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Free Trade Zones: Tax Exemptions

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Last Updated on Friday, 18 May 2007 21:12


While doing business in an Free Trade Zone you will get the following tax exemptions as long as you cannot claim the Costa Rican-exempted taxes as a business expense in another country.

Import Custom Duty & Tariff Exemptions:

Your company will receive 100% Custom Duty and Tariff Exemption on:

  • Imported raw materials, capital goods, parts and components, materials for packing, containers as well as any material/product that it is required for the company to operate in a Free Trade Zone. (1)

  • Imported machinery, equipment, their accessories and parts, as well as the import of vehicles for your company such as trucks, chassis for trucks, single cabin chassis, 1 - 2 ton capacity pick ups, any vehicle that can transport a minimum of 15 passengers.(2)

  • Imported oils, lubricants, and gas required for your company to operate.(3)

  • Imported products for commercial or industrial samples.

(1) If your company needs products, raw materials, and/or services that are available in Costa Rica, your company must buy them in Costa Rica. However, if you can prove that those products, raw material, and/or services do not meet the quality, pricing and delivery time that your company needs, you will be able to import them with the tax exemption.

 

(2) You will be able to re-sell or transfer the ownership of the items you bought for your company five years after the date that you imported them without paying any taxes. If you are selling vehicles to a person, the person must pay all the necessary transfer taxes and customs duties.

 

(3) You will get these exemptions as long as the products do not exist in Costa Rica and/or are not the same in quality, quantity as those required by your company. You must file a petition to import these products if they exist in Costa Rica with the Ministerio de Economia, Industria y Comercio. Approval will be granted 15 days after your submission.

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Export Duties & Tariff Exemptions:

Your company will receive 100% Export Duty & Tariff Exemptions on:

  • All re-export equipment and machinery used in your business facilities in Costa Rica

  • Exported commercial or industrial samples.


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Tax Exemptions:

Local Tax Exemptions
Your company will receive 100% Local Tax Exemption on:

  • Local property taxes for ten years starting on the date your company begins operating

  • Local real estate or capital transfer taxes for ten years starting on the date your company begins operating

  • Local purchases (on good & services) sales taxes

  • Local purchases (on good & services) consumer taxes

  • Taxes levied on remittances abroad*

  • Municipality taxes and patent issuance's fees for ten years


(*) It does not apply to companies that handle, wrap, or redistribute a non-traditional Costa Rican product.

Income Tax Exemptions
Income Tax exemptions percentages are based in which Free Trade Zone your company does business:

  • If you are located in a Free Trade Zone with a high development rate, your company will receive a 100% income tax (income from dividends, capital gains, and profits) exemption for eight years, and 50% exemption for four additional years after eight years of operations.

  • If you are located in a Free Trade Zone a low development rate, your company will receive a 100% income tax (income from dividends, capital gains, and profits) exemption for 12 years, and 50% exemption for four additional years after six years of operations.

Note: The development rate is determined by the number of companies based in the Free Trade Zone and the number of people they employed. The greater the number of companies and jobs opportunities, the higher rating the Free Trade Zone gets, and vice versa.

Tax Deductions
If you are a U.S. citizen, you can deduct from your income tax expenses incurred for attending a business meeting or convention in Costa Rica.