Benefits of Setting up a Company in Costa Rica’s Free Trade Zones

The political and economic stability, including the long standing democracy in the country have contributed to creating a reasonably stable business environment in Costa Rica, which in turn has made it a preferred investment location for foreign investors.

Costa Rica as a country has gone to great lengths to provide favorable investment conditions for investors and the government has been active in its encouragement of foreign investment. They have put in place, several free trade agreements with the neighboring countries and with other countries including Canada and the US. Several incentives, one of which is the Export – Related Operations incentive, have been put in place by successive governments in order to encourage foreign investment.

The export-related incentives generally come under two broad categories and those are the Free Trade Zones and Special Drawback.

The Free Trade Zone is mostly made up of some particular non-residential areas that have been designated "Free Trade Zone" parks. The way this operates is that companies that are established in these parks are given tax breaks.

There are only six types of companies that can be established in these parks and they are Export processing companies which produce and process goods for export, trading companies that distribute non-traditional goods, service companies that provide services to clients who are not domiciled in Costa Rica or to other companies that benefit from the Free Trade Zone (though financial entities and companies are not included in this category), individuals or companies that exist for scientific research which would be beneficial to the development of Costa Rica, companies that specialize in vessel construction, repair and maintenance or that provide dry dock facilities, shipyard services and similar work; and the firms that have been granted the concessions for managing the free trade zones.

If your company falls into any of the above categories and you are making a new investment in Costa Rica, participation in the Free Trade Zone is open to you once you meet a couple of financial conditions.

There are also tax incentives which are available for some companies in the Free Trade Zone one of which is a ten year exemption from taxes on all net capital assets, property and transfers of property and this goes into effect from the day operations commence. A huge plus of operating within the Free Trade Zone is that you are not required to remit any foreign currency you’ve earned to the Central Bank of Costa Rica; you are allowed a great deal of flexibility in managing your foreign currency.

Costa Rica is still fine tuning its laws and incentives to make the country even more attractive to foreign investors. It’s years of political and economic stability, speak for themselves.