- General context of the agricultural sector in Costa Rica.
In Costa Rica, the agricultural sector represents around 7% of GDP. This percentage is made up of around 673 companies, which export 440 different products to 105 export destinations. The product of such activity is calculated at a total of US$3,176 million dollars as a result of said sector.
- General legal framework.
In general, the Political Constitution of Costa Rica establishes economic freedom and its exercise, by indicating that labor is a constitutional right. It also protects private property, and it can only be limited by expropriation, or a law voted by three quarters of the Legislative Assembly. In the same way, the state can exercise said activity in properties that belong to it.
Therefore, a range of freedoms for companies and/or individuals to exploit and develop agricultural activities. The foregoing as long as the legal framework is respected and the requirements and certifications for the production of these products are obtained.
The main government authority that regulates the agricultural sector is the Ministry of Agriculture and Livestock (“MAG” in Spanish), as well as its dependencies. The MAG leads the National Agricultural Sector Council, an organization that also strengthens the regulation of the sector. There are also Regional Agricultural Sectoral Committees that represent the country’s eight production regions.
- Tax framework.
The Ministry of Finance is the government body responsible for and competent in tax and fiscal matters in Costa Rica. Through the Law to Strengthen Public Finances, the value added tax (“VAT”) was created on certain goods and services in Costa Rican territory. The Costa Rican tax system is territorial in nature, and therefore taxes are paid on what is produced or developed in the territory of Costa Rica.
With the creation of the VAT, and in order to mitigate the impact of said tax on the agricultural sector, the Special Agricultural Regime (“REA” in Spanish) was created, which seeks beneficiaries for the developers of said sector. Through this regime, producers must be registered and declared under it in order to apply for such. The RAE simplifies the calculation of VAT, which is applied to the entire production chain, and its declaration period will depend on the activity carried out (for example, coffee, cane producers and beekeepers will make an annual declaration and the rest agricultural and fishing activities will do so every four months).
Taxpayers will have a reduced VAT rate of 1% for the purchase of necessary products in their production chain and will benefit from simplification of procedures such as using the electronic purchase invoice as support for the sale, keeping simplified records, including non-electronic, and consider the productive cycles for the periodicity of the declaration.
- Main Costa Rican export products.
Having 5% of the planet’s biodiversity, Costa Rica is one of the main exporters to the United States of plants, flowers and foliage.
The country is the world’s leading exporter of pineapple and the world’s second largest exporter of bananas. Among other important fruits that it exports are melon, papaya, watermelon and mango.
The country is mainly recognized for its local production of Arabica coffee. This international market is already more than 200 years old, beginning the first export to the European continent in 1820. In this present 2022, Costa Rica increased its coffee exports by 75.5%.
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Gian María Berello
CENTRAL LAW in Costa Rica