Free Trade Zones in Costa Rica: Growth Engine Under New Challenges
Costa Rica has established itself as an attractive destination for foreign investment thanks to its political stability, qualified human capital, and a solid legal framework that provides security to investors. According to the Costa Rican Foreign Trade Promotion Agency (PROCOMER), 89% of employment related to free trade zones comes from companies with foreign capital, highlighting the direct impact of international investment on local job creation. This model not only promotes economic development but also strengthens Costa Rica’s competitiveness.
Between 1990 and 2024, the number of companies operating under the free trade zone regime increased from 56 to 626, demonstrating significant sector expansion. During this period, free trade zone companies generated a cumulative economic value of USD 13.893 billion, representing 15% of Costa Rica’s national GDP. In comparison, in 1990 their contribution amounted to only USD 215 million (1% of GDP), underscoring the growing strategic importance of free trade zones for the Costa Rican economy.
“Between 1990 and 2024, the number of companies under the free trade zone regime increased from 56 to 626, demonstrating significant sector expansion.”
A Success Model in Continuous Development
Since its introduction in the 1990s, Costa Rica’s free trade zone regime has evolved from an export-oriented industrial system into an advanced ecosystem for innovation, services, and high-tech manufacturing. According to the PROCOMER study “Free Trade Zone: 35 Years Building Value for Costa Rica”, the country has experienced sustained growth under this system.
Innovation and Technological Security
Over the past three decades, high-tech sectors within free trade zones have experienced exponential growth, bringing new regulatory challenges. Maintaining a balance between openness, innovation, and technological sovereignty requires close cooperation between the public and private sectors to safeguard national security without undermining international competitiveness.
This approach ensures that technological development and foreign investment continue contributing sustainably to economic growth.
Legal Framework and Tax Incentives
The Free Trade Zone Regime Law in Costa Rica establishes several categories of companies eligible for incentives, including manufacturing and export-oriented companies, service providers, research institutes, healthcare and audiovisual companies, as well as enterprises that promote economic development outside the Greater Metropolitan Area of San José.
The legal framework aims to attract new investment, foster technological innovation, and strengthen regional competitiveness—under modalities that ensure real job creation and modernization of production processes.
For national manufacturing companies operating under this regime, legislation allows access to tax exemptions and benefits regardless of export levels. According to Article 20, subsection d) of Law No. 7210 (Free Trade Zone Regime Law), companies are exempt for a period of ten years from the start of operations from capital taxes, net worth taxes, property taxes, and real estate transfer taxes.
In other words, incentives are not tied to export performance but to the strategic or territorial importance of the investment.
However, if goods produced under the free trade zone regime are sold in the domestic market, all corresponding taxes must be paid, applying the same customs procedures as imports from abroad.
In this context, the law introduces a key customs principle: tariffs apply only to imported raw materials used in production, not to the total value of the final product. This differentiated treatment—regulated under Article 21, subsection a) of the Free Trade Zone Law—ensures that tariffs reflect only the imported portion of the production process, in line with Costa Rica’s international obligations, and promotes a balanced, competitive, and transparent investment policy.
“Tax incentives are not linked to export performance, but to the strategic or territorial importance of the investment.”
Internal Competitiveness: Structural Challenges
According to the Costa Rican Free Trade Zone Association (AZOFRAS), in order to maintain growth within the regime, the country must address key national competitiveness factors, including:
- Flexible labor regulations that allow operational adaptability in key industries;
- Exchange rate fluctuations affecting financial planning for exporting companies;
- Energy costs, which directly impact industrial production;
- High social security contributions influencing wage competitiveness and talent planning;
- Logistics and digital infrastructure, essential for efficiency and global market connectivity;
- Human capital development, crucial for innovation and productivity in high-tech sectors.
Free trade zones represent a central pillar of Costa Rica’s economic model. Their future depends on the country’s ability to anticipate risks, adapt to global changes, and strengthen cooperation between government, business, and society. They represent more than a special tax system; they embody a development vision based on innovation, stability, and openness.
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For more information, contact:
Lexincorp Central American Law Firm, San José
