Costa Rica's Free Zone Regime: An Attractive Market?

Published date01 June 2022
Subject MatterCorporate/Commercial Law, Tax, Corporate and Company Law, Income Tax, Sales Taxes: VAT, GST
Law FirmTMF Group BV
AuthorTMF Group

The Latin American country is encouraging investment with its free trade zone setup, offering tax and operational advantages for companies looking to do business in the jurisdiction, under the rules of the regime.

In Costa Rica, it is becoming increasingly attractive for companies to operate under a 'Free Zone Regime' (FZR). The FZR is a set of benefits and incentives granted by the Costa Rican government to companies making new investments in the country, as stated in the Free Zone Regime Act NN'7210 Act NN'8794 and in its bylaws.

The FZR accounts for approximately 50% of Costa Rica's commercial shipments abroad, but firms that are under the free zone status and jurisdiction - and stand to benefit from the incentives - must comply with legally stipulated requirements.


Major benefits of the scheme include a number of tax incentives, among which is exemption from:

  • Value Added Tax (VAT)
  • Income tax
  • Remittances abroad

An entity that operates under the FZR in Costa Rica benefits directly from general and administrative expenses of the income statement, due to the exemption of 13% of VAT granted by the regime on these areas. In some cases, this applies to the income tax rate, with the applicable corporate rate at 0% for operations within the regime.


Entities must comply with set obligations in order to operate within the regime. These include designing, implementing and maintaining the relevant internal controls relating to property, plant and equipment; internal controls at an administrative level; and closely following what the different local laws and regulations stipulate.

With this approach, entities can not only ensure their permanence within the regime, but also mitigate reputational risks to which they are exposed, that could derive from administrative processes with government authorities.

Complying with the FZR: general recommendations

Here are some general recommendations that can guide you in compliance tasks, helping you ensure your entity maintains the current benefits offered by the Free Zone Regime:

  • The local regulation comes first: it is quite usual for regimen companies to have their headquarters outside of Costa Rica, with financial reporting frameworks based on accounting regulations of other jurisdictions. However, tax and statutory rules of the special regime require entities to have and present financial statements in Costa Rican colóns, based on International Financial Reporting Standards (IFRS).

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