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Free Trade Zones in 
Central America

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How to take advantage of the Free Trade Zones in Central America.

Central American Free Trade Zones

The Central American Group operates free trade zones in El Salvadora and Costa Rica

The Central American Group is the owner and operator of three free zones in the region.   The term “free zone” refers to specially designated areas in which companies are taxed minimally, or not at all.    Activities in free zones may include the storage, the manufacture and reconfiguration of goods, as well as repair work.   The Central America Group’s free zone in Costa Rica is located in the municipality of Alajuela, while the Group’s Salvadoran free zones are located in and in proximity to the country’s capital, San Salvador.

Operations a Free Trade Zone in Costa Rica

The main feature of a free trade zone in Costa Rica is the set of fiscal benefits and incentives that is granted by the country’s federal tax authority to companies that locate within its boundaries.   Benefits that are used to incentivize companies to locate manufacturing and distribution facilities in Costa Rica are not permanent and do have a duration for a limited time.  Among the benefits of operating in one of the more than ten free zones in Costa Rica are:

  • 100% exemption on import duties on capital goods, components, and raw materials;
  • 100% exemption on capital taxes;
  • No restriction on foreign currency management and profit repatriation;
  • 100% exemption on local sales and excise tax;
  • 100% exemption from export taxes;
  • 100% exemption on corporate income taxes;
  • The option to sell to Costa Rican exporters;
  • Expedited on-site customs clearance.

Operations in Free Zones in El Salvador

The Central American group is the owner and operator of free trade zones in El Salvador that include industrial parks in La Paz and San Marcos El Salvador.   They are the Zona Franca Internacional and the San Marcos Free Zones

The free zone regime was started in El Salvador in 1998.  The law governing their operation was crafted in a way that was designed to attract foreign companies to the country. Today, more than 90% of firms manufacturing in Salvadoran free zones are working within the textile industry. 

Benefits that are available to companies operating inside free zones in El Salvador include:

  • Exemption of taxes on real-estate taxes that are related to the export of goods and services;
  • Exemption from municipal taxes on property and company assets;
  • Exemption from all taxes and duties on imports of equipment used to produce goods for export, as well as on raw materials and other inputs to the manufacturing process;
  • Exemption from taxes for lubricants and fuels imported for use in producing goods for export.
  • Exemption from corporate income tax for a ten-year period. After the initial 10 years’ exemption, companies operating in free trade zones in El Salvador will be entitled to a 60% reduction in income tax.

Investment Requirements for Costa Rican Free Zones

The operation of Free Zones in Costa Rica is governed by Free Zones Law No.  7210.  One of the main provisions of this law is that companies wishing to locate in a free zone in Costa Rica must make a minimum investment of US $150,000.00 in fixed assets.  This investment must be completed within the first three years of the project’s start date. 

Why locate in a free trade zone in El Salvador?

Salvadoran free trade zones offer investors certain tax exemptions, duty-free imports and personnel recruitment services. 

In El Salvador, a contribution of 1% of total monthly payroll is imposed on employers with more than ten employees.  The monies that are collected fund the technical instruction and training of workers through a program that is managed by the country’s National Institute of Professional Training. 

A free trade zone is a specific geographical area that is destined for industrialization for export purposes.  It is a territory within the country where customs laws are applied differently, or not applied, so that the goods of foreign origin can enter and remain or be transformed into goods for sale abroad.

The entry and exit of merchandise in a free trade zone is usually considered as an import and export respectively.  The permanence of products within the zone can be indefinite since there are no deadlines for their extraction or removal.

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