score of getting credit (0-100) 85.0 Score of trading across borders (0-100) 77.6 Procedures (number) 10 Strength of legal rights index (0-12) 10 Time to export Time (days) 23 Depth of credit information index (0-8) 7 Documentary compliance (hours) 24 Cost (number) 9.6 Credit registry coverage (% of adults) 36.4 Border compliance (hours) 20 Paid-in min. capital (% of income per capita) 0.0 Credit bureau coverage (% of adults) 86.0 Cost to export Documentary compliance (USD) 80 Dealing with Construction Permits (rank) 78 Protecting Minority Investors (rank) 110 Border compliance (USD) 450 Score of dealing with construction permits (0-100) 70.8 Score of protecting minority investors (0-100) 48.0 Time to export Procedures (number) 17 Extent of disclosure index (0-10) 5.0 Documentary compliance (hours) 26 Time (days) 138 Extent of director liability index (0-10) 5.0 Border compliance (hours) 80 Cost (% of warehouse value) 2.0 Ease of shareholder suits index (0-10) 8.0 Cost to export Building quality control index (0-15) 11.0 Extent of shareholder rights index (0-6) 2.0 Documentary compliance (USD) 75 Extent of ownership and control index (0-7) 3.0 Border compliance (USD) 500 Getting Electricity (rank) 25 Extent of corporate transparency index (0-7) 1.0 Score of getting electricity (0-100) 88.9 Enforcing Contracts (rank) 111 Procedures (number) 5 Paying Taxes (rank) 66 Score of enforcing contracts (0-100) 55.2 Time (days) 39 Score of paying taxes (0-100) 78.0 Time (days) 852 Cost (% of income per capita) 158.0 Payments (number per year) 10 Cost (% of claim value) 24.3 Reliability of supply and transparency of tariff index (0-8) 8 Time (hours per year) 151 Quality of judicial processes index (0-18) 9.5 Total tax and contribution rate (% of profit) 58.3 Registering Property (rank) 49 Postfiling index (0-100) 87.2 Resolving Insolvency (rank) 137 Score of registering property (0-100) 74.4 Score of resolving insolvency (0-100) 34.6 Procedures (number) 5 Recovery rate (cents on the dollar) 29.5 Time (days) 11 Time (years) 3.0 Cost (% of property value) 3.4 Cost (% of estate) 14.5 Quality of the land administration index (0-30) 17.5 Outcome (0 as piecemeal sale and 1 as going 0 concern) Strength of insolvency framework index (0-16) 6.0 Page 4 Doing Business 2020 Costa Rica Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate a company To make the data comparable across economies, several assumptions about the business and the (number) procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business city -Is a limited liability company (or its legal equivalent). If there is more than one type of limited • Postregistration (for example, social security registration, liability company in the economy, the limited liability form most common among domestic firms is company seal) chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office. • Obtaining approval from spouse to start a business or to leave -Operates in the economy’s largest business city. For 11 economies the data are also collected for the home to register the company the second largest business city. • Obtaining any gender specific document for company -Performs general industrial or commercial activities such as the production or sale to the public of registration and operation or national identification card goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily Time required to complete each procedure (calendar days) polluting production processes. • Does not include time spent gathering information -Does not qualify for investment incentives or any special benefits. -Is 100% domestically owned. • Each procedure starts on a separate day (2 procedures cannot -Has five business owners, none of whom is a legal entity. One business owner holds 30% of the start on the same day) company shares, two owners have 20% of shares each, and two owners have 15% of shares • Procedures fully completed online are recorded as ½ day each. -Is managed by one local director. • Procedure is considered completed once final document is -Has between 10 and 50 employees one month after the commencement of operations, all of them received domestic nationals. • No prior contact with officials -Has start-up capital of 10 times income per capita. -Has an estimated turnover of at least 100 times income per capita. Cost required to complete each procedure (% of income per -Leases the commercial plant or offices and is not a proprietor of real estate. capita) -Has an annual lease for the office space equivalent to one income per capita. • Official costs only, no bribes -Is in an office space of approximately 929 square meters (10,000 square feet). -Has a company deed that is 10 pages long. • No professional fees unless services required by law or commonly used in practice The owners: Paid-in minimum capital (% of income per capita) -Have reached the legal age of majority and are capable of making decisions as an adult. If there • Funds deposited in a bank or with third party before registration is no legal age of majority, they are assumed to be 30 years old. or up to 3 months after incorporation -Are in good health and have no criminal record. -Are married, the marriage is monogamous and registered with the authorities. -Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Page 5 Doing Business 2020 Costa Rica Starting a Business - Costa Rica Standardized Company Legal form Sociedad Anónima (S.A.) - Corporation Paid-in minimum capital requirement No minimum City Covered San José Indicator Costa Rica Latin America & OECD high Best Regulatory Caribbean income Performance Procedure – Men (number) 10 8.1 4.9 1 (2 Economies) Time – Men (days) 23 28.8 9.2 0.5 (New Zealand) Cost – Men (% of income per capita) 9.6 31.4 3.0 0.0 (2 Economies) Procedure – Women (number) 10 8.1 4.9 1 (2 Economies) Time – Women (days) 23 28.8 9.2 0.5 (New Zealand) Cost – Women (% of income per capita) 9.6 31.4 3.0 0.0 (2 Economies) Paid-in min. capital (% of income per capita) 0.0 0.4 7.6 0.0 (120 Economies) Figure – Starting a Business in Costa Rica – Score 47.1 77.4 95.2 100.0 Procedures Time Cost Paid-in min. capital Figure – Starting a Business in Costa Rica and comparator economies – Ranking and Score DB 2020 Starting a Business Score 0 100 91.4: Chile (Rank: 57) 87.0: Colombia (Rank: 95) 86.8: Guatemala (Rank: 99) 79.9: Costa Rica (Rank: 144) 79.6: Regional Average (Latin America & Caribbean) 78.6: El Salvador (Rank: 148) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2020 Costa Rica Figure – Starting a Business in Costa Rica – Procedure, Time and Cost Time (days) Cost (% of income per capita) 5 20 Cost (% of income per capita) 4 15 Time (days) 3 10 2 5 1 0 0 1 2 3 4 5 6 *7 *8 9 10 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2020 Costa Rica Details – Starting a Business in Costa Rica – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Check the availability of the proposed company name Less than one day no charge Agency : National Registry ( Registro de Personas Jurídicas) (online procedure) In order to register a company one must first verify the availability of the company name. The company name can be verified online (https://www.rnpdigital.com) free of cost. Companies can also be registered by number, in which case the name would not have to be verified. 2 A notary public drafts and notarizes public deeds of the incorporation charter for Less than one day CRC 181,500 registration before the Public Registry online (online procedure) Agency : Public Notary The founding shareholders, as well as the members of the Board of Directors, must sign the public deed of incorporation drafted and authorized by the notary public, who will then submit it for registration to the National Registry. A minimum of two founding shareholders is required, as well as designation of a President, Secretary, Treasurer and Comptroller. The same person cannot occupy two different positions. According to the fee schedule established by Executive Order No. 41457-JP effective on February 1, 2019, the fee for notarizing the articles of association is CRC 181,500 for any corporation. 3 Deposit capital in the bank account, pay registration fees and stamp duties 1 day see comments Agency : National Banking System As a prerequisite for registering the company, 25% of the capital stock indicated in the incorporation charter (if paid in cash) must be deposited in a national bank. The amount deposited may be withdrawn once the company has been duly recorded. If founders chose to sign a promissory note, there is no enforceable obligation to deposit capital in a bank account later. In fact, the business is not even required to operate a bank account at any point during its existence. The registration fees, which include the notary public fees, are as follows: Stamp fees: National Archive (Archivo Nacional) CRC 20 Coleg Contad. Priv (Libros legales) CRC 75 Colegio de Abogados CRC 15,000 Educación y Cultura CRC 750 Fiscal CRC 625 Municipal Fees CRC 0.2% of capital National Registry CRC 44,620 Legal Books CRC 17,150.00 Agrary Stamp (Agrario) CRC 0.15% of capital 4 Register the incorporation charter in the National Registry and obtain authorization to 2 days CRC 8,000 (digital legalize the company books; send the notice of constitution of the company (edicto) registration fees) + CRC Agency : Crear Empresa (National Registry) 6,580 (publication fees) One must register the incorporation charter at the National Registry, obtain authorization to legalize the company books and send a notice of constitution of the company. This can be done online since February 2012, when Costa Rica launched Crear Empresa. This online platform for business registration allows all incorporation documents to be submitted electronically. 5 File Form D-140 with the before the Tax Department to register the firm as a taxpayer Less than one day see comment Agency : Tax Department (Registro Unico de Contribuyentes, Dirección General de Tributación (online procedure) Directa) Costa Rican citizens or corporations with a Costa Rican legal representative can register electronically as taxpayer (https://www.haciendadigital.go.cr/inscriptipopersona.jsp) 6 Pay the Legal Entities Tax Less than one day 15% of a base salary Agency : Bank (online procedure) Companies must pay the legal entities tax within the first thirty calendar days following registration with the National Registry. The tax is paid from the website of any Costa Rican bank. 7 Register for labor risk insurance with the National Insurance Institute (Instituto Nacional de 1 day (simultaneous with no charge Seguros) previous procedure) Agency : National Insurance Institute (Instituto Nacional de Seguros) The National Insurance Institute is the only insurance at the moment that only offers labor insurance. The annual premium for this type of insurance is about 2.17% of reported payroll. 8 Register the company as an employer with Caja Costarricense de Seguro Social (CCSS, 1 day (simultaneous with no charge Social Security Institute) previous procedure) Agency : Social Security Institute (Caja Costarricense de Seguro Social) After submitting the documents required, the CCSS issues a registration form (inscripción ante CCSS de persona jurídica) that allows the company to start operations. Within 15 days after registration with the CCSS, the company will receive an ex-post inspection from an officer, which consists on a simple verification of the information provided by the company about the business activity and the employees. Page 8 Doing Business 2020 Costa Rica 9 Apply for sanitary permit 1 day USD 30 Agency : Health Department (Ministerio de Salud) The cost for applying for a sanitary permit depends on the degree of environmental risk of the company and varies from USD 30 to USD 100 (USD 30 for low environmental risk, USD 50 for moderate environmental risk, USD 100 for high environmental risk). 10 Apply for the business license (patente municipal) from the municipality 15 days Cost varies between CRC Agency : Local municipality 10,000 and CRC 100,000 All new businesses must apply for the business license (patente municipal) from the municipality. depending on the type of activity, number of employees, location. Takes place simultaneously with previous procedure. Page 9 Doing Business 2020 Costa Rica Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates The construction company (BuildCo): • Submitting all required notifications and receiving all necessary - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest inspections business city. For 11 economies the data are also collected for the second largest business city. • Obtaining utility connections for water and sewerage - Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects • Registering and selling the warehouse after its completion or engineers. BuildCo is not assumed to have any other employees who are technical or licensed Time required to complete each procedure (calendar days) experts, such as geological or topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse upon its • Does not include time spent gathering information completion. • Each procedure starts on a separate day—though procedures The warehouse: that can be fully completed online are an exception to this rule - Will be used for general storage activities, such as storage of books or stationery. • Procedure is considered completed once final document is received - Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be • No prior contact with officials located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of income per - Will have complete architectural and technical plans prepared by a licensed architect. If capita) preparation of the plans requires such steps as obtaining further documentation or getting prior • Official costs only, no bribes approvals from external agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory Building quality control index (0-15) requirements). • Quality of building regulations (0-2) The water and sewerage connections: • Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water • Quality control during construction (0-3) delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. • Quality control after construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow • Liability and insurance regimes (0-2) of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and • Professional certifications (0-4) a peak wastewater flow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 10 Doing Business 2020 Costa Rica Dealing with Construction Permits - Costa Rica Standardized Warehouse Estimated value of warehouse CRC 327,599,011.50 City Covered San José Indicator Costa Rica Latin America & OECD high Best Regulatory Caribbean income Performance Procedures (number) 17 15.5 12.7 None in 2018/19 Time (days) 138 191.2 152.3 None in 2018/19 Cost (% of warehouse value) 2.0 3.6 1.5 None in 2018/19 Building quality control index (0-15) 11.0 9.0 11.6 15.0 (6 Economies) Figure – Dealing with Construction Permits in Costa Rica – Score 52.0 67.7 90.1 73.3 Procedures Time Cost Building quality control index Figure – Dealing with Construction Permits in Costa Rica and comparator economies – Ranking and Score DB 2020 Dealing with Construction Permits Score 0 100 75.9: Chile (Rank: 41) 70.8: Costa Rica (Rank: 78) 69.1: Colombia (Rank: 89) 65.3: Guatemala (Rank: 118) 63.2: Regional Average (Latin America & Caribbean) 52.3: El Salvador (Rank: 168) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Page 11 Doing Business 2020 Costa Rica Figure – Dealing with Construction Permits in Costa Rica – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 1.2 120 1 Cost (% of warehouse value) 100 0.8 Time (days) 80 0.6 60 0.4 40 0.2 20 0 0 1 2 *3 *4 *5 6 *7 8 9 10 11 * 12 13 14 * 15 * 16 17 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 12 Doing Business 2020 Costa Rica Figure – Dealing with Construction Permits in Costa Rica and comparator economies – Measure of Quality 14 13.0 12 11.0 11.0 11.0 10.0 Index score 10 9.0 8 6 4 2 0 Costa Chile Colombia El Guatemala Latin Rica Salvador America & Caribbean Details – Dealing with Construction Permits in Costa Rica – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Request and obtain zoning authorization (uso de suelo) from the Municipal Government 10 days no charge Agency : Municipal Government The request must be made personally before the Local Government, the owner of the property or third party with legal authorization of the owner, who must complete a form and provide the respective requirements. This request can also include a request for property line setbacks to be indicated by the Municipal Government. New land use policies were approved in April 2006. The greater San Jose metropolitan area includes 31 municipalities. The zoning authorization will be valid for 6 months, or up to 12 months. Many municipal authorities, such as the Belen Municipality, do not respect their own land-use regulations when granting the final construction permit. 2 Obtain results of geotechnical study / soil test 17 days CRC 628,981 Agency : Private licensed company A soil study is not a requirement by law. In practice, contractors ask for a soil test to ensure that the foundation of the building is solid. The engineer must understand the suitability of the soil for the proposed construction work. Soil test allows to build a solid foundation and avoid structures to be damaged or collapsed or leaned. The zoning authorization must be obtained prior to requesting a soil test. 3 Obtain topographic results of land plot 11 days CRC 428,982 Agency : Private licensed company A topographic survey of the land plot is obtained prior to developing the architectural plans of the warehouse. 4 Request and obtain approval by the Water Department (Acueductos y Alcantarillados) 10 days no charge Agency : Water Department BuildCo must complete and submit an approval form to the Water Department. In turn, the Department must verify that the construction project site has a water source. 5 Request and obtain workers compensation insurance proof from National Insurance 1 day no charge Institute Agency : National Insurance Institute The National Insurance Institute requires proof that worker compensation insurance has been paid prior to issuing a building permit. This proof is required to start each new project. In the past, developers were allowed a blanket insurance policy that did not require purchase of insurance for every new project. In 2007, the Institute’s policies were revised; it now allows a blanket insurance that the developer adjusts, paying the differences annually. But the complexity of the process discourages its use. Most construction companies purchase individual insurance on a case-by- case basis for projects instead of globally for annual activities. This system is likely to be changed because of private sector complaints. Insurance premiums are based on the amount of coverage. The cost is 4.16% of the value of the labor force which is in turn evaluated to amount for 35% of the total cost of the project. The completed form must be presented with copies of the workers’ identification cards or (for underage employees) working permits. 6 Request and obtain approval from National Environment Technical Secretary 60 days CRC 1,000,000 Agency : National Environment Technical Secretary BuildCo must obtain approval from the National Environment Technical Secretary (Secretaría Técnica Nacional del Ambiente, SETENA), using two forms (in Spanish) available on SETENA’s Web site (www.minae.go.cr /setena.html). BuildCo would use Form D-1 which costs anywhere between CRC 1 million to CRC 1.5 million. The response generally takes 60 -- 90 days. This procedure and the next can be completed simultaneously. Page 13 Doing Business 2020 Costa Rica 7 Request and obtain approval of blue prints by College of Architects and Engineers 20 days CRC 1,051,937 Agency : College of Architects and Engineers BuildCo should submit the property survey map and a contract, signed by two members of the College of Architects and Engineers (Colegio Federado de Ingenieros y de Arquitectos de Costa Rica), an electrical engineer and either a civil engineer or an architect. It is preferred that at least four blueprint copies be submitted. The college has implemented the new Administrador de Proyectos de Construccion (APC) system (via the Internet). If the APC submits the approval, the time line is 1 day; if not, it is about 5-8 days. In 2007, the College encouraged a complete change to digital approval. 8 Request and obtain construction permit from Municipal Government 15 days CRC 3,275,990 Agency : Municipal Government According to Law 8220, the relevant authorities must respond to a construction permit request within 30 days. However, on average, it should take 15 days. 9 Receive on-site inspection - I 1 day no charge Agency : Municipal Government During construction, inspections occur monthly, though not according to a specific schedule. The inspector may show up randomly to view the construction and review the construction log book (bitacora de construccion), which the engineer/architect uses to register entries for each stage of construction. Under Costa Rican law, the engineer is responsible for complying with construction laws and regulations. There is no need to request inspections. 10 Receive on-site inspection - II 1 day no charge Agency : Municipal Government 11 Receive on-site inspection - III 1 day no charge Agency : Municipal Government Request water connection 1 day no charge 12 Agency : Water Department After the connection is requested, an inspector from the Water Department visits the construction site, determines the connection requirements, and, on this basis, estimates the costs. Sewage connection is not included. With few centralized sewage connections, most connections are done with an independent septic system or treatment plant. BuildCo must complete an application form and present all the required documents, including a copy of the company's identification card. 13 Receive inspection from Water Department and pay connection cost 1 day CRC 79,520 Agency : Water Department The Water Department (Dirección de Agua) will send a team to install the gauge and make the connection to the drinking water network 14 Connect to water and sewage services 28 days no charge Agency : Water Department Request proof of completed construction (Constancia de Obra Terminada) from 1 day no charge 15 Municipality Agency : Municipal Government BuildCo or the Responsible of Construction works (Responsable de Obra) must provide a certificate of completed construction to the Municipality . The Inspection Department of the Municipality (Seccion de Inspeccion Municipal) must inspect and issue the certificate of completed construction stating that the construction has been completed in accordance with what was stated in the permit and with the municipal regulations. The legal basis is the Urban Master Plan published in La Gaceta N. 148 of August 3, 2005 (“Plan Director Urbano del Cantón de San José”). Receive final inspection from from Municipality 1 day no charge 16 Agency : Municipal Government 17 Obtain proof of completed construction (Constancia de Obra Terminada) from Municipality 3 days no charge Agency : Municipal Government Takes place simultaneously with previous procedure. Page 14 Doing Business 2020 Costa Rica Details – Dealing with Construction Permits in Costa Rica – Measure of Quality Answer Score Building quality control index (0-15) 11.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; Free 1.0 of charge. Which requirements for obtaining a building permit are clearly specified in the building regulations or on any List of required 1.0 accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in compliance with existing Licensed architect; 1.0 building regulations? (0-1) Licensed engineer. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? (0-2) Inspections by in- 1.0 house engineer; Unscheduled inspections. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance with the approved Yes, final inspection 2.0 plans and regulations? (0-2) is done by government agency; Yes, in-house engineer submits report for final inspection. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 1.0 Which parties (if any) are held liable by law for structural flaws or problems in the building once it is in use Architect or engineer; 1.0 (Latent Defect Liability or Decennial Liability)? (0-1) Professional in charge of the supervision; Construction company; Owner or investor. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or No party is required 0.0 problems in the building once it is in use (Latent Defect Liability Insurance or Decennial Insurance)? (0-1) by law to obtain insurance . Professional certifications index (0-4) 2.0 What are the qualification requirements for the professional responsible for verifying that the architectural plans University degree in 1.0 or drawings are in compliance with existing building regulations? (0-2) architecture or engineering; Being a registered architect or engineer. What are the qualification requirements for the professional who supervises the construction on the ground? (0- University degree in 1.0 2) engineering, construction or construction management; Being a registered architect or engineer. Page 15 Doing Business 2020 Costa Rica Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection (number) To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining all necessary clearances and permits The warehouse: • Completing all required notifications and receiving all necessary - Is owned by a local entrepreneur and is used for storage of goods. inspections - Is located in the economy’s largest business city. For 11 economies the data are also collected for • Obtaining external installation works and possibly purchasing the second largest business city. material for these works - Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway. • Concluding any necessary supply contract and obtaining final - Is a new construction and is being connected to electricity for the first time. supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square Time required to complete each procedure (calendar days) feet). The plot of land on which it is built is 929 square meters (10,000 square feet). • Is at least 1 calendar day The electricity connection: • Each procedure starts on a separate day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- • Does not include time spent gathering information kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution • Reflects the time spent in practice, with little follow-up and no network and is either overhead or underground, whichever is more common in the area where the prior contact with officials warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other Cost required to complete each procedure (% of income per owners’ private property because the warehouse has access to a road. capita) - Does not require work to install the internal wiring of the warehouse. This has already been • Official costs only, no bribes completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours • Duration and frequency of power outages (0–3) a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours • Tools to monitor power outages (0–1) (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. - Tariffs effective in January of the current year are used for calculation of the price of electricity for • Regulatory monitoring of utilities’ performance (0–1) the warehouse. Although January has 31 days, for calculation purposes only 30 days are used. • Financial deterrents limiting outages (0–1) • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity. Page 16 Doing Business 2020 Costa Rica Getting Electricity - Costa Rica Standardized Connection Name of utility Compania Nacional de Fuerza y Luz Price of electricity (US cents per kWh) 14.4 City Covered San José Indicator Costa Rica Latin America & OECD high Best Regulatory Caribbean income Performance Procedures (number) 5 5.5 4.4 3 (28 Economies) Time (days) 39 66.8 74.8 18 (3 Economies) Cost (% of income per capita) 158.0 407.2 61.0 0.0 (3 Economies) Reliability of supply and transparency of tariff index (0-8) 8 4.4 7.4 8 (26 Economies) Figure – Getting Electricity in Costa Rica – Score 66.7 90.9 98.0 100.0 Reliability of supply and transparency of Procedures Time Cost tariff index Figure – Getting Electricity in Costa Rica and comparator economies – Ranking and Score DB 2020 Getting Electricity Score 0 100 88.9: Costa Rica (Rank: 25) 85.7: Chile (Rank: 39) 84.2: Guatemala (Rank: 46) 76.3: Colombia (Rank: 82) 74.5: El Salvador (Rank: 87) 71.7: Regional Average (Latin America & Caribbean) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Figure – Getting Electricity in Costa Rica – Procedure, Time and Cost Time (days) Cost (% of income per capita) 160 35 140 Cost (% of income per capita) 30 120 25 Time (days) 100 20 80 15 60 10 40 5 20 0 0 1 2 *3 4 5 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures Page 17 Doing Business 2020 Costa Rica reflected here, see the summary below. Figure – Getting Electricity in Costa Rica and comparator economies – Measure of Quality 9 8 8 7 7 7 Index score 6 6 6 5 4.4 4 3 2 1 0 Costa Chile Colombia El Guatemala Latin Rica Salvador America & Caribbean Page 18 Doing Business 2020 Costa Rica Details – Getting Electricity in Costa Rica – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Request and obtain approval of electrical design by CFIA 2 calendar days CRC 27,602.86 Agency : Colegio de Ingenieros y Arquitectos (CFIA) The design is prepared by an engineer certified by CFIA, indicating the works and materials required. The designs are presented to CFIA for approval and if the plans comply with the requirements established in the Manual de Diseño para Redes Aéreas, CFIA will seal and stamp the electrical design. 2 Submit application and await the case number and acceptance note 8 calendar days CRC 35,000 Agency : Compania Nacional de Fuerza y Luz (CNFL) The service is requested in person. The customer has to file the following documents with the application form: • the electrical plans sealed and stamped by CFIA, • the cadastre plans • and a copy of the applicant's ID. Depending on the nature of the work, more documents might be required. None of these documents require notary's certification. When the documents are received by the utility it will issue a case number, which is unique to each project. CNFL will review that the plans comply with the regulation and once they have been checked by the design department (Área de Diseño del Sistema de Distribución), the utility will issue an acceptance note and provide the excavation permit. 3 Receive site inspection by CNFL 1 calendar day CRC 0 Agency : Compania Nacional de Fuerza y Luz (CNFL) A site inspection by the Design Department of the utility (Área Diseño del Sistema de Distribución) is necessary to issue the acceptance note. 4 Hire private company to carry out external works 26 calendar days USD 17,500 Agency : Empresa privada The external connection works have to be done by a firm that has been authorized by CNFL to do medium voltage network construction work. There are 21 firms with such authorization in the capital city. Once the supply contract between the client and the authorized provider has been signed, it is filed with CNFL. Three transformers of 50 kVA have to be installed inside the client's private property. The client has to pay for them. They can be installed in a post inside the private property (it's not allowed to install them in public places) or in a transformers vault. 5 Receive meter installation and final connection from CNFL 3 calendar days CRC 324,548.87 Agency : Compania Nacional de Fuerza y Luz (CNFL) The client has to request the meter. There is a guarantee deposit that is calculated according to consumption. It represents one-month consumption. This deposit is required for all clients requesting a new service. The deposit is refundable, and after five years it begins to generate interests. The deposit covers the installation of the metering equipment with its materials. Additionally, it includes the operating costs and service maintenance. Usually CNFL installs the meter and energizes the warehouse at the same time. The installation of the meter is the exclusive responsibility of CNFL. Takes place simultaneously with previous procedure. Page 19 Doing Business 2020 Costa Rica Details – Getting Electricity in Costa Rica – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 8 Total duration and frequency of outages per customer a year (0-3) 3 System average interruption duration index (SAIDI) 0.5 System average interruption frequency index (SAIFI) 0.2 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 5.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? Yes Financial deterrents aimed at limiting outages (0-1) 1 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? Yes Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online https://www.cnfl.go.cr/inde x.php/tarifas-vigentes- c#disposiciones- generales Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 20 Doing Business 2020 Costa Rica Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable property To make the data comparable across economies, several assumptions about the parties to the (number) transaction, the property and the procedures are used. • Preregistration procedures (for example, checking for liens, The parties (buyer and seller): notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). • Registration procedures in the economy's largest business city. - Are located in the periurban (that is, on the outskirts of the city but still within its official limits) • Postregistration procedures (for example, filling title with area of the economy’s largest business city. For 11 economies the data are also collected for the municipality) second largest business city. - Are 100% domestically and privately owned. Time required to complete each procedure (calendar days) - Perform general commercial activities. • Does not include time spent gathering information The property (fully owned by the seller): • Each procedure starts on a separate day - though procedures - Has a value of 50 times income per capita, which equals the sale price. that can be fully completed online are an exception to this rule - Is fully owned by the seller. • Procedure is considered completed once final document is - Has no mortgages attached and has been under the same ownership for the past 10 years. received - Is registered in the land registry or cadastre, or both, and is free of title disputes. • No prior contact with officials - Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required. Cost required to complete each procedure (% of property - Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- value) story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, • Official costs only (such as administrative fees, duties and building codes and legal requirements. The property, consisting of land and building, will be taxes). transferred in its entirety. • Value Added Tax, Capital Gains Tax and illicit payments are - Will not be subject to renovations or additional construction following the purchase. excluded - Has no trees, natural water sources, natural reserves or historical monuments of any kind. - Will not be used for special purposes, and no special permits, such as for residential use, Quality of land administration index (0-30) industrial plants, waste storage or certain types of agricultural activities, are required. - Has no occupants, and no other party holds a legal interest in it. • Reliability of infrastructure index (0-8) • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 21 Doing Business 2020 Costa Rica Registering Property - Costa Rica Indicator Costa Rica Latin America & OECD high Best Regulatory Caribbean income Performance Procedures (number) 5 7.4 4.7 1 (5 Economies) Time (days) 11 63.7 23.6 1 (2 Economies) Cost (% of property value) 3.4 5.9 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 17.5 12.0 23.2 None in 2018/19 Figure – Registering Property in Costa Rica – Score 66.7 95.2 77.2 58.3 Procedures Time Cost Quality of the land administration index Figure – Registering Property in Costa Rica and comparator economies – Ranking and Score DB 2020 Registering Property Score 0 100 74.4: Costa Rica (Rank: 49) 71.2: Colombia (Rank: 62) 71.1: Chile (Rank: 63) 66.3: El Salvador (Rank: 79) 64.9: Guatemala (Rank: 89) 54.9: Regional Average (Latin America & Caribbean) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Page 22 Doing Business 2020 Costa Rica Figure – Registering Property in Costa Rica – Procedure, Time and Cost Time (days) Cost (% of property value) 3 10 2.5 Cost (% of property value) 8 2 Time (days) 6 1.5 4 1 2 0.5 0 0 1 *2 3 4 5 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 23 Doing Business 2020 Costa Rica Figure – Registering Property in Costa Rica and comparator economies – Measure of Quality 20 17.5 18 16.5 16 14.0 14.0 Index score 13.5 14 12.0 12 10 8 6 4 2 0 Costa Chile Colombia El Guatemala Latin Rica Salvador America & Caribbean Details – Registering Property in Costa Rica – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain a tax clearance certificate from the Municipality 1 day CRC 1,320; (CRC 1320 Agency : Municipality of San José (Tax clearance certificate)) The seller shall provide to the buyer a certificate attesting that the property is current with all the payments of all Municipal taxes and charges (including property tax, and charges for municipal services). 2 Obtain a literal certification from the National Registry and a cadastral plan from the Less than one day, CRC 5,600; (CRC 2800 Cadastre online online (stamps for the ownership Agency : Registro General Inmobiliario certificate) + CRC 2800 According to Decree Nº 35488-J, all certificates obtained electronically have the same legal value (stamps for the certified as paper-based certificates. plan)) The seller obtains a literal certification (printed sheet with the information of the property recorded at the Registry's database) from the Registro General Inmobiliario, where it is issued the same day. Information about the property can be obtained online. A notary public or any individual can access it with a designated password and get this information by simply logging into the National Registry's website (www.rnpdigital.com), putting the property's information and getting a print screen with the above indicated information (nature of property, location, area, cadastre number, owner, liens, mortgages, easements, limitations, boundaries, etc). It is also possible to do searches in computers available at the Registro General Inmobiliario. 3 A lawyer/notary drafts the sale agreement as a public deed 2 days CRC 3,454,740.11; (Fees Agency : Lawyer/Notary according to the following A lawyer/notary (in Costa Rica notary publics are lawyers) prepares the sale agreement in the scale: form of a public deed based on the information obtained in procedure 1 and 2, provided by the Property value Fees parties. In accordance with the Notary Code, the lawyer/notary is legally obliged to study the 0 – 11 million CRC 2% property and in case the parties are corporations, study the Articles of Incorporation and verify that the person signing the transfer deed has the legal authority to represent the company. 11 – 16.5 million CRC 1.5% Parties must provide photocopies of their ID (“cédula” for Costa Rican citizens or passport for 16.5 – 33 million CRC foreigners) Corporations must provide a certificate of incorporation. Notary fees were amended by 1.25% the Executive Decree No. 39078-JP of 25th of May of 2015 (which entered into force in August 33 million CRC and higher 2015). 1%) 4 Pay transfer tax and the stamp duties at the Banco de Costa Rica Less than one day, CRC 7,724,221.77; (1.5% Agency : Banco de Costa Rica online of property price (transfer Transfer tax and stamp duties must be paid at the Banco de Costa Rica, a state-owned bank that tax) + 0.5% of property will transfer the money to the tax authorities—either online or in person. In order to pay online, one price (National Property must have a bank account and internet access to the Bank’s secure web page. The notary Register Stamp) + 0.2% of certifies the affidavit that the payment was made and the registrant must check this info on the bank’s database. It has become a common practice for law firms and notaries to pay the transfer property price (Municipal tax and stamp duties online. Stamp) + 0.15% of The transfer tax and stamp duties are calculated on the basis of the highest stated purchase price property price (Agrarian and the property value appearing on the National Property Registry. Price is updated when the Stamp) + 25,000 CRC property is sold or mortgaged. (Costa Rican Bar Association fee) + CRC For a land transfer there are various types of stamps that must be paid. Payment is calculated as 625 (Fiscal Stamp Tax) + follows: CRC 20 (National Archive • National Property Register Stamp: 0.5% of the property value fee)) • Municipal Stamp: 0.2% of property value • Fiscal Stamp Tax: CRC 625 • Agrarian Stamp: 0.15% of property value • Costa Rican Bar Association: 25,000 CRC for deeds between CRC 100 million -500 million (Executive Act No. 36562-JP) • National Archive: CRC 20 Page 24 Doing Business 2020 Costa Rica 5 File the public deed registration at the National Property Registry 7 days Already paid in Procedure Agency : Registro General Inmobiliario 4 The lawyer/notary files an affidavit of the public deed (known as a “testimonio”) before the National Property Registry (Registro General Inmobiliario), with proof of payment of the transfer tax and other applicable stamp taxes. Once filed, the affidavit of the transfer deed is assigned for review by a Registrar of the Registro General Inmobiliario. If the document complies with all requirements, it is recorded and the buyer shall be the formal owner of the property thereafter. If the document contains problems it is returned to notary for correction and re-filing. Takes place simultaneously with previous procedure. Page 25 Doing Business 2020 Costa Rica Details – Registering Property in Costa Rica – Measure of Quality Answer Score Quality of the land administration index (0-30) 17.5 Reliability of infrastructure index (0-8) 5.0 Type of land registration system in the economy: Dual system (Title & Deed) What is the institution in charge of immovable property registration? Registro Nacional In what format are past and newly issued land records kept at the immovable property registry of the largest Computer/Scanned 1.0 business city of the economy —in a paper format or in a computerized format (scanned or fully digital)? Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, Yes 1.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Subdirección Catastral del Registro Nacional In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business Computer/Scanned 1.0 city of the economy—in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information Yes 1.0 (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping agency Different databases 1.0 kept in a single database, in different but linked databases or in separate databases? but linked Do the immovable property registration agency and cadastral or mapping agency use the same identification No 0.0 number for properties? Transparency of information index (0–6) 3.5 Who is able to obtain information on land ownership at the agency in charge of immovable property registration Freely accessible by 1.0 in the largest business city? anyone Is the list of documents that are required to complete any type of property transaction made publicly available– Yes, online 0.5 and if so, how? Link for online access: https://www.rnpdigital. com/direccion_servici os/servicios_formulari os.htm Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable Yes, online 0.5 property registration in the largest business city made publicly available–and if so, how? Link for online access: https://www.rnpdigital. com/direccion_servici os/servicios_formulari os.htm Does the agency in charge of immovable property registration agency formally commit to deliver a legally No 0.0 binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard? Link for online access: Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency No 0.0 in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the immovable property No 0.0 registration agency? Number of property transfers in the largest business city in 2018: 16514.0 Who is able to consult maps of land plots in the largest business city? Freely accessible by 0.5 anyone Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? Yes, online 0.5 Page 26 Doing Business 2020 Costa Rica Link for online access: https://www.rnpdigital. com/shopping/login.js px Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and Yes, online 0.5 if so, how does it communicate the service standard? Link for online access: https://www.rnpdigital. com/direccion_servici os/servicios_formulari os.htm#HERMES_TA BS_2_1 https://www.rnpdigital. com/shopping/login.js px Is there a specific and independent mechanism for filing complaints about a problem that occurred at the No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 4.0 Are all privately held land plots in the largest business city formally registered at the immovable property Yes 2.0 registry? Are all privately held land plots in the economy formally registered at the immovable property registry? No 0.0 Are all privately held land plots in the largest business city mapped? Yes 2.0 Are all privately held land plots in the economy mapped? No 0.0 Land dispute resolution index (0–8) 5.0 Does the law require that all property sale transactions be registered at the immovable property registry to make Yes 1.5 them opposable to third parties? Legal basis: Art. 455 del Código Civil Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Type of guarantee: State guarantee Legal basis: Ley 3883 Art. 1 Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Legal basis: Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., Yes 0.5 checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Notary; Does the legal system require verification of the identity of the parties to a property transaction? Yes 0.5 If yes, who is responsible for verifying the identity of the parties? Registrar; Notary; Is there a national database to verify the accuracy of government issued identity documents? Yes 1.0 What is the Court of first instance in charge of a case involving a standard land dispute between two local Juzgado Civil businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located in the largest business city? How long does it take on average to obtain a decision from the first-instance court for such a case (without Between 2 and 3 1.0 appeal)? years Are there publicly available statistics on the number of land disputes at the economy level in the first instance No 0.0 court? Number of land disputes in the economy in 2018: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Page 27 Doing Business 2020 Costa Rica Do married men and married women have equal ownership rights to property? Yes 0.0 Page 28 Doing Business 2020 Costa Rica Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit • Rights of borrowers and lenders through collateral laws (0-10) information index measures rules and practices affecting the coverage, scope and accessibility of • Protection of secured creditors’ rights through bankruptcy laws credit information available through a credit registry or a credit bureau. The strength of legal rights (0-2) index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary Depth of credit information index (0–8) secured transactions system exists. Then two case scenarios, case A and case B, are used to • Scope and accessibility of credit information distributed by determine how a nonpossessory security interest is created, publicized and enforced according to credit bureaus and credit registries (0-8) the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest credit bureau In some economies the legal framework for secured transactions will allow only case A or case B as a percentage of adult population (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral. Credit registry coverage (% of adults) • Number of individuals and firms listed in credit registry as a Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: percentage of adult population - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 29 Doing Business 2020 Costa Rica Getting Credit - Costa Rica Indicator Costa Rica Latin America & OECD high Best Regulatory Caribbean income Performance Strength of legal rights index (0-12) 10 5.3 6.1 12 (5 Economies) Depth of credit information index (0-8) 7 5.1 6.8 8 (53 Economies) Credit registry coverage (% of adults) 36.4 14.6 24.4 100.0 (2 Economies) Credit bureau coverage (% of adults) 86.0 47.6 66.7 100.0 (14 Economies) Figure – Getting Credit in Costa Rica – Score 85.0 Score - Getting Credit Figure – Getting Credit in Costa Rica and comparator economies – Ranking and Score DB 2020 Getting Credit Score 0 100 90.0: Colombia (Rank: 11) 85.0: Costa Rica (Rank: 15) 85.0: Guatemala (Rank: 15) 80.0: El Salvador (Rank: 25) 55.0: Chile (Rank: 94) 52.0: Regional Average (Latin America & Caribbean) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Page 30 Doing Business 2020 Costa Rica Figure – Legal Rights in Costa Rica and comparator economies 12 11 10 10 9 9 Index Score 8 6 5.3 4 4 2 0 Costa Chile Colombia El Guatemala Latin Rica Salvador America & Caribbean Page 31 Doing Business 2020 Costa Rica Details – Legal Rights in Costa Rica Strength of legal rights index (0-12) 10 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents Yes to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description Yes of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the Yes original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; Yes and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? Yes Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third Yes party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? Yes Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? No Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell Yes the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Costa Rica and comparator economies 9 8 8 7 7 7 7 7 Index Score 6 5.1 5 4 3 2 1 0 Costa Chile Colombia El Guatemala Latin Rica Salvador America & Caribbean Page 32 Doing Business 2020 Costa Rica Details – Credit Information in Costa Rica Depth of credit information index (0-8) Credit bureau Credit registry Score Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative credit data distributed? Yes Yes 1 Are data from retailers or utility companies - in addition to data from banks and Yes No 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes Yes 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes Yes 1 By law, do borrowers have the right to access their data in the credit bureau or Yes No 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes Yes 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help No No 0 banks and financial institutions assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 2,832,826 1,223,376 Number of firms 126,183 30,151 Total 2,959,009 1,253,527 Percentage of adult population 86.0 36.4 Page 33 Doing Business 2020 Costa Rica Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Disclosure, review, and To make the data comparable across economies, a case study uses several assumptions about approval requirements for related-party transactions the business and the transaction. • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for The business (Buyer): prejudicial related-party transactions; Available legal - Is a publicly traded corporation listed on the economy’s most important stock exchange. remedies (damages, disgorgement of profits, disqualification - Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of from managerial position(s) for one year or more, rescission of Buyer where permitted, even if this is not specifically required by law. the transaction) - Has a supervisory board in economies with a two-tier board system on which Mr. James appointed 60% of the shareholder-elected members. • Ease of shareholder suits index (0–10): Access to internal - Has not adopted bylaws or articles of association that go beyond the minimum requirements. corporate documents; Evidence obtainable during trial and allocation of legal expenses Does not follow codes, principles, recommendations or guidelines that are not mandatory. - Is a manufacturing company with its own distribution network. • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder suits indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to • Extent of shareholder rights index (0-6): Shareholders’ rights Buyer’s five-member board. and role in major corporate decisions - Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-7): Governance - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s safeguards protecting shareholders from undue board control distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of and entrenchment Buyer’s assets and is higher than the market value. • Extent of corporate transparency index (0-7): Corporate - The proposed transaction is part of the company’s principal activity and is not outside the transparency on ownership stakes, compensation, audits and authority of the company. financial prospects - Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0–20): Sum of the - The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and extent of shareholders rights, extent of ownership and control directors that approved the transaction. and extent of corporate transparency indices • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices Page 34 Doing Business 2020 Costa Rica Protecting Minority Investors - Costa Rica Stock exchange information Stock exchange Bolsa Nacional de Valores Stock exchange URL http://www.bolsacr.com Listed firms with equity securities 58 City Covered San José Indicator Costa Rica Latin America & OECD high Best Regulatory Caribbean income Performance Extent of disclosure index (0-10) 5.0 4.1 6.5 10 (13 Economies) Extent of director liability index (0-10) 5.0 5.2 5.3 10 (3 Economies) Ease of shareholder suits index (0-10) 8.0 6.7 7.3 10 (Djibouti) Extent of shareholder rights index (0-6) 2.0 3.0 4.7 6 (19 Economies) Extent of ownership and control index (0-7) 3.0 2.3 4.5 7 (9 Economies) Extent of corporate transparency index (0-7) 1.0 2.3 5.7 7 (13 Economies) Figure – Protecting Minority in Costa Rica – Score 48.0 Score - Protecting Minority Investors Figure – Protecting Minority Investors in Costa Rica and comparator economies – Ranking and Score DB 2020 Protecting Minority Investors Score 0 100 80.0: Colombia (Rank: 13) 66.0: Chile (Rank: 51) 48.0: Costa Rica (Rank: 110) 47.3: Regional Average (Latin America & Caribbean) 36.0: El Salvador (Rank: 140) 30.0: Guatemala (Rank: 153) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Page 35 Doing Business 2020 Costa Rica Figure – Protecting Minority Investors in Costa Rica and comparator economies – Measure of Quality Costa Rica 1 5 5 3 2 8 Chile 2 6 8 4 6 7 Colombia 5 7 9 7 4 8 El Salvador 3 0 3 1 4 7 Guatemala 1 2 3 1 3 5 OECD high income 5.6 5.6 6.6 4.3 4.5 7.4 Latin America & Caribbean 2.5 5.4 4.4 2.5 3.2 6.5 0 5 10 15 20 25 30 35 40 45 Sub-Indicator Score Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10) Page 36 Doing Business 2020 Costa Rica Details – Protecting Minority Investors in Costa Rica – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-30) Extent of disclosure index (0-10) 5.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of directors 2.0 excluding interested members Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Existence of a conflict 1.0 without any specifics Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the 1.0 transaction only Must Buyer immediately disclose the transaction to the public? (0-2) Disclosure on the 1.0 transaction only Extent of director liability index (0-10) 5.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Yes 1.0 Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Liable if negligent 1.0 Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2) Liable if negligent 1.0 Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) Yes 1.0 Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) Yes 1.0 Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of fraud 0.0 or bad faith Ease of shareholder suits index (0-10) 8.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? Yes 1.0 (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) Yes 1.0 Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Preapproved 1.0 questions only Is the level of proof required for civil suits lower than that of criminal cases? (0-1) Yes 1.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-20) Extent of shareholder rights index (0-6) 2.0 Does the sale of 51% of Buyer's assets require shareholder approval? No 0.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? No 0.0 Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new shares? No 0.0 Do shareholders elect and dismiss the external auditor? No 0.0 Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? Yes 1.0 Extent of ownership and control index (0-7) 3.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? No 0.0 Page 37 Doing Business 2020 Costa Rica Must the board of directors include independent and nonexecutive board members? No 0.0 Can shareholders remove members of the board of directors without cause before the end of their term? Yes 1.0 Must the board of directors include a separate audit committee exclusively comprising board members? No 0.0 Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? Yes 1.0 Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? No 0.0 Extent of corporate transparency index (0-7) 1.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? No 0.0 Must Buyer disclose information about board members’ primary employment and directorships in other No 0.0 companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? No 0.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? Yes 1.0 Must Buyer's annual financial statements be audited by an external auditor? No 0.0 Must Buyer disclose its audit reports to the public? No 0.0 Page 38 Doing Business 2020 Costa Rica Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in 2018 (number Using a case scenario, Doing Business records taxes and mandatory contributions a medium size per year adjusted for electronic and joint filing and payment) company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of • Total number of taxes and contributions paid or withheld, filing and payments, time taken to comply with tax laws, time taken to comply with the including consumption taxes (value added tax, sales tax or requirements of postfiling processes and time waiting. goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces Time required to comply with 3 major taxes (hours per year) ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the second year of operation (calendar year 2018). Taxes and mandatory contributions are measured • Collecting information, computing tax payable at all levels of government. • Preparing separate tax accounting books, if required • Completing tax return, filing with agencies The VAT refund process: - In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times • Arranging payment or withholding income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income Total tax and contribution rate (% of commercial profits) per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred • Profit or corporate income tax in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output • Social contributions, labor taxes paid by employer VAT in June 2018. • Property and property transfer taxes The corporate income tax audit process: • Dividend, capital gains, financial transactions taxes - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, • Waste collection, vehicle, road and other taxes or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the Postfiling Index tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax • Time to comply with VAT refund (hours) liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. • Time to obtain VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 39 Doing Business 2020 Costa Rica Paying Taxes - Costa Rica Indicator Costa Rica Latin America & OECD high Best Regulatory Caribbean income Performance Payments (number per year) 10 28.2 10.3 3 (2 Economies) Time (hours per year) 151 317.1 158.8 49 (3 Economies) Total tax and contribution rate (% of profit) 58.3 47.0 39.9 26.1 (33 Economies) Postfiling index (0-100) 87.2 47.5 86.7 None in 2018/19 Figure – Paying Taxes in Costa Rica – Score 88.3 84.2 52.2 87.2 Payments Time Total tax and contribution rate Postfiling index Figure – Paying Taxes in Costa Rica and comparator economies – Ranking and Score DB 2020 Paying Taxes Score 0 100 78.0: Costa Rica (Rank: 66) 77.5: El Salvador (Rank: 70) 75.3: Chile (Rank: 86) 70.3: Guatemala (Rank: 104) 60.5: Regional Average (Latin America & Caribbean) 58.6: Colombia (Rank: 148) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Page 40 Doing Business 2020 Costa Rica Figure – Paying Taxes in Costa Rica and comparator economies – Measure of Quality 100 87.2 90 80 Index score 70 57.0 60 48.2 49.5 47.5 50 40 33.0 30 20 10 0 Costa Chile Colombia El Guatemala Latin Rica Salvador America & Caribbean Page 41 Doing Business 2020 Costa Rica Details – Paying Taxes in Costa Rica Tax or Payments Notes on Time (hours) Statutory tax Tax base Total tax and Notes on TTCR mandatory (number) Payments rate contribution contribution rate (% of profit) Employer paid - 1.0 online 59.0 26.33% gross salaries 29.70 Social security contributions Corporate 1.0 online 18.0 30% taxable profit 19.17 income tax Municipal patent 1.0 online 0.3% sales 5.30 license Employer paid - 1.0 between 1.5% gross salaries 2.98 Worker's and up to 4% compensation insurance Property transfer 1.0 1.5% sale price 0.45 tax Tax on land 1.0 online 0.25% registered value 0.37 property Tax on interest 1.0 online 8% interest income 0.20 Highway 1.0 various rates 0.11 tax/Vehicle tax Stamp duty 1.0 various rates transaction value 0.00 General sales tax 1.0 online 74.0 13% value added 0.00 (GST) Employee paid - 0.0 jointly 9.34% gross salaries 0.00 Social security contributions Totals 10 151 58.3 Page 42 Doing Business 2020 Costa Rica Details – Paying Taxes in Costa Rica – Tax by Type Taxes by type Answer Profit tax (% of profit) 19.2 Labor tax and contributions (% of profit) 32.7 Other taxes (% of profit) 6.4 Page 43 Doing Business 2020 Costa Rica Details – Paying Taxes in Costa Rica – Measure of Quality Answer Score Postfiling index (0-100) 87.2 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? Yes Restrictions on VAT refund process none Percentage of cases exposed to a VAT audit (%) 0% - 24% Is there a mandatory carry forward period? Yes Time to comply with VAT refund (hours) 6.0 89.0 Time to obtain VAT refund (weeks) 23.0 61.5 Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 0% - 24% Time to comply with a corporate income tax correction (hours) 2.5 98.2 Time to complete a corporate income tax correction (weeks) No tax audit per case 100 study scenario Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 44 Doing Business 2020 Costa Rica Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as origin economy 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, • Obtaining, preparing and submitting documents required by suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and destination economy and any transit economies can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of information Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the Border compliance costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. • Customs clearance and inspections Contributors are private sector experts in international trade logistics and are informed about exchange rates. • Inspections by other agencies (if applied to more than 20% of shipments) Assumptions of the case study: • Handling and inspections that take place at the economy’s port - For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in or border the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy. Domestic transport - It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from • Loading or unloading of the shipment at the warehouse or its natural import partner—the economy from which it imports the largest value (price times port/border quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is • Transport between warehouse and port/border the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while shipment is en - The mode of transport is the one most widely used for the chosen export or import product and route the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 45 Doing Business 2020 Costa Rica Trading across Borders - Costa Rica Indicator Costa Rica Latin America & OECD high Best Regulatory Caribbean income Performance Time to export: Border compliance (hours) 20 55.3 12.7 1 (19 Economies) Cost to export: Border compliance (USD) 450 516.3 136.8 0 (19 Economies) Time to export: Documentary compliance (hours) 24 35.7 2.3 1 (26 Economies) Cost to export: Documentary compliance (USD) 80 100.3 33.4 0 (20 Economies) Time to import: Border compliance (hours) 80 55.6 8.5 1 (25 Economies) Cost to import: Border compliance (USD) 500 628.4 98.1 0 (28 Economies) Time to import: Documentary compliance (hours) 26 43.2 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 75 107.3 23.5 0 (30 Economies) Figure – Trading across Borders in Costa Rica – Score 88.1 57.5 86.4 80.0 71.7 58.3 89.5 89.3 Time Cost Time Cost Time Cost Time Cost to to to to to to to to export: export: export: export: import: import: import: import: Border Border Documentary Documentary Border Border Documentary Documentary compliance compliance compliance compliance compliance compliance compliance compliance Figure – Trading across Borders in Costa Rica and comparator economies – Ranking and Score DB 2020 Trading Across Borders Score 0 100 89.8: El Salvador (Rank: 46) 80.6: Chile (Rank: 73) 77.6: Costa Rica (Rank: 80) 77.2: Guatemala (Rank: 82) 69.1: Regional Average (Latin America & Caribbean) 62.7: Colombia (Rank: 133) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Page 46 Doing Business 2020 Costa Rica Figure – Trading across Borders in Costa Rica – Time and Cost Time (hours) Cost (USD) 90 600 80 80 500 450 500 70 Time (hours) Cost (USD) 60 400 50 300 40 30 24 26 200 20 20 80 75 100 10 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 47 Doing Business 2020 Costa Rica Details – Trading across Borders in Costa Rica Characteristics Export Import Product HS 85 : Electrical machinery and equipment and HS 8708: Parts and accessories of motor vehicles parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles Trade partner United States Japan Border Limón port Limón port Distance (km) 199 199 Domestic transport time (hours) 6 6 Domestic transport cost (USD) 600 600 Details – Trading across Borders in Costa Rica – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required by 1.8 100.0 customs authorities Export: Clearance and inspections required by 0.0 0.0 agencies other than customs Export: Port or border handling 20.0 350.0 Import: Clearance and inspections required by 72.0 100.0 customs authorities Import: Clearance and inspections required by 0.0 0.0 agencies other than customs Import: Port or border handling 80.0 400.0 Page 48 Doing Business 2020 Costa Rica Details – Trading across Borders in Costa Rica – Trade Documents Export Import Customs Export Declaration Customs Import Declaration Commercial Invoice Commercial Invoice Packing List Packing List Bill of Lading Bill of Lading Terminal Handling Receipts Terminal Handling Receipts Certificate of Origin SOLAS certificate SOLAS certificate Page 49 Doing Business 2020 Costa Rica Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the courts The dispute in the case study involves the breach of a sales contract between two domestic (calendar days) businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. • Time to file and serve the case • Time for trial and to obtain the judgment To make the data on the time and comparable across economies, several assumptions about the case are used: • Time to enforce the judgment - The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both Cost required to enforce a contract through the courts (% of located in the economy’s largest business city. For 11 economies the data are also collected for the claim value) second largest business city. - The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of • Average attorney fees adequate quality. • Court costs - The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater. • Enforcement costs - The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater. Quality of judicial processes index (0-18) - The Seller requests the pretrial attachment of the defendant’s movable assets to secure the • Court structure and proceedings (-1-5) claim. - The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods • Case management (0-6) was not adequate. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. - The Seller enforces the judgment through a public sale of the Buyer’s movable assets. • Alternative dispute resolution (0-3) Page 50 Doing Business 2020 Costa Rica Enforcing Contracts - Costa Rica Standardized Case Claim value CRC 12,586,284 Court name Collegiate Court of First Instance of San José City Covered San José Indicator Costa Rica Latin America & OECD high Best Regulatory Caribbean income Performance Time (days) 852 774.2 589.6 120 (Singapore) Cost (% of claim value) 24.3 32.0 21.5 0.1 (Bhutan) Quality of judicial processes index (0-18) 9.5 8.8 11.7 None in 2018/19 Figure – Enforcing Contracts in Costa Rica – Score 40.0 72.8 52.8 Time Cost Quality of judicial processes index Figure – Enforcing Contracts in Costa Rica and comparator economies – Ranking and Score DB 2020 Enforcing Contracts Score 0 100 64.7: Chile (Rank: 54) 55.2: Costa Rica (Rank: 111) 53.5: Regional Average (Latin America & Caribbean) 51.9: El Salvador (Rank: 126) 34.5: Guatemala (Rank: 176) 34.3: Colombia (Rank: 177) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Page 51 Doing Business 2020 Costa Rica Figure – Enforcing Contracts in Costa Rica – Time and Cost Time (days) Cost (% of claim value) 1600 45.8 50 Cost (% of claim value) 1402 1400 1288 40 1200 Time (days) 32.0 1000 852 28.4 26.5 30 25.6 24.3 816 774.2 800 21.5 589.6 20 600 519 400 10 200 0 0 Chile Colombia Costa El Guatemala Latin OECD Rica Salvador America high & income Caribbean Page 52 Doing Business 2020 Costa Rica Figure – Enforcing Contracts in Costa Rica and comparator economies – Measure of Quality Costa Rica 2.5 3.5 0.5 3 Chile 1.5 3.5 2 3 Colombia 2.5 1.5 1.5 3.5 El Salvador 2.5 2 0.5 3 Guatemala 2 0.5 0.5 3 OECD high income 2.5 3.2 2.4 3.6 Latin America & Caribbean 2.4 2.2 1 3.6 0 2 4 6 8 10 12 14 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Costa Rica Indicator Time (days) 852 Filing and service 45 Trial and judgment 547 Enforcement of judgment 260 Cost (% of claim value) 24.3 Attorney fees 20 Court fees 1.4 Enforcement fees 2.9 Quality of judicial processes index (0-18) 9.5 Court structure and proceedings (-1-5) 3.0 Case management (0-6) 3.5 Court automation (0-4) 0.5 Alternative dispute resolution (0-3) 2.5 Page 53 Doing Business 2020 Costa Rica Details – Enforcing Contracts in Costa Rica – Measure of Quality Answer Score Quality of judicial processes index (0-18) 9.5 Court structure and proceedings (-1-5) 3.0 1. Is there a court or division of a court dedicated solely to hearing commercial cases? No 0.0 2. Small claims court 1.0 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? No 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 3.5 1. Time standards 0.5 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? No 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be granted? No 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) No 0.0 clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent court? Yes 1.0 5. Are there any electronic case management tools in place within the competent court for use by judges? Yes 1.0 6. Are there any electronic case management tools in place within the competent court for use by lawyers? Yes 1.0 Court automation (0-4) 0.5 1. Can the initial complaint be filed electronically through a dedicated platform within the competent court? No 0.0 2. Is it possible to carry out service of process electronically for claims filed before the competent court? No 0.0 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 0.5 4.a Are judgments rendered in commercial cases at all levels made available to the general public No through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made Yes available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 1. Arbitration 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes Page 54 Doing Business 2020 Costa Rica 2. Mediation/Conciliation 1.0 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 55 Doing Business 2020 Costa Rica Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s estate) - The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater. • Measured as percentage of estate value - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. • Court fees The hotel cannot pay back the loan, but makes enough money to operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to judicial • Lawyers’ fees liquidation and reorganization proceedings and the extent to which best insolvency practices have been implemented in each economy covered. • Assessors’ and auctioneers’ fees • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 56 Doing Business 2020 Costa Rica Resolving Insolvency - Costa Rica Indicator Costa Rica Latin America & OECD high Best Regulatory Caribbean income Performance Recovery rate (cents on the dollar) 29.5 31.2 70.2 92.9 (Norway) Time (years) 3.0 2.9 1.7 0.4 (Ireland) Cost (% of estate) 14.5 16.8 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going concern) 0 .. .. .. Strength of insolvency framework index (0-16) 6.0 7.2 11.9 None in 2018/19 Figure – Resolving Insolvency in Costa Rica – Score 31.8 37.5 Recovery rate Strength of insolvency framework index Figure – Resolving Insolvency in Costa Rica and comparator economies – Ranking and Score DB 2020 Resolving Insolvency Score 0 100 71.4: Colombia (Rank: 32) 60.1: Chile (Rank: 53) 45.6: El Salvador (Rank: 92) 39.2: Regional Average (Latin America & Caribbean) 34.6: Costa Rica (Rank: 137) 27.6: Guatemala (Rank: 157) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Page 57 Doing Business 2020 Costa Rica Figure – Resolving Insolvency in Costa Rica – Time and Cost Time (years) Cost (% of estate) 4 16.8 18 3.5 3.5 14.5 14.5 14.5 16 Cost (% of estate) 3.0 3.0 2.9 14 3 Time (years) 12.0 12 2.5 2.0 9.3 10 2 8.5 1.7 1.7 8 1.5 6 1 4 0.5 2 0 0 Chile Colombia Costa El Guatemala Latin OECD Rica Salvador America high & income Caribbean Page 58 Doing Business 2020 Costa Rica Figure – Resolving Insolvency in Costa Rica and comparator economies – Measure of Quality Costa Rica 2 3 1 0 Chile 4.5 2.5 3 2 Colombia 5.5 3 2 0.5 El Salvador 4 2 3 0 Guatemala 0 2 2 0 OECD high income 5.3 2.8 2.1 1.9 Latin America & Caribbean 3.7 2.4 1.9 0.8 0 2 4 6 8 10 12 14 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Costa Rica and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 80 68.7 70 60 50 41.9 40 32.4 31.2 29.5 28.1 30 20 10 0 Costa Rica Chile Colombia El Salvador Guatemala Latin America & Caribbean Page 59 Doing Business 2020 Costa Rica Details – Resolving Insolvency in Costa Rica Indicator Answer Score Proceeding liquidation (after an Mirage would initiate an in-court reorganization proceeding (solicitud de concurso) based on article 709 of the Civil attempt at Procedure Code. This procedure would involve the appointment of an insolvency administrator, who will be reorganization) responsible for the day-to-day business of the company while an agreement is negotiated in-court with the creditors. The most likely scenario is that these negotiations won’t end up with an agreement, and therefore the reorganization procedure would be converted into a liquidation procedure after the Mirage’s bankruptcy declaration is issued by the Court (Article 740 of the Code of Civil Procedure). The sale of the secured assets will occur during this stage. Outcome piecemeal sale Insolvency proceeding of liquidation usually involved the end of business operation for the company and the sale of its assets due to the lack of liquidity. Without these assets the company won’t be able to continue with its business operations (Articles 760 and following of the Civil Procedure Code) Time (in years) 3.0 A reorganization proceeding which is converted into liquidation, similar to the case study, will take about three years. The preparation of the creditors’ claims, the appointment of the insolvency professionals, and the negotiation with creditors during the reorganization stage will last approximately 1.5 years. After this, assuming that there won’t be an agreement with BizBank, the liquidation proceeding will start in accordance with Article 709 Procedure Code. During this stage, the necessary steps towards a judicial sale of the property (inventory preparation, auction, etc.) would take place. The liquidation proceeding would last about 1.5 additional years. This time estimate takes into account a decrease in time to settle in-court disputes in Costa Rica after the creation and full implementation of the Bankruptcy Court in San Jose in 2008, which has reduced the time it takes solve cases like the one at stake from 3.5 to 3 years. Cost (% of estate) 14.5 The costs associated with the reorganization proceeding which is then converted into liquidation like in the actual case would amount to approximately 14.5% of the value of the estate. The main component of this expenditure would be the attorney’s fees around 10% and fees insolvency representatives around 4% based on article 700 of the Code of Civil Procedure. Recovery rate 29.5 (cents on the dollar) Page 60 Doing Business 2020 Costa Rica Details – Resolving Insolvency in Costa Rica – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 6.0 Commencement of proceedings index (0-3) 3.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may file for 1.0 both liquidation and reorganization Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (a) Yes, a creditor 1.0 may file for both liquidation and reorganization What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) (a) Debtor is 1.0 Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value generally unable to of its assets pay its debts as they mature Management of debtor's assets index (0-6) 2.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the No 0.0 debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? No 0.0 Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of No 0.0 insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 0.0 Which creditors vote on the proposed reorganization plan? (c) Other 0.0 Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as No 0.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote No 0.0 separately and are creditors in the same class treated equally? Creditor participation index (0-4) 1.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency No 0.0 representative? Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0 Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting Yes 1.0 creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 61 Doing Business 2020 Costa Rica Employing Workers Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the worker and the (i) whether fixed-term contracts are prohibited for permanent business are used. tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the maximum probationary period; (iv) minimum The worker: wage;(v) ratio of minimum wage to the average value added per - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. worker. - Is a full-time employee. - Is not a member of the labor union, unless membership is mandatory. Working hours (i) maximum number of working days allowed per week; (ii) The business: premiums for work: at night, on a weekly rest day and overtime; - Is a limited liability company (or the equivalent in the economy). (iii) whether there are restrictions on work at night, work on a - Operates a supermarket or grocery store in the economy’s largest business city. For 11 weekly rest day and for overtime work; (iv) length of paid annual economies the data are also collected for the second largest business city. leave. - Has 60 employees. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the Redundancy rules food retail sector and they apply even to firms that are not party to them. (i) whether redundancy can be basis for terminating workers; (ii) - Abides by every law and regulation but does not grant workers more benefits than those whether employer needs to notify and/or get approval from third mandated by law, regulation or (if applicable) collective bargaining agreements. party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected. Page 62 Doing Business 2020 Costa Rica Employing Workers - Costa Rica Details – Employing Workers in Costa Rica Answer Hiring Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) 12.0 Maximum length of fixed-term contracts, including renewals (months) 12.0 Minimum wage applicable to the worker assumed in the case study (US$/month) 614.2 Ratio of minimum wage to value added per worker 0.4 Maximum length of probationary period (months) 3.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 0.0 Premium for work on weekly rest day (% of hourly pay) 100.0 Premium for overtime work (% of hourly pay) 50.0 Restrictions on night work? Yes Restrictions on weekly holiday? No Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 12.0 Paid annual leave for a worker with 5 years of tenure (working days) 12.0 Paid annual leave for a worker with 10 years of tenure (working days) 12.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 12.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? No Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 4.3 Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 2.8 Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 15.2 Page 63 Doing Business 2020 Costa Rica Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 25.1 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 14.4 Unemployment protection after one year of employment? No Page 64 Doing Business 2020 Costa Rica Business Reforms in Costa Rica From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. =Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2020 Getting Electricity: Costa Rica improved the reliability of electricity supply by repairing the El Porvenir sub-station, installing 1,140 new poles and implementing a mapping program for transformers and meters throughout San José. Costa Rica also made getting electricity faster by reducing the time to approve the electrical design. Enforcing Contracts: Costa Rica made enforcing contracts easier by adopting a new code of civil procedure that introduced pretrial conferences as part of the case management techniques in court. DB2019 Starting a Business: Costa Rica made starting a business more expensive by introducing a new legal entities tax. Employing Workers: Costa Rica changed regulations pertaining to the content of dismissal letters, non-discrimination, special protection for employees and limitations to strikes and implemented a new jurisdictional structure of the labor courts. DB2018 Registering Property: Costa Rica decreased the time needed to transfer a property through several measures, including the introduction of effective time limits. Protecting Minority Investors: Costa Rica strengthened minority investor protections by allowing greater access to corporate information before and during trial and enhancing disclosure requirements, but weakened shareholder rights in certain major transactions. DB2016 Getting Electricity: The utility in Costa Rica made getting electricity easier by reducing the time required for preparing the design of the external connection works and for installing the meter and initiating the electricity supply.In addition, Costa Rica introduced a new law aimed at curbing power outages through the introduction of a compensation scheme for customers impacted by blackouts. Getting Credit: Costa Rica improved access to credit by adopting a new secured transactions law that establishes a functional secured transactions system and a modern, centralized, notice-based collateral registry. The law broadens the range of assets that can be used as collateral, allows a general description of assets granted as collateral and allows out-of-court enforcement of collateral. Paying Taxes: Costa Rica made paying taxes easier for companies by promoting the use of its electronic filing and payment system for corporate income tax and general sales tax. DB2015 Getting Electricity: Costa Rica reduced the time required for getting electricity by improving the coordination between different departments at the utility. Paying Taxes: Costa Rica made paying taxes easier for companies by implementing an electronic system for filing corporate income tax and VAT. DB2014 Starting a Business: Costa Rica made starting a business easier by creating an online platform for business registration, eliminating the requirement to have accounting books legalized and simplifying the legalization of company books. Dealing with Construction Permits: Costa Rica made dealing with construction permits easier by eliminating procedures, improving efficiency and launching an online platform that streamlined the building permit process by integrating different agencies’ approval processes. DB2013 Starting a Business: Costa Rica made starting a business easier by streamlining the process of obtaining a sanitary permit from the authorities for low-risk activities. Dealing with Construction Permits: Costa Rica streamlined the process for obtaining construction permits by implementing online approval systems. Getting Credit: Costa Rica improved access to credit information by guaranteeing borrowers’ right to inspect their personal data. Paying Taxes: Costa Rica made paying taxes easier for companies by implementing electronic payment for municipal taxes—though it also introduced a registration flat tax. DB2012 Registering Property: Costa Rica made transferring property easier and quicker by making property certificates available online through a single website. Paying Taxes: In Costa Rica online payment of social security contributions is now widespread and used by the majority of taxpayers. Page 65 Doing Business 2020 Costa Rica DB2010 Enforcing Contracts: Costa Rica improved its contract enforcement system by allowing new modes of delivery of service and by simplifying auction procedures by authorizing the publication of a single auction notice. DB2009 Starting a Business: Costa Rica reduced the time required to start a business by digitizing tax registration records and company books. DB2008 Trading across Borders: Costa Rica made trading across borders easier by improving its electronic data interchange system and allowing electronic submission of cargo manifests before arrival of the goods. Page 66 Doing Business 2020 Costa Rica Page 67