Tax Reform and Free Zones

Entrepreneurs in Costa Rica are warning of the negative impact of not maintaining, in the new law of public finances, the VAT exemption on local purchases of goods and services carried out by free zone companies.

Thursday, September 6, 2018

The Association of Free Trade Zone Companies of Costa Rica (Azofras) points out that in the bill to strengthen public finances that is being discussed in the Assembly, motion 302 was not revised, a motion which aims to keep the VAT exemption on the local purchases of goods and services carried out by free zone companies, both to be incorporated into export products and for their operations. Currently the sales tax exemption applies. 

Crhoy.com explains that "...According to Azofras, the approval and enforcement of the proposed wording for this subsection would affect and discourage productive linkages between these companies and national suppliers; In addition, it throws overboard all of the work that has been perfected since 1990 with the issuance of the new Free Zones Law, and it would send a negative message to the international community regarding the country's legal security."

In a statement, the president of Azofras, Jorge Brenes, detailed "...'We compete with 135 countries and 3,500 free zones, which is why instead of attacking the Regime, we must think about taking care of it and strengthening it in order to build loyalty to the companies that are already here, and attract other companies that continue to generate more quality jobs and productive chains," said Jorge Brenes, president of Azofras."

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More on this topic

No Changes to be Made to Costa Rica's Free Zones

July 2015

Once again the Presidency has spoken out to calm investors denying the insinuations of a Deputy Minister related to opening up the discussion on the free trade zone regime.

According to an article in Crhoy.com, the Deputy Minister of Labour, Harold Villegas, mentioned in the framework of the International Forum of Social Solidarity Economy that "as a society we should discuss the activities that should or should not be tax-free and although free zones functioned well in a moment of history, it's time to move towards a system of greater tax justice and for a more open discussion to take place. "

Guatemala: Incentives for Free Zones Expire

January 2015

The business sector is demanding that the government take action to minimize the impact of the expiry at the end of the year of tax incentives granted to foreign firms in free zones.

About 1,300 companies enjoy the benefits granted by the World Trade Organization, which expire on December 31 this year. Two companies have already moved their operations to other countries, according to the Ministry of Economy of Guatemala.

Success of Free Zone Regime in Costa Rica

July 2014

In the last four years since the reform of the law in 2009, 132 companies registered to operate under this tax exemption scheme.

Since 2009 companies eligible under the free zone regime "... must be included in one or more of the categories set out in the law, including: handling, processing, manufacturing, production, repair and maintenance of goods, repacking and redistribution of goods and provision of services for export or re-export. "

Costa Rica Doesn’t Attract Investment Outside GAM

September 2012

Although tax incentives have been granted by the government, a lack of good telecommunication services and public infrastructure deters investors from setting up in less developed areas.

In 2010 reforms were introduced to the FTZ Act for the purpose of complying with the terms set by the World Trade Organization (WTO).

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