Costa Rica Heats Up Reform Talks

November 8, 2011 Taxation in Costa Rica

Costa Rica TaxSAN JOSE – Debates are rising in Costa Rica over the government’s proposed fiscal reform plans, with several parties stepping forward to claim that the changes would result in lessening of foreign investment in the country.

On November 4th the Foreign Trade Minister of Costa Rica Anabel González gave a speech at the country’s Legislative Assembly, voicing her criticism of the tax reform proposals. She is the first member of Presidenta Laura Chinchilla’s administration to openly speak out against the proposed changes.

The Minister specifically spoke out against the plan of instating a new levy on enterprises operating in the country’s Free Trade Zones. Foreign companies which operate in a local Free Trade Zone are eligible to receive comprehensive tax benefits and customs duties. Under the conditions of the proposal, any new taxes in Free Trade Zones would only be implemented after 2015, and would apply only to newly entering companies. The Minister warned that the rules would have serious negative repercussions on prospective future investment. She added that legislative stability is very important for multinational businesses, and such a change would send a very negative message to foreign investors.

Earlier last week several companies already operating in the Free Trade Zone responded to the proposed plans with a joint letter, signed by representatives of several large international firms operating in Costa Rica, including Panasonic, Intel, Bridgestone-Firestone, and Procter & Gamble. All signatories warned that the government’s plans for reform are seriously jeopardizing their future investment plans in Costa Rica.

The fiscal reform package will be voted on in December.

Photo by Andrew Morrell Photography