Central America and Tax Incentives

According to the ICEFI, "tax incentive policies seem to be a lost opportunity because of permanent tax expenses and the lack of tangible social benefits."

Monday, October 31, 2016

From a statement issued by the ICEFI:

Within the framework of the international meeting on Tax Justice and Transnational Fraud, held in Costa Rica, a study was presented on October 20 entitled 'The effectiveness of tax incentives for investment in Central America' in which an analysis was undertaken of the Central American experience in investment attraction through tax incentives. 

Taking part in the activity were a panel of Central American commentators, representatives from the Central Tax Justice Network, which formed part of the effort to carry out the study.

The study, presented by economist Abelardo Medina, introduces the concepts of tax incentives, tax expenditures and their differences.  In addition analysis was carried out on the figures for the global competitiveness index on the importance of tax incentives for attracting investment to Central America.

Read full report (in spanish).

More on this topic

SMBs: Benefit Period Extended

December 2019

In Honduras, Congress extended for two more years the validity of the Law to Support Micro and Small Enterprises, which grants benefits such as exemption from payment of income tax and other taxes.

To opt for the benefits granted by the law, interested parties must process their permits, national and municipal licenses for its operation, reports a statement issued by Congress.

Guatemala: Free Zones Situation Gets More Complicated

May 2016

It has been reported that one of the 17 free zones operating in the country has started the process of closing its operations entirely due to the legal uncertainty generated by the emergent employment law.

Companies operating in free zones have spent several months denouncing the serious situation they have faced since the Emergent Act for the Conservation of Employment was implemented, instead of encouraging investment and job creation, it has become a good example of how to discourage investment in a country.

Costa Rica: Tax Exemptions to be Processed Online

July 2015

The mandatory use of the Exonet system has been established for carrying out procedures related to tax exemptions.

Decree No. 39037-H Ministry of Finance:

"Article 9. Mandatory use of EXONET System. One month after the publication of this decree, the EXONET system will be compulsory for all beneficiaries applying for tax exemptions to the laws mentioned in this article, as well as their legal representatives and to all those classified as system users and who are involved in the management and processing of applications for exemption.

Real Usefulness of Tax Incentives

May 2015

The problem with income tax exemptions is that they favor high-return projects that would probably have been made anyway.

From an IDB document entitled "The effectiveness of tax incentives: The case of export processing zones in Costa Rica, El Salvador and the Dominican Republic".

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