The Free Trade Zone Regime is one of Costa Rica's main instruments for attracting investment and creating jobs. If your company is eligible, it can offer significant tax and customs advantages. It should not be understood, however, as an automatic or unconditional exemption: entering and remaining in the regime means taking on concrete commitments, maintaining sound controls, and meeting periodic obligations to PROCOMER (Costa Rica's foreign trade promotion agency), Customs, and other authorities.
In other words, the value of the regime lies not only in its benefits. It also lies in your company's ability to demonstrate, in an orderly and timely manner, that it complies with the Free Trade Zone Regime Law (Law No. 7210), its regulations, the Executive Agreement (Acuerdo Ejecutivo) granting it free trade zone status, and its operations contract.
What benefits does the Free Trade Zone Regime offer?
The applicable incentives depend on your company's category, its authorized activity, and whether it is located inside or outside the Greater Metropolitan Area (GAM). The most significant benefits include the following:
1. Duty and tax exemptions on imports related to the authorised activity
Beneficiary companies may enjoy exemption from import duties and taxes on goods needed to operate and manage their authorized activity. Under specific conditions, PROCOMER's guide also provides for the duty- and tax-free import of certain work vehicles, such as trucks, cab-and-chassis units, cargo pickup trucks, and vehicles seating at least fifteen passengers.
The practical rule is an important one: the goods must be necessary for, and related to, the authorized activity. Keep documentary and inventory controls that allow you to substantiate that connection in the event of a review.
2. Tax-exempt local purchases when needed for operations
The regime allows a tax exemption on local purchases of goods or services required to manage or operate the authorized activity. To properly support these purchases, keep, among other documents, the purchase order or its equivalent, a copy of your Executive Agreement, and the local supplier's electronic invoices.
The benefit does not remove the need to document the transaction. A local purchase without sufficient evidence can become a point of tax or compliance risk, so supporting documents must be kept on file from the outset.
3. Tax and export benefits
The applicable legislation provides for exemption from value-added tax (VAT), from the tax on remittances abroad (withholding on payments to nonresidents), and, for a ten-year period, from real estate transfer taxes and the municipal business license tax (patente municipal). It also includes benefits with respect to corporate income tax (impuesto sobre las utilidades) and other taxes whose base is tied to profits, dividends, income, or sales.
Corporate income tax rates and the periods over which they apply vary by category, project type, and company location. Each case must therefore be analyzed individually; not all free trade zone companies receive the same exemption percentage for the same period.
The other side of the regime: commitments your company must keep
Approval to operate under the Free Trade Zone Regime comes with ongoing obligations. These are not mere administrative formalities: they are part of the conditions your company must meet to keep the regime's benefits.
Meeting investment and employment commitments
Your company must sign an operations contract with PROCOMER and meet the investment and employment commitments set out in its Executive Agreement. The amounts, deadlines, and targets depend on the category and the conditions under which it entered the regime.
This requires the finance, accounting, human resources, and legal teams to work with consistent information. Make sure that committed investment, recorded assets, and payroll data can be reconciled with the company's reports and supporting documentation.
Maintaining accounting, documentary, and customs controls
Your company must keep specific books and records of the operations involving goods brought in under exemption. It must also have accounting and operating systems that make it possible to continuously control goods as they enter, remain on site, and leave, whether they are owned or held on consignment.
In customs matters, your company must use the required declarations, seals, and other instruments, and it must have the means to electronically transmit Single Customs Declarations (DUA, by its Spanish acronym). Its operating obligations include the electronic start-of-trip and end-of-trip notices (inicio y fin de viaje) for goods movements. Some procedures you can handle directly; others must go through a customs broker, depending on the type of operation.
Monthly fee: a cost that must be budgeted for
Beneficiary companies must pay PROCOMER a monthly fee (canon) for the use of the regime. The guide we consulted sets a minimum of US$200 per month, so it should be built into your compliance budget from the start.
- For service companies, trading companies, and park administrators, the fee is calculated on total revenue or sales: 0.30% for operations inside a free trade zone park and 0.50% for operations outside a park.
- For manufacturing companies, the fee is determined by square meters of roofed industrial space: US$0.25 per square meter inside a park and US$0.50 outside a park.
Determining the fee correctly depends on reliable sales reports and on properly identifying the activity that gives rise to the charge. If your company operates under more than one category, keep separate accounts, assets, and flows of goods and funds, and pay the fee that corresponds to each activity.
Guarantee in favor of PROCOMER
Another financial obligation is to post and maintain at all times a guarantee deposit in favor of PROCOMER. The minimum amount indicated in the guide is US$5,000 or the equivalent of three months of the monthly fee, as applicable.
Keep this requirement in mind from the financial planning stage. Posting it at the outset is not enough: it must remain in force for the entire time the company is in the regime.
Annual Operations Report: the evidence of compliance
Every year, your company must file a report with PROCOMER on its compliance with the commitments it has undertaken. The report is filed through the SIAN system and must bear the digital signature of the legal representative.
The deadline is a critical point: the report must be accepted within four months after the company's fiscal year-end. It is not advisable to start preparing it when the due date is near. Financial, tax, employment, investment, local-purchase, and operating information should be gathered and reviewed throughout the period, not at the end.
For service companies, for example, the information reported must be consistent with their operating results and with their income tax return. Discrepancies between reports can lead to inquiries, adjustments, or exposure in an audit.
Audits: prepare before the notice arrives
PROCOMER may conduct on-site, remote, simplified, follow-up, operating-expense, or special audits. Their purpose is to verify compliance with the obligations and commitments previously communicated to the company. Selection takes into account risk criteria such as employment, sales, investment, operating categories, the results of previous audits, and the information in the annual report.
In an audit, your company must be able to show that its controls work in practice. PROCOMER's guide refers, among other documents, to the Audit Manual, the Internal Control Questionnaire, the Customs Procedures Manual, and the Operations Control Log (Libro de Control de Operaciones).
The company must prepare before a notice arrives. To do so, it must keep its procedures up to date, perform inventory and asset reconciliations, safeguard local purchase files, document customs movements, and verify compliance with its investment and employment commitments. Findings may call for corrective or preventive measures and may lead to a follow-up audit.
Permits and general regulatory compliance
The regime does not replace the company's other legal obligations. The beneficiary must continuously comply with the environmental, zoning, health, and other regulations that apply to its activity, and must keep its operating permits current.
Also keep your local purchase documentation for the period established in the Code of Tax Rules and Procedures (Código de Normas y Procedimientos Tributarios) and attach, where applicable, the required tax documentation to the Annual Operations Report.
A practical view: the regime should be managed as a control system
To take advantage of free trade zone benefits without exposing the company to contingent liabilities, it is advisable to set up a compliance calendar that covers payment and review of the monthly fee, monitoring of investment and employment, customs and accounting reconciliations, document retention, and early preparation of the annual report.
The Free Trade Zone Regime can be a valuable tool for companies that meet the entry requirements and run an orderly operation. The tax benefit is significant, but sustaining it depends on disciplined management of financial, tax, customs, and regulatory obligations.
At ASCONFIN, we can support you with the accounting, tax, and financial organization needed to assess and meet the obligations that come with the regime.