Main Incentives for Companies Establishing Operations in
Costa Rica
1. The Export Contract and its Incentives
The export contract was created as a tool to coordinate
the benefits granted to companies exporting non-traditional
products. Beneficiaries are defined as:
- producers-exporters
- traders
- suppliers
INCENTIVES
Exemption from import or local taxes (proportional to third
market exports of non-traditional products) on raw materials,
packing goods and components related to the export product.
- Exemption from import or local taxes (proportional to
third market exports of non-traditional products) on machinery,
equipment and spareparts that are directly related to the
export product
The Export Contract incentives expire on September 30, 1996.
The export contract incentives are to be requested at the
Technic Secretary of the National Investment Council located
on the second floor of the Center of Foreign Trade (CENPRO).
2. temporarily admission
Temporary admission is known as the customs regulation which
allows the entry within the national territory under suspension
of all taxes, of certain merchandise destined to be re-exported
to foreign markets. Merchandise must be subjected to provisional
storage for transformation, reparation, reconstruction, mounting
and assembly processes, or to be transformed into goods, machinery
or general transport equipment of greater technological and
functional complexity.
The normal time limit for imported goods, to remain in the
country is three months for samples and models, six months
raw materials and other components used in the process, and
five years for machinery and equipment. These terms can be
renewed.
The benefits of this system are granted a period of five
years, automatically renewed with the approval of the National
Investment Council.
Application forms are sold at the Export and Investment
Promotion Center (CENPRO).
3. FREE ZONES
Export Free Zones are the mainstay of Costa Rica's export
and investment strategy. The Free Zones are, by definition,
areas of customs and fiscal extra-territoriality. These are
designated facilities for carrying on economic operations
based on imported inputs and raw materials, manufacturing,
assembly or marketing of products or services for their subsequent
export.
Ease of operation, fiscal incentives, monetary and exchange
facilities, excellent communications, electricity, access
to basic services and highly educated labour force, make up
a firm foundation for the dynamic development of companies
established under the Free Zone status.
Some of the advantages of operating in the Free Zones of
Costa Rica are:
- 100% exemption from taxes on capital and assets.
- Exemption from taxes on profits.
- Independent management of foreign currency.
- Streamlined processing of documentation required r installation
and operation.
The Export Free Zone Corporation provides investors with
centralized services to carry out established necessary procedures.
The Corporation is located in the Center of Foreign Trade.
Other factors that make Costa Rica a grand opportunity for
investment and installation are:
- The geographical location of the country, right in the
middle of the Western Hemisphere.
- The productivity of its labour force. Historically, education
has always been a national priority. School is compulsory
and free up to the highschool level. That is the reason why
Costa Rica has the highest literacy rate in the Third World,
94%. Costa Ricans are highly disciplined people, they learn
fast and they have excellent working and administrative capacities.
4. REFORESTRY INCENTIVES - LAW 7174
Forestry laws have been established by the government in
order to promote the conservation and development of natural
resources. The Forestry Bureau has developed several systems
in order to promote reforestation projects and conservation
of existing natural forest.
4-1 Forestry trust Certificate
The certificates are negotiable bonds used for tax payments,
with a nominative value of $120,000.00 per reforested hectare.
Any individual or legal entity involved in a reforestation
project is also eligible for the following additional benefits:
a) Exemption from land taxes, for land registered under
the Forest Regime Incentive System.
b) Exemption from land taxes, for non-cultivated lands (as
established by Agrarian Law 2825).
c) Protection against land squatters on empty lots.
The amount of the Forestry Trust Certificate per hectare
will be allocated on a yearly basis. It is applicable to cover
establishment and maintenance expenses of a planted forest.
During the first five years the certificate is allocated as
follows: 50% for year 1, 20% for year 2, 15% for year 3, 10%
for year 4, and 5% for year 5.
4-2 Reforestation programs
This system is geared towards those who have ongoing reforestation
projects or who wish to reforest with their own resources.
Those who reforest without the benefits of the Forestry Trust
Certificate can enjoy the above mentioned benefits (points
a, b and c), plus the following;
- Exemption from land taxes and from income taxes derived
from sales of plantation products.
- Those who freely submit to forestry management of specific
farms will be protected by an approved forestry management
plant.
4-3 industrialization and transport of wood
Those industries wishing to reorganize or to increase their
efficiency according to the policy of the Forestry Bureau,
will enjoy the following benefits:
a) Priority as to approval and endorsement of loans.
b) The Forestry Bureau will facilitate exports of the industrial
production.
c) if companies invest in training, they will be exempted
from paying the training compulsory lee to the National Training
Institute.
5. INCENTIVES FOR TOURISM Infrastructure LAW 6990 Incentives
are granted to the following activities:
1. Hotel services
2. Local and international air transport of tourists.
3. Vehicle rental to local and foreign tourists.
4. Tourist aquatic transportation.
5. Inbound tourism activities for travel agencies exclusively
dedicated to this activity.
Upon request and approval, some of the benefits granted
to the above mentioned activities are exemptions from tax
and surtax on the import or purchase of essential goods, and
advanced depreciation of assets.
OTHER ADVANTAGES FOR FOREIGN INVESTORS
TRADE AGREEMENTS: there is a bilateral free trade agreement
between Costa Rica and Panama and Mexico. Bilateral trade
agreements are on their way with Colombia and Venezuela. Preliminary
conversations have been held with Chile to establish bilateral
trade agreements.
Among others, these bilateral free trade agreements grant
benefits related to customs and non-customs duties in order
to facilitate imports to the signing countries under favorable
conditions, thus guaranteeing exports to those specific markets.
GENERALIZED SYSTEM OF PREFERNCES (GSP)
Generalized systems of preferential customs duties are mechanisms
used by most of the developed and market-oriented countries
in order to grant access to their markets. Products subject
to these preferential systems are wholly or partially manufactured
in developing countries, including some agricultural and sea
related products.
Costa Rica has GSP benefits granted by Japan, Canada, the
European Community, Australia, Austria, New Zealand, Norway,
Sweden, Switzerland, Bulgaria, Slovakian Republic, Hungary
and Poland. Preferences include products that most developing
countries do not yet export, either because they do not produce
them or because their industry is still oriented to their
local markets. In this case, the generalized preferences are
an incentive to local and foreign investment for promoting
industrialization processes in the beneficiary countries.
CARIBBEAN BASIN INITIATIVE (CBI)
The Caribbean Basin Initiative II is a unilateral concession
granted by the United States for most products imported from
beneficiary countries, including Costa Rica. One of the main
advantages of this Initiative is its indefinite time limit,
which improves the access conditions to the US market, thus
granting security to the exporters. The list of products and
preferential benefits broaden specially for those industries
with intensive workmanship, thus promoting investment in our
country.
TREATIES ON PROMOTION AND RECIPROCAL Protection OF INVESTMENTS
In September 1993 Costa Rica signed an agreement with Germany
to suscribe the Treaty on the Promotion and Reciprocal Protection
of Investments".
This treaty is a great supporting tool to Costa Rican policy
of investment promotion since if offers security and confidence
to German investors. It Is also a guarantee to the investor
who, according to the legal framework, can invest in Costa
Rica and enjoy the same protection granted to Costa Ricans
and to citizens of other countries. The treaty establishes
rules in case of expropriation and compensation, free transfer
of payments related to the investment, the use of international
arbitration courts, etc.
In addition to this treaty with Germany, Costa Rica is in
the process of negotiating treaties with other countries.
SUMMARY OF ADVANTAGES FOR PRODUCING IN AND EXPORTING FROM
COSTA RICA
- Political stability.
- Peace and democracy.
- No army.
- Fiscal incentives and local exemptions.
- Regional incentives.
- Low cost and highly qualified labour force.
- Good access by air, sea and land transportation.
- Proximity and access to important international markets
through agreements, conventions and bilateral and multilateral
treaties.
- Access to raw materials.
- Streamlined investment procedures.
- Simple and streamlined import and export procedures.
- Official participation in important international exhibitions
and commercial missions to main international markets.
- Excellent electricity, water, telecommunications, insurance,
banking and health services.
- Well located free zone parks.
- Infrastructure suited to export and tourism needs.
- Excellent weather and geographic location.
- Adequate recreational areas.
- Protected national parks and reserves with great variety
of flora and fauna.
- Public and private centers for technical and academic
education.
- Well organized and active chambers and private associations
that participate in the definition of development policies.
- Timely and updated information about the country.
- Special immigration status for investors, executives,
technicians and their families.
- Highly experienced private consultants.
- Public and private specialized laboratories to support
quality production.
- International prestige and recognition of Costa Rican
products.
- Open support to private development initiatives that promote
employment, technology transfer, national income, social and
economic development and the preservation of the environment.
IMMIGRATION PROCEDURES
CENPRO offers a support program to investors through the
immigration category of: RESIDENT INVESTMENT VISA.
RESIDENT INVESTMENT VISA
Residence as an investor can be requested by foreign investors
who can prove having invested no less than US$ 200.000 in
the country or US$ 50.000 in activities declared as high priority
by the Executive Branch.
For this immigration category, CENPRO's responsibility is
to endorse the application; it is the National Immigration
Council who will grant or deny the requested status.
CENPRO is the official agency for the promotion of exports
and investments. It was founded by Law 4081 in February 1978
to promote non-traditional exports to third markets and local
and foreign investments that involve export development activities.
CENPRO is the operative branch of the Ministry of Foreign
Trade.
Following its export and investment promotion task, CENPRO
offers its services to export companies, potential exporters,
foreign and local investors, foreign importers, trading companies,
cooperatives, associations, chambers, local and foreign consultants,
international organizations, embassies, universities, governmental
institutions, foreign and local diplomats, and any interested
party.
CENPRO is an export information bank providing its users
with a wide range of data related to the export potential
of the country, incentive systems granted to exporters, rules
and procedures for exports and imports of raw materials and
components, and foreign trade statistics. If offers information
and guidance to investors interested in doing business in
Costa Rica. In addition, CENPRO provides information on international
markets, ranging from prices and regulations to international
contacts.
CENPRO trains and offers assistance in international trade
to producers, exporters, potential exporters, governmental
staff and students.
CENPRO also organizes and coordinates local participation
in international exhibitions and commercial missions, as well
as missions of foreign businessmen interested in buying Costa
Rican products or investing in the country.
CENPRO is the official contact point between importers and
foreign investors and the country, and between producers and
local exporters and the international markets.
To attain its goals, CENPRO is divided into one administrative
and four technic divisions.
I. Export Promotion
This Division specializes in the gathering, selection, analysis
and distribution of commercial information. As a complement,
this division has three programs for the support of producers
and exporters:
Commercial Attaches, Immigration Procedures for the Investor,
and Training and Technic Assistance in International Trade.
This division has the following programs:
A. Commercial Information
It is responsible for giving assistance on commercial topics
related to products, markets, prices, international demands,
etc.
1. Technic support to exporters.
2. International demands.
3. information on products and markets.
4. Exportable supply.
5. Elaboration of the Official Export Directory of Costa
Rica.
B. The National Statistics Center (CENEX)
It is a computerized information system specialized in foreign
trade. It offers the following information and services:
- Behavior of traditional and non-traditional products.
- Statistical information on commercial exchange of products,
by economic sector, area and country.
- World statistics on imports and exports.
- Exportable supply by company, showing company profile
and short and long-term supply.
- Behavior of the main world markets.
- Macro-economic statistics and economic indicators.
- Access to international data bases such as those of the
European Economic Community, the Organization of American
States and the International Trade Center. Through these there
is access to information on international prices, lists of
importers, laws and regulations in international markets,
marketing studies and world statistics.
C. Integrated System of Investment Services -S'S'
This system allows CENPRO to offer adequate and competitive
attention to investors, local and foreign businessmen, public
and private institutions and general public, regarding information
on financial, customs, ports and tax services, brands and
registers, insurance, immigration procedures, incentives,
environment, water, energy and construction services, socio-economic
profile of Costa Rica, communications and transportation.
D. Documentation Center
It is the largest foreign trade documentation center in
the country. If offers information on the following:
- Import duties and regulations for Costa Rican products
in international markets.
- Selected commercial literature from books and journals.
- Directories of local and foreign companies.
- Product and market studies and research.
- Foreign trade local and international incentive systems.
- Design, package and packing.
- International transport of cargo.
- Transport and credit insurance, etc.
- Quality control and regulations.
- Duty nomenclature and correlations.
E. Program of Commercial Attachés
Through this program, CENPRO is linked to the Costa Rican
embassies and commercial offices abroad, thus promoting exports
and foreign investment.
F. Training and Technic Assistance in Foreign Trade - PROCEX
This specialized training program counts with both local
and international experts. The program extends to all regions
of the country and includes a wide range of issues related
to international trade. Its goals are attained by seminars,
conferences and visits to production sites.
II. Foreign Trade One-Stop Office
All documentary procedures for import and export are processed
by this division. It is surprising how the country was able
to simplify and centralize export and import procedures in
such a way, that today it is possible to go through the process
in approximately 4 minutes, making these procedures among
the shortest in Latin America.
The One-Stop Office offers the following services:
1. Assistance on export procedures and required documentation.
2. Assistance on import procedures and required documentation.
3. Processing of import and export documentation.
4. Certification of processing operations.
5. Export and import statistics.
6. Sale of export and import required documentation.
7. Descentralized service in customs offices in the country.
8. Centralization of import exemptions included in Export
Contracts and import exemptions processed by the Industrial
Director of the Ministry of Economy, Industry and Commerce.
Once the system is fully automatized, other exemption processes
will be included.
9. Centralization of procedures derived from bilateral commercial
agreements that Costa Rica has signed and will sign in the
future.
III. International Exhibitions and Commercial Missions
This division is in charge of planning, organizing and coordinating
the participation of Costa Rican companies in international
well known commercial events. These international opportunities
allow businessmen to have practical and effective ways of
making contacts, selling, assessing the trends in the international
markets, and promoting exports and Costa Rican products.
In a periodic and successful way, Costa Rican non-traditional
products are exhibited in Germany, France, Holland, The United
States, Canada and other countries.
This division is also in charge of coordinating and receiving
international missions of businessmen searching for Costa
Rican products.
IV. Export Incentives
This division is in charge of all related to the Secretariat
of the National Investment Council (CNI). It provides assistance
to exporters and investors about the incentives granted by
the Export Contract. Export Contracts are agreements signed
between private applicants and the Government of Costa Rica
which grant attractive fiscal incentives.
According to the Export Contract regulations, this division
receives, examines and recommends applications for tax exemptions
to the Ministry of Treasure.
This division also offers assistance on the Temporary Admission
or Draw-Back System, specially regarding requirements and
benefits.
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