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." 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."

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