Costa
Rica Executive Summary
San José, the capital of Costa Rica, with around
1m inhabitants, has its own silicon valley to
rival the more famous one in California.
Costa
Rica is between Panama and Nicaragua. With 51,000
sq km, more than 4 million people, no army, volcanic
mountain ranges and a sub-tropical climate, the
country's beaches and beautiful scenery spell
tourism. The ex-Spanish colony has been peaceful
and stable since 1948. The culture and language
are Spanish, but English is widely spoken in business.
The currency is the colon, standing at 480 to
the dollar.
The
country's liberal constitution has a separation
of powers between executive, legislative and judiciary.
The legal system is based on a Civil Code and
a Commercial Code. There is high literacy, a well-educated,
skilled work-force, and reasonably business-friendly
legislation which is less bureaucratic than in
some Civil Code countries. GDP per head is $12,500
(2006 figures) at purchasing power parity; inflation
is 11.5% (2006), unemployment 6.6% (2006) and
growth in that year was 7.9%.
The
economy was traditionally based on agricultural
exports and tourism. In the last 20 years the
Government has introduced a host of export incentives
including Free Zones; as a result manufactured
exports have shot up. The most famous investor
is Intel which generated $2bn of exports from
its chip plant in 2004.
Costa
Rica has territorial taxation (ie it taxes only
local income), although a move towards worldwide
taxation has been under consideration for several
years. There are no offshore regimes as such except
for the Free Zones. For domestic companies taxation
is significant, and high social insurance charges
make employees increasingly expensive. For incoming
investors the tax bill is very low indeed, and
the sophisticated business environment is attractive.
The country has traditionally had no international
tax treaties, but it now has an exchange of information
treaty with the US, its main trading partner and
the source of most of its incoming investment,
and has begun to negotiate DTAs with several countries.
Banking secrecy is relatively good.
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