Law 10286: Regulations Related to Tax Exemptions in Costa Rica

On September 1, 2022, the Law in reference was published, which intends to regulate the procedure for the granting, release, liquidation, transfer and control over the use and destination of the exemptions that are under the supervision of the General Directorate of Finance, as well as the creation of a sanctioning regime applicable to non-compliance with the regulations governing the exemptions.

It specifies that those exemptions that by special law are not under the supervision of the General Directorate of Finance and that have not been expressly reformed or repealed by means of the law in question are excluded from the present law.

In this context, it is established that the General Directorate of Finance, of the Ministry of Finance, is empowered to authorize the enjoyment of exemptions from the payment of the national taxes that are under its custody and administration, upon request of the interested party, as well as the liquidations and releases thereof, by the means determined by this Directorate.

In those cases in which the law establishes it, it will be necessary that the request of the interested party be accompanied by the guarantee issued by the respective recommending entity. Without this guarantee, the Ré gie will not be able to authorize the exemption. Likewise, the Directorate is responsible for the control and supervision of the exemptions it has authorized, with the technical support of the recommending entities.

Further on, the Law regulates the administrative procedure to be followed and establishes the sanctioning regime related to undue enjoyment of benefits.

Finally, the Law reforms some existing exonerations, among which is the reform of article 4 of Law 7293, Law Regulating all Exonerations in Force, Repeals and Exceptions, of March 31, 1992. The text is as follows:

Article 4- The importation or local purchase of medicines shall not be subject to any type of taxation except for the value added tax, whose rate is set at two percent (2%) and the customs duties that must be paid in full.

A medicine is defined as any merchandise used in the diagnosis, prevention, treatment and relief of diseases or abnormal physical states or their symptoms and in the reestablishment or modification of organic functions of the human being.

The condition of medicine will be accredited by the Ministry of Health, for the pertinent effects.

The importation and local purchase of medical equipment, wheelchairs and similar, special hospital beds, orthopedic equipment, equipment for chemical-clinical laboratories and agricultural research, dental equipment, prosthesis in general and all kinds of equipment used by people with hearing problems are exempted from all taxes, as well as that used in special education programs for persons with disabilities, including technical aids and support services for persons with disabilities, aimed at improving the functionality and guaranteeing the autonomy of persons with disabilities, in accordance with the provisions of Article 2 of Law 7600, Equal Opportunities for Persons with Disabilities, of May 2, 1996.

Likewise, the raw materials, inputs and any intermediate or final product used in the manufacture of medicines are exempted from all taxes, except for the value added tax, whose rate is set at two percent (2%) and customs duties that must be paid in full. Reagents or catalysts, machinery and equipment required for the production of medicines, containers and packaging materials are included.

The Ministry of Health, in coordination with the Ministry of Finance and the Ministry of Economy, Industry and Commerce, will prepare and publish, in the official gazette, the list of goods entitled to the exemption described above.

In addition, the importation and local purchase of goods and services required by the Costa Rican Social Security Fund for the fulfillment of its purposes shall be exempted from all taxes, except for vehicles, which shall be exempted in accordance with the provisions of Article 16 of Law 7088 of November 30, 1987.

This Law shall enter into force as of September 1, 2022.