Costa Rican firms worried over potential tax changes for free trade zones

Costa Rican construction firms and other sectors have raised the alarm over potential changes to free trade zone (FTZ) tax rules – as finance minister Nogui Acosta recently hinted.

On Tuesday, Acosta told local daily La República that a review of tax exonerations will be carried out due to the OECD’s 15% minimum global corporate tax, which entered into force on January 1.

“In a big step towards tax standardization, nearly 140 countries agreed in late 2021 on a 15% global minimum tax for large multinationals – a landmark deal to prevent ‘a race to the bottom’ as governments compete to attract foreign companies,” said the UN Conference on Trade and Development (UNCTAD) about the OECD measure.

“We must revise the FTZ incentives in the new international context, particularly for taxation issues,” said Acosta. Any tax changes would have to be approved by Costa Rica’s national assembly.

REACTION

According to the executive director of the Costa Rican construction chamber, Randall Murillo, this could generate legal uncertainty for the companies in the FTZs. 

“We call on the government to make the tax system changes that the country requires to improve everyone’s legal certainty before analyzing potential increases of the tax burden [in FTZs],” local daily El Mundo reported Murillo as saying. 

The country requires stronger measures to avoid double taxation, the implementation of the Hacienda Digital project to digitize processes, and a decision on the incentives that will allow Costa Rica to continue being an attractive investment destination, he said.

“It’s unfeasible to think of any measure to increase taxes without the State showing that it is reducing its current expenditure,” said Murillo. 

For Carlos Wong, president of the country’s FTZ association (Azofras), raising taxes goes “in the opposite direction of” economic growth, employment creation and economic stability, the E&N outlet reported. 

“Establishing taxes for FTZs represents a risk. Not just for incoming investments but for the continuation of those [firms] that are here. It's a change to the conditions that were initially offered,” La República reported Silvia Castro, president of The Costa Rican American Chamber of Commerce (AmCham), as saying.