Costa
Rica Double Tax Treaties
Costa Rica has traditionally not been a party
to any double taxation treaties. However it has
signed an exchange of information treaty with
the United States with a view to promoting the
necessary interchange of tax information and to
ensure that the correct level of taxation is levied
in both countries as well as to eradicate tax
evasion.
In
April, 2006, however, as the country mulled a
controversial switch from a territorial tax system
to one where it would collect tax on worldwide
income, it emerged that the authorities had begun
negotiations with several countries to avoid the
double taxation of income.
Director
of the Revenue Service Francisco Fonseca said
at that time that negotiations towards double
taxation avoidance agreements with Israel, South
Korea and Switzerland were in their early stages.
Similar agreements with Canada and Spain were
also being negotiated.
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Costa Rica
Other International Agreements
Mutual
Assistance Treaties: Other than the exchange
of information treaty signed with the United States
Costa Rica has no mutual assistance treaties with
any other countries. The banks do not share any
banking information with the tax department or
with any other Government departments other than
the central bank. Civil and criminal implications
attach to the disclosure of any information received
by a lawyer and disclosed without proper authority.
Free
Trade Agreements: President
Bush signed the Central American Free Trade Agreement
(CAFTA) in August, 2005, after its approval by
Congress. The main aim of the agreement is the
lifting of tariffs and trade restrictions between
the United States and Costa Rica, El Salvador,
Guatemala, Honduras, Nicaragua and the Dominican
Republic. According to recent statistics, the
CAFTA area has a combined economy of $57 billion,
and approximately $20 billion worth of trade takes
place between the CAFTA nations and the US.
CAFTA
was signed by Costa Rica, along with four other
Central American nations, in June, 2004. However,
there has been much debate in Costa Rica as to
the merits of CAFTA- for more information, see
below.
CAFTA,
will eliminate tariffs and duties on around 80%
of manufactured goods and 50% of agricultural
products exported from the United States to Costa
Rica, El Salvador, Guatemala, Honduras and Nicaragua.
Tariffs on all other goods, with the exception
of American sugar and a few Central American agricultural
goods, will be phased out over a longer period.
Applauding
the pact, the US National Association of Manufacturers
said: “This is the highest-quality trade
agreement yet.”
“Not
only does it eliminate tariffs on 80 percent of
US manufactured exports immediately, but it also
sets new standards for intellectual property protection,
anti-corruption measures, open distribution channels,
and other issues that are important for US companies,”
observed NAM Vice President for International
Economic Affairs, Frank Vargo.
In
October 2007, after a great deal of to-ing and
fro-ing on the issue, a referendum on whether
Costa Rica should participate in CAFTA was held,
and the 'yes' campaign secured a narrow victory.
The
United States government welcomed the referendum
result, with US Trade Representative Susan Schwab
observing at the time that:
"We
are pleased that Costa Rica will be joining the
other CAFTA-DR countries in reaping the benefits
of greater regional economic integration and market
opportunities that the CAFTA-DR provides We look
forward to working with the Government of Costa
Rica as it completes the necessary steps to implement
the agreement, so that the CAFTA-DR can enter
into force for Costa Rica as soon as possible."
After
a heated debate over the merits of CAFTA, which
culminated in a huge street demonstration by the
'no' campaign on the eve of the referendum, voters
eventually decided to ratify the agreement by
a slender margin, with a reported 51.58% voting
in favor and 48.42% voting against.
The
government of President Oscar Arias also faces
an uphill battle in its quest to pass a package
of 13 laws required as part of the CAFTA agreement,
especially the more controversial parts that will
open the state telecommunications and insurance
monopolies, with opposition lawmakers likely to
demand concessions such as increased farm subsidies.
Meanwhile,
earlier that year (in August 2007), it was announced
that President Arias was to sign a free trade
agreement with Panama which will reduce tariffs
on most industrial and agricultural goods traded
between the two countries over the next decade.
The
agreement aims at the removal of tariffs on 93%
of industrial and agroindustrial products, although
barriers on certain industrial goods are not scheduled
to phase out completely for eleven years, while
some agricultural products will have schedules
for reduction of duties as long as 16 years.
The
agreement also opens up Costa Rica's monopolistic
telecoms market to Panamanian operators, although
the the Instituto Costarricence de Electricidad
will be able to offer services in Panama.
While
not nearly as controversial as the much-debated
CAFTA, the FTA with Panama nonetheless sparked
demonstrations from anti-trade agreement protestors
in Costa Rica.
Bilateral
Investment Treaties: Costa
Rica has bilateral investment treaties already
in effect with countries including: Canada, Chile,
Great Britain, France, Spain, Germany, Switzerland
and Taiwan, Korea, Venezuela, Paraguay, Argentina,
the Czech Republic and the Netherlands.
Treaty
negotiations are also at various stages with Bolivia,
Ecuador, Belgium, Luxembourg, Finland, Poland
Austria, Barbados, Brazil, Denmark, United States
of America, Greece, Ireland, Jamaica, Italy, Norway,
Peru, Portugal, Romania, Sweden and Uruguay.
In
November, 2005, Kenneth Valley, Trinidad & Tobago's
trade minister, and Manuel Gonzalez Sanz, his
Costa Rican counterpart, signed a comprehensive
bilateral free trade deal under which will eventually
eliminate tariffs on all goods traded between
the two nations.
The
deal removed tariffs on 90% on goods traded between
the two nations immediately, while tariffs on
all remaining goods were set to be removed over
the coming four years.
"This
agreement with Costa Rica is a pioneering effort
providing the opportunity for us to develop access,
investment, and dispute settlement among others,"
Minister Valley observed.
The
deal also aimed to provide Costa Rica with access
to the Caribbean Community (Caricom), which is
in the process of establishing a free market,
and of which Trinidad was one of the first participants.
"We
export more to the Caribbean than all of South
America and look forward to Trinidad & Tobago
influencing other countries to get on board,"
Mr Gonzalez Sanz stated.
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