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Free Trade Zones and the "Regime of Active Finishing" are the only export incentive systems remaining in Costa Rica.

The Export Processing Law of 1981 established publicly operated Free Trade Zone (FTZ) industrial parks in Santa Rosa (Puntarenas) on the Pacific Coast, and Moin (Limon) on the Caribbean seaboard. Today, eight FTZs operate in Costa Rica, six of which are privately managed. The newest FTZ is in rural Turrialba and opened in 1998.

219 companies employ 31,000 workers in FTZs. According to the Ministry of Foreign Trade, FTZ exports totaled almost US$ 3.6 billion in 1999, an 84 percent increase over the previous year. The manufacturing sectors represented in the FTZs include: electronics (69 percent); textiles (9 percent); medical instruments, watches and jewelry (3 percent); machinery and equipment (3 percent); television sets, radios and communications equipment (3 percent); and others (13 percent). The benefits extended to qualifying companies established in FTZs include the following:

- 100 percent exemption from all import taxes associated with the import of goods used to make exported products. The same exemption is granted for the equipment and machinery used in the productive process;

- 100 percent exemption from sales and consumer taxes, and taxes levied on remittances abroad;

- 100 percent exemption from income tax for the first eight years of operations and a 50 percent exemption for the following four years, for free zone investments in areas of "greater relative development;"

- 50 percent longer periods of exemption from income taxes for free zone investments in areas of "lesser relative development;" and

- credit for job creation in rural areas.

In addition to these benefits, companies operating in FTZs enjoy simplified investment, trade, and customs procedures.

The active finishing regime, which dies in 2003, provides for temporary admission and suspension of duty collection for material and equipment used to produce goods that are subsequently exported. There are no income tax benefits.





                      Copyright By :  Kish Trade Promotion Center  2002


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