Local Governments vs. Legal Security

After the Mayor of Alajuela filed an action of unconstitutionality in Costa Rica to revert the exoneration of real estate taxes applicable to free trade zones, the business sector believes that legal certainty is being undermined.

Monday, April 12, 2021

On March 16, 2021 Humberto Soto, Mayor of the municipality of Alajuela, filed an action of unconstitutionality. This legal recourse has the objective of reverting the exemption that free zones enjoy for the payment of the real estate tax.

For Soto, law 9851, which was published in July 2020, is against the law of the Constitution, since the decision of the deputies to authentically interpret the legislation in force since 1990 cannot "disregard, affect and modify totally consolidated legal situations."

The action of unconstitutionality specifies that "... in the present case, as has been accused, although an appearance of compliance with the formal parameters can be visualized, in the background there is a violation of substantive due process. Inasmuch as the content of the challenged law does not comply with the substantive reasonableness of the Constitution as a supreme norm."

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Carlos Wong, president of the Free Zones Association (Azofras), told Observador.cr that this legal action generates an air of uncertainty that "... may attempt against the arrival of investment in the short term. For the moment, the sector is only waiting for the resolution of the Constitutional Chamber."

These actions threaten the legal security of companies that make important investments in the country, said Wong.

The head of Azofras added that "... We are facing a condition that generates uncertainty. The companies had taken very well the clarification of a doubt that they had about the tax and that had already existed for several years. What is happening now is that this action by the Municipality of Alajuela is causing uncertainty for investment projects. There must be clear rules to attract investment'."

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