An expat went to his bank Friday to open a new account. He said to the customer service representative, “I would like to close a bank account for one company I have had for 10 years and open a new one for a new company.” The agent look at him perplexed and said, “Why in the world do you want to do that.”
The man explained that one business was stopping operations and has been legally closed with the tax agency and that he started a new company. The bank employee said, “Do you have any idea all the paperwork you need? It would be easier to use the old account and not close it.”
The diligent expat had previously requested a form with all the requirements and showed the representative his folder. He also explained he was a long-time loyal customer and there had never been a problem with his account. The agent said, “It does not matter how long you have been a customer with our bank, everything is different now. I will go talk to my boss to see if I can open the account. After a long wait, the person finally came back and said, “We will open your new account, but you still need more information.”
The crux of the story is the bank employee was correct. The red tape and requirements to open a new bank account for a company are a bad dream. Here they are on this abridged short list.
1.Certificación de personería jurídica (legal resume of a business that states who is what in a company). This is one of the most important legal documents in Costa Rica. It can be prepared by an attorney or downloaded from theRegistro Nacional Digital. It cannot be obtained if Law 9024 taxes are due. A “certificación literal,” is a similar document with more information and can be used in place of a personería. This document is available without having Law 9024 taxes paid.
2. A certified copy of the company’s constitution and any relevant changes, for example, change of name or legal address.
3. A certification prepared by an attorney outlining exactly who are the stockholders and their participation in the company. It must coincide with the entities stockholders register. If any stockholder is another company, the certification must extend through it, until a physical person is reached.
4. A certification of origin of any funds used to open the bank account. For new companies a projected cash flow for six months to a year is needed.
5. An electric bill or water bill indicating the name and address of the entity opening the bank account. If these do not exist or they do not have the correct information on them, then a valid rental or lease agreement can be used to fulfill this requirement.
6. A copy of the identification cédula for Costa Ricans or a DIMEX card for residents. This is known as the immigration identity card. In some cases a N.I.T.E. number may work depending on the bank. This stands for Número de Identificación Tributaria Especial. It is used in cases where an individual does not have a Costa Rican cedula or DIMEX card. Also a copy of the identification of the registered agent is required. Registered agents of companies in Costa Rica must be attorneys.
7. A completed know your customer formprovided by the bank.
8. A zillion signatures and a few hours to waste to complete all the paperwork.
It is not surprising Citibank is advising its foreign customers they are closing their accounts and more importantly closing their branches outside the Central Valley. They are probably finding it hard to keep customers, let alone get new ones.
What foreign investor in his right mind wants to go through all this baloney just to open a bank account to pay monthly bills? The bank representative was right. It is easier to keep an old account open.
Well, not so fast. That is not exactly true. Banks have been calling customers and placing ads in all available media for them to come in and update their information. And, believe it or not, almost the same gobbledygook to open a new account is needed to maintain an old one.
Costa Rican Law 8204 and its subsequent regulations of implementation are at fault. This law is the anti-drug and terrorism legislation of Costa Rica. It is not a new law, but it was extensively reformed a few years back, and institutions are now in high gear to enforce its directives.
U.S. H.R. 2847, the Hire Incentives to Restore Employment Act that was signed into law in 2010 is also at fault. This is the bill which included the Foreign Account Tax Compliance Act. This law known to most as FATCA, makes U.S. residents accountable for money invested in foreign banks. It requires offshore financial institutions to provide information on their American customers to the U.S. Internal Revenue Service.
What is important to expats, especially ones who have second homes here or are invested in some way in Costa Rica but do not have residency, is that they will most likely not be able to open a bank account. If they have one, it will probably be closed soon.
One expat when asked why he was selling his beautiful house close to the beach, said, “Costa Rica is just making it impossible to live here.” This feeling is echoed all over the country. Banking goes hand-in-hand with investment. Citibank’s decision to close many of its branches is the writing on the wall and a prelude for things to come.
The country works on a pendulum. It is never in the middle. It is always nothing or too much. Like the music ones hears on the streets and in social gathering places. It is either off or full blast.
Garland M. Baker is a 44-year resident and naturalized citizen of Costa Rica who provides multidisciplinary professional services to the international community. Reach him at firstname.lastname@example.org. Baker has undertaken the research leading to these series of articles in conjunction with A.M. Costa Rica. Find the collection at http://crexpertise.info, a complimentary reprint is available at the end of each article. Copyright 2014, use without permission prohibited.