Tax: Setback for Local Authorities

After in Costa Rica the mayor of Alajuela filed an action of unconstitutionality to revert the authentic interpretation approved by the deputies for the payment of real estate taxes applicable to free zones, the Chamber ruled negatively to the legal recourse filed.

Friday, April 16, 2021

The magistrates determined that the allegations presented on March 16, 2021 by Humberto Soto, mayor of the municipality of Alajuela, were incorrect and the appeal was rejected.

This legal recourse was intended to leave without effect the authentic interpretation approved by the deputies of the Legislative Assembly to guarantee the exoneration of the Real Estate Tax for companies in the free zone regime.

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According to 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 current case, as has been charged, although an appearance of compliance with the formal parameters can be visualized, in the background there is a violation of substantive due process. Since the content of the challenged law does not comply with the substantive reasonableness of the Constitution as a supreme norm."

Elfinancierocr.com reports that the resolution of the Chamber was approved by majority, since "... justices Fernando Castillo, Paul Rueda, Nancy Hernández, Luis Fernando Salazar, Jorge Araya and Anamari Garro voted to reject the action; while Fernando Cruz reserved his vote."

Carlos Wong, president of the Free Zones Association (Azofras), said that "... the interpretation law, now constitutionally supported, allowed 'improving the investment climate in Costa Rica and eliminating the legal insecurity that caused, both for the local governments and for the companies covered by the Free Zone Regime, an inadequate interpretation of the regulations on this matter."



More on this topic

Local Governments vs. Legal Security

April 2021

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.

On March 16, 2021 Humberto Soto, Mayor of the municipality of Alajuela, filed an action of unconstitutionality.

Call to Veto Special Tax Regime for Agriculture

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The Guatemalan Chamber of Commerce opposes the special tax scheme for agricultural activity approved by Congress, arguing that it is unconstitutional and violates the principles of tax equity.

The new fiscal regime for agriculture, approved last September 24 by the deputies of the Congress of the Republic, has been surrounded by controversy, as from the beginning the chambers of industry and commerce expressed their opposition.

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Investors are on the alert over possible modification to the Law on Free Zones while analysts are warning that this would generate legal uncertainty.

The government will be revising the law on free zones in order to avoid companies who are not operating under the regime from moving into it and avoiding paying taxes.

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 Elfinancierocr.com 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.

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