More Taxes for Free Zones in Costa Rica?

New taxes for businesses in free zones contained in the draft fiscal amendment, are bringing insecurity and threatening the investment climate.

Monday, October 10, 2011

The tax advantages that have made Costa Rica an attractive country for foreign investment could disappear with the approval of a tax package pact agreed between the ruling party and the opposition Citizens Action Party.

One of the main side effects is that, on approval of the project, companies entering into the free trade zone from 2015 must pay 15% tax on dividends. This puts foreign companies at risk of having to pay tax in Costa Rica and also in their home country.

In his column, Tribuna Fiscal in, Diego Salto examines the topic:

"Any attempt to impose taxes on free zone companies shows complete ignorance of the dynamics of investment attraction. The fact that we all now have to pay more taxes .... That the figures show that free zone companies have little dividends ... That taxes may be charged in their home countries ... That the regulation is not retroactive because it applies to new businesses from 2015 ...
All these arguments offered by the CEP and the government show that they dont actually know about the process that led to Costa Rica to be recognized as a benchmark internationally in actively competing to attract businesses to the Free Trade Zone ... or what is essentially the same thing, in attracting businesses that create jobs. "

More on this topic

Increasing Criticism to Tax Plan in Costa Rica

October 2011

Unions and business associations are insisting that the economy will be damaged if the proposed tax reform is approved by the Executive.

The private sector is objecting to the negative impact that the reform will have on the national productive apparatus and consumers. Unions for their part say the new tax (Value Added Tax, VAT) will affect the finances of Costa Rican families.

How Much Will Free Zones Be Affected by the Tax Package?

October 2011

In Costa Rica, pressure from employers to maintain tax exemptions in free zones is increasing.

According to an article in at a meeting of a group of businessmen which included the main force behind the increase in taxes in the free zones, the former presidential candidate Otton Solis, there were no positive results, and the same outcome was seen at a meeting held with the full bench of the Citizen Action Party, of which Solis is the leader.

President Confirms More Taxes in Free Zones

October 2011

Laura Chinchilla, Costa Rica's president, has defended the political pact that will allow the approval of a tax package that includes tax increases in the zones.

The president defended her new tax reform plan despite strong opposition from the Ministry of Foreign Trade.

Opposition to Taxes in Free Zones

September 2011

In Costa Rica, the Association of Free Zones and Investment promoter CINDE are lobbying against the imposition of new taxes on businesses.

The proposed measure, now under a fast track approval system in the Legislature, include a tax on dividends for those companies who establish themselves in in the zone after 2015, plus requirement to pay municipal taxes.

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