According to the World Trade Organization Agreement on Subsidies and Countervailing Measures and to the extensions of the term for the subsidies granted on exports given to a group of countries, including Costa Rica, beginning in December 31, 2015 the tax exemptions on exports of goods, considered by WTO as subsidies, must be eliminated.
For such reason, the Costa Rican Government made some changes to the Free Trade Zone Law (Law N° 7210) and its regulations. One of the main changes made to such Law was that the regime for incentives and tax exemptions for manufacturing companies which are beneficiaries of the Free Trade Zone Regime will end in December 31, 2015. However, there are specific manufacturing operations that under certain conditions and characteristics are allowed by the Law to transfer to what was denominated as “f” type manufacturing companies. These “f” type manufacturing companies will “survive” the December 31, 2015 deadline, and will be able to keep their operation as beneficiaries of the Free Trade Zone Regime even beyond the original expiration dates on their respective executive agreements.

As indicated above, companies of the “f” type are manufacturing companies, with particular characteristics and conditions, which according to the law will have specific tax incentives notwithstanding the elimination of incentives to regular manufacturing companies in December 31, 2015. This type of manufacturing companies were created in Section f) of Article 17 of the Free Trade Zone Regime Law, and may destine 100% of their sales to the local market, meaning that these companies will not require to export in order to be beneficiaries of the Free Trade Zone Regime. Additionally, the exemption on income taxes for the “f” type companies is applied as follows: (i) payment of a 6% income tax for the first 8 years (from the initial date of operation under the “f” type regime); (ii) payment a 15% income tax for the following 4 years.

In order to apply for the transfer to the above mentioned category, there is a specific classification of companies which are considered and selected as the ones that are part of strategic investment sectors for the country, and may therefore apply. Other characteristics such as the amount of the additional investment to be made and the number of additional employees to have and maintain, are also relevant matters for transferring to the “f” type manufacturing companies’ regime.

Lang & Asociados, as a leading Costa Rican law firm in the foreign investment, free trade zone and corporate law areas can assist you with evaluating the consequences of the above mentioned law and assign top attorneys and law experts in Costa Rica free trade zone regimes to evaluate your specific case and suggest the most suitable course of action.