Last April 27th, the Legislative Assembly approved in second debate the bill 22.607 called “Law for the strengthening of territorial competitiveness to promote the attraction of investments outside the Greater Metropolitan Area (GAM)”.

The main objective of the bill is to generate new incentives for companies under the Free Zone Regime to set up in rural, coastal and border areas outside the Greater Metropolitan Area, in order to create new employment and development opportunities for the citizens of such regions.

Application of the Law
This Law would be applied to companies that make new investments in the country outside the Greater Metropolitan Area (GAM), for which the projects must be new, and the companies interested in their development must be totally or partially exempt from income tax.

Incentives and proposals of the bill

This Law would bring the following proposals and benefits:

– The sectors benefited by the Free Zone Regime are expanded. The legislative proposal includes new categories that would be include such as: human health services (dentistry, ophthalmology and cosmetic surgery), inputs (agricultural, livestock and fishing) and sustainable adventure parks.

– Decrease in the amount of new initial investment. Currently the companies included in the categories of Article 17 of the Free Zones Law, that wish to operate outside the GAM and outside an industrial park must carry out an initial investment in of at least five hundred thousand dollars legal tender of the United States of America (US $500,000), with this new Law the investment amount is reduced by half and the initial investment in fixed assets, investment in human capital and/or investment in public infrastructure must be at least two hundred and fifty thousand dollars legal tender of the United States of America (US$ 250,000).

–Expedite procedures for investments outside of the GAM. These companies would benefit from the Ventanilla Única de Inversión (VUI), which proposes to expedite and significantly reduce the time required for procedures, such as the following:

– Land use certificate granted by the competent Municipality, within five (5) working days.
– Sanitary permit of operation granted by the Ministry of Health, within five (5) working days.
– Labor risk policy granted by the National Insurance Institute (INS), within a term no longer than one (1) working day.
– Certificate of patent or commercial license granted by the competent municipality, in the optional term of five (5) working days.
– Employer’s registration before the Costa Rican Social Security Fund (CCSS), within a term no longer than one (1) working day.
– Registration before the Single Tax Registry of the Ministry of Finance, for the pre-operative phase, within a term not exceeding one (1) business day.
– Executives of company’s beneficiaries of the free trade zone regime, before the General Direction of Migration, in a term no longer than twenty (20) working days.
– Availability of water before the Costa Rican Institute of Aqueducts and Sewage (AyA), in the term not greater than ten (10) working days.
– Granting of the Auxiliary of the Customs Public Function, before the General Directorate of Customs, in a term not greater than three (3) working days.

– Authorization to generate renewable electric energy. Companies administering parks located outside the GAM are authorized to generate renewable electric energy for self-consumption and to supply the service at cost to the companies installed or to be installed in these parks under the Free Trade Zone Regime.

– Exoneration of social charges. The project exonerates from the payment of social charges in favor of the Instituto Mixto de Ayuda Social (IMAS), the Instituto Nacional de Aprendizaje (INA) and the Fondo de Desarrollo Social y Asignaciones Familiares (FODESAF) to the companies that obtain the Regime outside the GAM. In the case of the FODESAF, employers must currently pay to the Fund five percent (5%) of the total salaries they pay monthly to their workers. Under this Law, during the first five years, companies that join the RZF outside the GAM will be exempt from payment. From the sixth to the seventh year, these companies will be subject to the payment of one percent (1%). From the eighth year of operation, these companies will be subject to the payment of two percent (2%). As of year nine of operation, these companies will be subject to the general payment established for private employers.

For this Law to be applicable, it requires the signature of the President of the Republic, its official publication in the Official Gazette and the drafting of a regulation which is expected to be finalized in the next 6 months.

At ERP Lawyers & Associates we are very enthusiastic about the approval of this bill, as it will undoubtedly generate new employment and development opportunities in the most remote regions of the country.

If you are considering having your company as part of the Free Trade Zone Regime, we invite you to contact us at info@erplawyers.com where our team of experts will gladly provide you with the necessary legal advice.