Costa Rica’s Free Trade Zone Regime remains one of the country’s most relevant tools for attracting investment and developing business operations in strategic sectors.
One of its main advantages is the tax treatment available to qualifying companies, particularly in relation to income tax.
Depending on the type of company and the location of the operation, the applicable rate may start at 0%. As a reference, the general corporate income tax rate outside the regime is 30%.
The benefit depends on the activity and location
Service companies and trading companies may qualify for an exemption from corporate income tax.
For manufacturing companies located outside the Greater Metropolitan Area (GAM), the regime provides for:
- years 1 to 6: 0%;
- years 7 to 12: 5%; and
- years 13 to 18: 15%.
For certain manufacturing companies located within the GAM, the applicable rate may be:
- years 1 to 8: 6%; and
- years 9 to 12: 15%.
This means that the tax analysis of an investment should not focus solely on whether a company may enter the regime, but also on identifying the category under which it may operate and the specific tax treatment applicable based on its location.
Beyond income tax
The regime also provides other incentives that may have a significant impact on operating costs.
These include exemptions on certain imports and local purchases required for the operation, as well as benefits related to remittances abroad, real estate transfers and municipal business licenses.
Manufacturing companies may also be eligible for tax credits when reinvesting profits in fixed assets or employee training.
A decision that should be assessed before investing
For a company considering establishing or expanding operations in Costa Rica, the tax impact should be analyzed from the earliest stages of the project.
The question is not only how much a company may save under the regime, but whether its activity, structure, location and level of investment meet the conditions required to access the available incentives.
An early review allows companies to properly assess the viability of the project and structure it consistently with the applicable requirements.
Author:
Tomás Quirós
Partner – CENTRAL LAW in Costa Rica
At CENTRAL LAW in Costa Rica, we advise local and multinational companies on eligibility analysis, corporate structuring, preparation and filing of applications before PROCOMER, and compliance with the obligations arising from the Free Trade Zone Regime.
Disclaimer: This content is for informational purposes only and should not be construed as legal or tax advice from its author or CENTRAL LAW.
