Tuesday 31 January 2023

Approved bill to attract investment outside the GAM

Legislators approve in first debate bill to attract investment with incentives for companies that set up outside the Greater Metropolitan Area

Paying the bills


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Paying the bills


QCOSTARICA – Legislators approved on Monday, in the first debate, a bill that promotes the attraction of investments outside the Gran Área Metropolitana (GAM) – Greater Metropolitan Area – through a series of incentives that will allow companies to pay fewer social charges.

For example, on the condition that they locate in rural, border and coastal areas, in order to bring development to those regions, discounts will be applied to employer contributions for the Fund for Social Development and Family Allowances (Fodesaf), Banco Popular, Mixed Institute of Social Assistance (IMAS) and the National Learning Institute (INA).

The Free Trade Zone Regime (FTZR) – Régimen de Zonas Francas (RZF) – is defined in Costa Rica as a set of incentives and benefits granted by the country to companies making new investments and complying with local requirements and obligations.

Under normal conditions, a company must pay these institutions the equivalent of 7% of its payroll, but with the incentive plan, the payment is reduced to 1.25% in the first year of operations.

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Among the advantages of locating outside the GAM is the total exemption, for five years, from the payment of an amount equivalent to 5% of monthly salaries, which employers must transfer to the Social Development and Family Allowances Fund (Fodesaf).

During years six and seven of operation, it would pay 1%, while during the eighth year, 2% of salaries. From year nine, they will have to pay 5%.

In the case of the charge paid by companies to the work fund administered by Banco Popular, these companies would only have to transfer 0.25% per month on all remunerations, for 10 years, as opposed to the 0.5% that today all the other employers pay.

Nor are they obliged to pay the amount to finance the Mixed Institute of Social Assistance (IMAS), which is currently 0.5% monthly on total remuneration. The project exempts them from this burden for five years, while from year six to year ten, the payment must be 0.25%.

As of year 11, these companies will be subject to the general contribution, which is 0.5%.

The other reduced social burden for these companies is that of the National Training Institute (INA), which is currently 1.5% of the total amount of monthly payroll for all companies.

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Companies in the free zone located outside the GAM would have to pay only 1% during the first 10 years of operation and would have to pay the full load from year 11.

The only social charges that are not lowered for new companies in Régimen de Zonas Francas (RZF) – Free Trade Zone Regime – outside the Metropolitan Area are those that correspond to the worker-employer contributions of the Costa Rican Social Security Fund (CCSS).

These discounts on social charges, for companies outside the GAM, are in addition to the other benefits of the RSF, where companies are exempt from value added taxes (VAT) and consumption taxes on purchases of goods and services. services, as well as income taxes and remittances.

A Free Zone offers a unique opportunity to defer, reduce or eliminate customs duties on your products, which can result in significant cost savings

In addition, for 10 years from the start of operations, companies are exempt from paying taxes on capital and net assets, land tax and transfer of real estate. Likewise, they are exempt from municipal taxes and patents for 10 years.

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One of the conditions is that they be new investments of at least US$250,000, which means that companies already established in the RSF will not be able to migrate out of the GAM to increase their profits.

The bill approved this Monday creates new categories of companies in the RSF: human health services (dental, ophthalmological and cosmetic surgery), supplies (agricultural, livestock and fishing), and sustainable adventure parks.

Independent legislator, Jonathan Prendas, said that this initiative makes it easier to generate employment outside the GAM.

The head of the Partido Liberacion Nacional (PLN) legislative faction, María José Corrales, affirms that it is important to generate incentives so that companies can settle in rural areas.

PLN legislator Carlos Ricardo Benavides assured that the project is a before and after in the promotion of investment in the most remote areas of the GAM, which have been abandoned and have not received investment from free zones.

“Once it is approved, the coasts, the borders and the most remote rural areas, passing through Limón, Guanacaste and Puntarenas can incorporate new companies,” he commented.

The plan had been presented last July and had the support of the Costa Rican Coalition of Development Initiatives (CINDE).

The bill now requires second and final approval and the signature of the President, followed by publication in La Gaceta to become law.

It is unclear if the bill will be on the legislative agenda before this Friday, the last day of the current legislative group or it will be passed on to the new legislators on Monday, May 1.




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Paying the bills
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