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- COSTA
RICA TABLE OF STATUTES
- COSTA RICA EXPORT
INCENTIVE REGIMES
Costa
Rica Table of Statutes
This is a non-exhaustive list of the main Costa
Rican statutes affecting offshore and non-resident
business. The statutes are listed in alphabetical
order – click on the statute for a fuller
description of the statute, the legal regime it
forms part of, or in some cases the text of the
law.
Commercial Code (Código de Comercio) 1964
Decree
25721 of 1996 (Law No. 7575 on forests)
General Customs Law 1995
Incentives To Tourist Development Law 1985
Law no 1155 of 1950 (Residence Law)
Law no 5162 of 1972 (Drawback Law)
Law no 6955 (Investment Incentives)
Law no 6982 of 1984 (Retirement Law)
Law no 7092
(Investment Incentives)
Law no 7201 (Public Companies)
Law no 7210 (Export
Processing Law)
Law
no 7558 of 1995 (Organic Law of the National Banking
System)
The Income Tax Law (Ley del Impuesto sobre la
Renta)
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Costa Rica Export Incentive
Regimes
There is a rather confusing tangle of legal regimes
which offer tax benefits to businesses involved
in exporting; this section lays out some of the
rules governing export incentive regimes, but
professional advice is necessary in assessing
which regime might be appropriate in any given
case.
Export
contracts and the Temporary Admission regime ceased
to be offered by the Costa Rican authorities from
1996. The sections below therefore detail the
incentives that were offered by these regimes
at that time.
Export
contracts were created in order to bring together
the advantages granted by different laws to export
companies. The applicable legislation is Laws
7092 and 6955, and the decree 15828-11. The administration
and the exporter signed a contract for a pre-determined
period, usually 10 years. The export contract
granted some or all of the following incentives:
-
Special port tariffs;
-
Simplified procedures;
-
Exemption from import duties;
-
Accelerated depreciation;
-
Tax Credit Certificates, issued by the government
to the exporter of non-traditional goods according
to the amount of foreign currency generated
by such exports.
Applications
for export contracts were to be sent initially
to the Promotora de Comercio Exterior (Foreign
Trade Promoter). A National Investment Council
was created to approve export contracts and coordinate
with other government entities the benefits granted
under each contract. An application needed to
contain at least the following information:
-
Business plan;
-
Description of the machinery, equipment, and
spare parts to be employed;
-
Description of the proposed activities;
- Financial
and credit references;
- Organization
chart;
-
Export program;
-
Number of employees, nationality, positions,
and average annual salary;
-
Production targets for a normal year of operation;
-
Overhead costs breakdown including salaries,
property leasing, royalties, interest and commissions
on loans, depreciation of assets; Production
costs breakdown including raw materials, packaging,
spare parts, fuel, electricity, etc.
The
approval process took between 3 and 4 months.
The
Temporary Admission Regime allowed storage
and processing in bonded areas according to regulations
issued by the General Customs Administration,
as recommended by the National Investment Council.
The applicable legislation was Laws 7092 and 6955
and decree 14418-H. There was complete exemption
from taxes on the materials covered by Temporary
Admission, as well as on some or all local inputs
to the processing that took place. The coverage
of Temporary Admission was described as follows:
-
Goods to be exported after undergoing a process
of reparation, reconstruction, mounting, assembly,
or incorporation into complex technological
systems, or to be used in transportation and
other equipment;
-
Samples, patterns, and other similar articles
to be used for demonstration and sales purposes;
- Equipment
and spare parts needed in processing;
- Temporarily
imported raw materials for processing and onward
exportation;
- Machinery
and equipment used in processing, although not
imported, may be included in the benefits when
used by a company that exports 100% of its production
to third markets, at the discretion of the National
Investment Council.
Temporary
Admission concessions were normally granted for
a period of five years. There were time limits
for temporary admission:
-
3 months for samples and similar articles for
demonstration, teaching and exhibition purposes;
-
6 months for raw material, intermediate products,
tags, or other types of materials used for production;
-
5 years for machinery, equipment, spare parts,
or other equipment used for establishing a company.
The beneficiary was responsible for damage or
losses of imported goods and had to pay customs
duties on them.
Applications
were to be made to the General Customs Administration
and to contain full details of the goods to be
covered, the eventual products and their destination,
employment details, and the amount of capital
investment, along with financial references.
Export Processing Zones (Free Zones) are
areas where imported goods can be stored for production,
assembly, processing and manufacturing, for later
exportation to markets outside Central America.
The following types of activity are permitted:
-
Export processing industries that produce, process,
and assemble for export or re-export to third
markets outside Central America;
-
Export commercial businesses that handle, pack,
or distribute non-traditional goods or exports
and re-exports;
-
Related businesses and industries which provide
the necessary services to export processing
companies, in order to operate, administrate,
and maintain these zones;
-
Industries and companies that build, repair,
and provide maintenance to ships for export
and re-export;
-
Entities or companies that are dedicated to
scientific investigation for the improvement
of the technological level of industrial or
agro-industrial activity and the country’s foreign
commerce;
-
Management companies which have concessions
for the management of Free Zones.
The exchange of imported and manufactured products,
raw material, machinery, and equipment among the
companies under the Free Zone System is allowed.
See
Offshore Legal and Tax
Regimes for details of the tax benefits available
to Free Zone companies, many of which are being
phased out as a result of Costa Rica's WTO commitments.
Free Zone companies located in certain specified
development areas by the Ministry of National
Planning and Economic Policy, have traditionally
received a grant of 15% of the total amount of
the previous year’s salary bill. This bonus will
be for a five-year term and will be decreased
by two points per year, finishing in the fifth
year.
Free
Zone companies receive assistance with the training
of employees coordinated by the National Aprenticeship
Institute ("Instituto Nacional de Aprendizaje"),
which can also assist in the recruitment of personnel.
Advice and assistance is also available in regard
to the housing and educational needs of the employees
and their families, with the coordination of the
respective public institutions.
Free
Zone companies, except trading companies, can
sell 40% of their production locally, with the
previous approval of the Corporation and the Ministry
of Economy, Industry, and Commerce. Such production
will be subject to the same taxes as any other
merchandise that enters into the country, but
not local sales taxes.
Agreements
to operate in a Free Zone, and operating contracts,
are signed with the Free Zone Corporation, which
applies various reporting requirements.
Applications need to contain the following information:
-
General description of the applicant;
-
Detailed description of production;
-
Services and facilities required;
-
Environmental impact assessment;
- Corporate
documents and some notarised certificates relating
to capitalisation, juridical status etc;
- Cash
flow and production projections;
-
Banking references (and a deposit of US$5,000).
The approval process normally takes 2 months.
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