LAW 7210

LAW 7210

THE LEGISLATIVE ASSEMBLY OF THE REPUBLIC OF COSTA RICA

DECREES:

THE FREE ZONE REGIMEN LAW

CHAPTER 1

FREE EXPORT ZONES

ARTICLE 1-

The Free Zone Regimen is a group of incentives and benefits granted by the State to those firms executing new investments in the country as long as they comply with the requirements and obligations established in this law and its regulations. These standing rules will determine what is understood by new investments in the country. The firms enjoying the benefits stated in this regimen will be dedicated to the handling, processing, manufacturing, production, reparation and maintenance of goods and provision of services regarding the exportation or reexportation, except the ones stated in the articles 22 and 24 of this law. It is known as a “Free Zone” the site where a group of firms have been benefited with this Regimen, this will be located in a delimitated and non-residential area authorized by the Executive Power in order to operate as has been established.

The Free Zone Regimen has been granted only to those firms with projects having an initial new investment in fixed assets of at least one hundred fifty thousand U.S. Dollars (US$150.000,00) or its equivalent in the national currency.

Small businesses associated in order to perform conjointly and directly processing activities for export shall reach the minimum amount of the investment stated in this article by the addition of the investment executed by each associated firm, according to regulations established in this law. For purposes herein, it is understood as small businesses the firms employing a maximum of twenty employees.

Firms qualifying for the Free Zone Regimen shall comply with all regulations for protection of the environment stated by the Costa Rican legislation and international rules established for the achievement of a sustainable development of economical activities.

Therefore amended by the article 1, paragraph a) of the Law No. 7830 dated September 22^nd of 1998.

CHAPTER II

THE CORPORATION

NOTE: The article 13, paragraph a), concerning the Law for the Development of the Ministry of Foreign Trade and the Foreign Trade Promoter No. 7638 dated October 30th of 1996 amends the current law in a sense that quotes related to the Corporation of the Export Free Zone shall be understood as referred to the Foreign Trade Promoter (PROCOMER)

ARTICLE 2.- Abolished by the article 13, paragraph a),of the Law No. 7638 dated October 30^th, 1996))

ARTICLE 3.- Abolished by the article 13, paragraph a), of the Law No. 7638 dated October 30^th, 1996)

ARTICLE 4.- The Corporation (*) is empowered to:

a) Encourage development and establishment of Free Zones.

b) Recommend, direct and regulate the respective permits of those firms willing to be established in the Free Zone in coordination with the corresponding governmental entities.

c) The Corporation may assume in a temporary terms, the administration of the free zones in concession when the Free Zone Regimen granted has been suspended or revoked.

This paragraph is amended by the article 1, paragraph b), Law No. 7830 dated September 22^nd 1998..

Ch) Rent properties or land owned or administrated by the Corporation, allowing the firms to build, have built, to modify at their own expenses the buildings or facilities designed in order to fulfill all the specific requirements. Any construction and improvement performed on the (*) Corporation’s properties after the expiration of the rental agreement will become property of the Corporation, that is, if the property owner is not able to dismantle and take away those tangible items within the established period of time.

d) Sell properties and land belonging to the Corporation (*), for a price not less than the amount determined in the appraisals performed by the General Tax Office for these purposes..

e) Coordinate with the pertinent entities the establishment of the mandatory customs, insurance and health facilities, according to the requirements and recommendations made by the Ministry of Treasury and Health and by the National Insurance Institute as required.

f) Build, contract and coordinate with the respective governmental entities, the construction of facilities and infrastructure and necessary public services for the accomplishment of all the objectives.

g) This paragraph is abolished by the article 3, paragraph a), of the Law No. 7830 dated September 22^nd of 1998.

h) Establishment of a deposit in guarantee, according to what is stated in the article 9, paragraph ch) of this law, stipulating that firms under the Free Zone Regimen shall be executed this deposit in the Corporation’s name. This guarantee shall be used by the Corporation(*) in order to pay off debts contracted by the guarantor with the Corporation and that have not been liquidated at the moment of the revoking of the Executing Agreement.

i) Ensure that firms administrating Free Zones build child care centers inside the respective industrial park in order to take care of employees’ children in ages ranging 0 to 5 years old. The park administrators will rent this service to the firms located inside the park. Likewise, the park administrators shall make efforts to construct recreational areas in each industrial park for the employees’ use.

j) Employment of qualified personnel required for a suitable operation.

k) Execution of any other lawful actions required for the fulfillment of its objectives.

(*) NOTE: These powers and duties currently correspond to the Foreing Trade Promoter PROCOMER, according to the article 13, paragraph a), of the Law No. 7638 dated October 30^tof 1996.

ARTICLE 5.- The Corporation (*) is obligated to comply to the instructions submitted by the Executive Power regarding the development and attraction of foreign investment.

(*) NOTE: These powers and duties currently correspond to the Foreing Trade Promoter PROCOMER, according to the article 13, paragraph a), of the Law No. 7638 dated October 30^t of 1996.

ARTICLE 6.- This article is abolished by article 13, paragraph a), of the Law No. 7638 dated October 30^th of 1996.

ARTICLE 7.- All the incentives and benefits stated in this law, in favor of firms under the Free Zone Regimen shall be granted to the Corporation(*) that will remain also exempted of the tax payment and other fees that should be cancelled in any other contract executed by them.

(*) NOTE: These powers and duties currently correspond to the Foreign Trade Promoter PROCOMER, according to the article 13, paragraph a), of the Law No. 7638 dated October 30^t1996.

CHAPTER III

CORPORATE(*) ORGANIZATION

ARTICLE 8.- Abolished by article 13, paragraph a), of the Law No. 7638 dated October 30^th of 1996

ARTICLE 9.- Abolished by article 13, paragraph a), of the Law No. 7638 dated October 30^th of 1996

ARTICLE 10.- Abolished by article 13, paragraph a), of the Law No. 7638 dated October 30^th of 1996

CHAPTER IV

Relations with other entities

ARTICLE 11.- The Ministry of Public Works and Transportation will give priority to the improvement of airports, roads, highways and other communication vias that are located nearby the Free Zones.

ARTICLE 12.- The Ministry of Treasury will be responsible of the vigilance and control of the fiscal regimen according to the law and its regulations and other fiscal legislation.

ARTICLE 13.- It is declared as Primary Free Zone, the areas where firms under the Free Zone Regimen are installed.

(*) This paragraph has been amended by the article 1, paragraph c), of the Law No. 7830 dated September 22^nd of 1998.

Customs agents will be required only for those operations performed by the firms approved by the Free Zone Regimen within the national customs territory.

ARTÍCULO 14.- The administrators of the parks and firms under the Free Zone Regimen will provide the assistance and cooperation required by the Customs General Office in order to comply with its responsibilities concerning the inspection and controlling of materials and merchandise entering and leaving the Free Zones.

Additionally, these administrators will provide to the Ministry of Foreign Trade and PROCOMER the cooperation and assistance required by these entities for the performance of its functions concerning the firms enjoying the benefits granted by the Free Zone Regimen.

This second paragraph is added by the article 2, paragraph a) of the Law No. 7830 date September 22^nd of 1998.

ARTICLE 15.- The Ministry of Health will resolve in a period of twenty working days, requests for obtaining the health permits for installation and operation of firms subscribed to the Free Zone Regimen. If the period of time has elapsed and the Ministry fails to notify the firm within the above time, the request will be considered as approved.

ARTICLE 16.- Ownership of scraps, subproducts, and wastes discarded by the firms subscribed to the Free Zone Regimen will have priority to the municipality of each area where said firms are located, as long as they can be treated at a local or national level and cause any danger to the population, in these cases, the municipalities are authorized to trade them in a direct way. If scraps, subproducts and wastes can not be treated at a local or national level will be responsibility of the corresponding firm to give them a suitable treatment.

When any manufacturer or vendor of goods similar to the ones discarded by the firms under the Free Zone Regimen, consider that their interests are threatened or harmed by the handling of the scraps, subproducts and wastes by the municipality, may file a complaint with the Ministry of Economy, Industry and Commerce. This Ministry will resolve this quarrel in favor of the claimant when a situation of a clear disadvantage is presented. In order to resolve these conflicts, the Ministry of Economy, Industry and Commerce will dictate the procedure to be followed.

It is amended by the article 1, paragraph d), of the Law No. 7830 dated September 22^nd of 1998.

CHAPTER V

BENEFICIARIES

ARTICLE 17.- Firms subscribed to the Free Zone Regimen will be classified as follows:

This first paragraph has been amended by the article 1, paragraph e), of the Law No. 7830 dated September 22^nd 1998.

a) Export manufacturing industries producing, processing or assembling for export or reexport..

b) Export commercial industries, non-producers, which are dedicated only to handle, re-packaging, or re-distribution of non-traditional merchandise and products for export or reexport.

c) Industries and service firms exporting to individuals and corporations installed abroad or providing to firms subscribed to the Free Zone Regimen, as long as , the services are directly related with the manufacturing process of the firms approved by the Free Zone Regimen.

d) Banking, Financial and Insurance companies located in the free zones are not eligible to be subscribed to the Regimen and enjoy the benefits. Neither individuals or corporations dedicated to offer professional services are eligible of enjoying the benefits provided by the Regimen.

This paragraph is amended by the article 1, paragraph 3) of the Law No. 7830 dated September 22^nd of 1998.

Ch) Companies administrating the industrial parks which are assigned to the installation of firms subscribed to the Free Zone Regimen, as long as the parks comply with the minimum conditions of infrastructure and availability of services, according to the regulation of the law. These firms may enjoy the exemptions stated in the article 20, as long as the industrial park developed may install only firms under the Free Zone Regimen. In case of allowing installation of firms not subscribed to the Free Zone Regimen, the administrating company will lose since this moment, the exemption indicated in paragraph g) of the article 20. In relation to other exemptions, they will be reduced in the corresponding proportion as if they were sales performed within the national customs territory under the terms stated in the article 22.

This paragraph is amended by the article 1, paragraph e) of the Law No. 7830 dated September 22^nd 1998.

d) Enterprises or entities dedicated to the scientific research for the improvement of the technological level of the industrial or agroindustrial activity and foreign trade of the country.

e) Enterprises operating dockyards and dry or floating dams for the construction, reparation or maintenance of vessels.

ARTICLE 18.- National or Foreign individuals and corporations performing activities in the Free Zones, which are stated in this law and the ones subscribed to the respective Executive Agreement, may:

a) Introduce, store, display, package, unpackage, manufacture, mount, assemble, refine, distill, purify, mix, transform and handle all kind of merchandise, products, raw materials, components, packaging material, containers and other commercial objects assigned for the export and re-export, except those products which importation, trading or manufacturing are prohibited by the Costa Rican law, with the exception of articles 22 and 24 of this law.

b) Provide and contract services for the Free Zone firms and individuals or corporations located abroad, such as: financing, insurance, shipping, expeditors, documentation, supply, building rental, maintenance and any other service suitable for the development of the Free Zone or the Regimen in general.

The companies dedicated to providing banking or financial services shall follow the regulations by the National Banking System, as well as, the current regulations on this matter.

c) In general, to execute all kind of mandatory actions for the establishment and start-up of the Free Zones, as long as, they do not infringe on the Costa Rican laws.

ch) Only in the case when the characteristics of the manufacturing process or the nature of the project interfere with the development of the process inside the industrial park, the Free Zone Regimen may be granted to those export manufacturing companies in order to be established outside the industrial park, as long as the initial investment in fixed assets is of at least two millions of US. Dollars (US$2.000.000,00) or its equivalent in national currency and the other required regulations are complied. In order to grant the Free Zone Regimen outside an industrial park, the Ministry of Foreign Trade shall have a favorable statement from the Ministry of Treasury. This Ministry shall communicate the statement within a period of time of fifteen working days following the receipt of a copy of the respective request. After the expiration of this period of time, if a statement has not been informed, the statement from the Ministry of Treasury will be understood as favorable.

For reasons of availability of labor, transportation, handling of raw material and for other duly justifiable reasons previously authorized by PROCOMER, the firms subscribed to the Free Zone Regimen installed in the industrial park may locate other subsidiary plants outside the park under the same terms stated in the Executive Agreement which authorizes it.

The plant installed in the park shall perform a significant proportion of its total production in relation with the number of plants installed outside the park and must be subject to the criteria stated by PROCOMER regarding this matter. In the same way, all pertinent procedures required for imports of raw material, machinery and others, as well as the export of finished product shall be performed in the plant installed in the industrial park, except for special situations duly justified and authorized by PROCOMER.

The Free Zone Regimen may not be granted in the situations mentioned in previously paragraphs if the firms do not comply with the corresponding financial and customs controls.

This paragraph is amended by the article 1, paragraph f),of the Law No. 7830 dated September 22^nd of 1998.

CHAPTER VI

OBLIGATIONS OF FIRMS

ARTICLE 19.- Beneficiaries of the Free Zone Regimen will have the following obligations:

a) Keep and record in books and specific reports authorized by the Corporation (*), the operations of the firm concerning the goods enjoying exemptions of tax payments authorized by the Ministry of Treasury. These goods are also subject to the inspection of the Corporation (*) and the financial authorities.

b) Provide to corresponding authorities, the reports requested regarding the use and destination of goods imported under this law, as well as, allow them to perform verifications when they determine that it is necessary.

c) Provide or lend to the official entity free samples of articles manufactured in order to be displayed in international fairs where the country is participating.

Ch)Sign an Operation Contract with the Corporation (*).

d) Furnish reports regarding levels of employment, investment and national added value and others stated in the Executive Agreement which grants the Regimen. The fulfillment of this obligation is a mandatory requirement in order to enjoy the incentives stipulated in this law.

This paragraph is amended by article 1, paragraph g) of the Law No 7830 dated September 22^nd of 1998.

e) Utilization of customs declarations, precincts and other legal or regulatory instruments for the documentation or control of its operations.

This paragraph is amended by the article 2, paragraph b) of the Law No. 7830 dated September 22^nd 1998.

f) The enterprises administrating the parks, the firms granted by the Free Zone Regimen outside the industrial park and the subsidiary plants shall establish the required controls concerning the entering and leaving of merchandise, contracts and other rules stipulated in the laws and applicable regulations.

This paragraph is amended by the article 2, paragraph b) of the Law No. 7830 dated September 22^nd 1998.

g) To comply with all the obligations and conditions imposed to the beneficiaries in the Executive Agreement granting the Free Zone Regimen, the regulations of this law and the Operation Contracts signed with the Corporation(*).

The enumeration of this paragraph has been amended by the article2, paragraph c), of the Law No. 7830 dated September 22^nd of 1998.

(*) NOTE: These powers and duties currently correspond to the Foreign Trade Promoter PROCOMER, according to the article13, paragraph a), of the Law No. 7638 dated October 30^th of 1996.

CHAPTER VII

INCENTIVES

ARTICLE 20.- Firms subscribed to the Free Zone Regimen will enjoy the following incentives, except in the specific circumstances indicated bellow:

This first paragraph has been amended by the article 1, paragraph h), of the Law No. 7830 dated September 22^nd of 1998.

a) Exemption of payment of all taxes and consular fees corresponding to import of raw material, finished or semifinished products, components and spare parts, packaging materials and packing, as well as, other merchandise and goods required for the operation. When domestic raw materials are available, the firms shall utilize them as priority, if the General Industry Office determines objectively that both have the same conditions regarding price, quality and delivery conditions required by the firms. This evaluation will be executed if the local manufacturer of the raw material presents the respective request before the General Industry Office, after the benefit of the Free Zone Regimen has been granted to the firm in question.

c) Exemption of all kind of taxes and consular fees affecting the import of machinery and equipment and the respective accessories and spare parts, as well as, the import or vehicles required for the operation, manufacturing, management and transportation. The automobiles and automobile parts that may be exempted are the following:

· Chassis with a single cabin with one or two tons of load capacity.

· Trucks or truck chassis.

· Pick up trucks with one or two tons load capacity.

· Vehicles with a minimum capacity of fifteen passengers.

These exemptions will be subject to the complete fulfillment of the Executive Agreement granting the respective exemption.

Machinery or equipment imported duty free five or more years prior may be transferred, re-destined or placed in the national customs territory freely, without payment of any tax.

Vehicles purchased by the firms subscribed to the Free Zone Regimen may circulate within the national territory after obtaining the corresponding permits submitted by the respective authorities.

If persons operating inside the national customs territory purchase these vehicles, they shall pay all the corresponding taxes, as well as, the transfer and nationalization charges must be cancelled taking into account the time lapsed since the introduction of the vehicle into the country and without enjoying any exemption according to the previous paragraph..

It shall be understood that if a person purchasing a vehicle from a firm subscribed to the Free Zone Regimen enjoys a free tax status for such a purchase, he/she may enjoy the exemption provided.

d) Exemption of all taxes and consular fees imposed on the import of fuels and lubricants required for the operation of these firms. Such as exemption will be granted only when these products are not manufactured inside the country with the quality, quantity and delivery conditions required. In order to import them, the Ministry of Economy, Industry and Commerce will grant a previous authorization and formulate a reasoned statement in a maximum period of time of fifteen working days.

This paragraph is amended by the article 1, paragraph h) of the Law No. 7830 dated September 22^nd of 1998.

ch) Exemption of all taxes related to the export or re-export of products. This exemption will be granted for the re-export of the manufacturing machinery and Free Zone equipment, entering under the regulations stated in this law.

d) Exemption for a period of time of ten years since the start-up of the operations, from taxes on capital and assets, property and real estate transfers.

e) Exemption from sales and consumer’s tax on purchases of goods and services.

f) Exemption from all kind of taxes on remittances abroad.

g) Exemption from all taxes on profits, as well as any other tax determined in relation with gross or net incomes, dividends paid to the shareholders or incomes or sales, according to the following differentiation’s:

1.- For firms installed in areas of “ greater relative growth”, the exemption will be one hundred percent (100%) for a period of time of eight years and fifty percent (50%) for the next four years.

2.- For firms installed in areas of “minor relative growth”, the exemption will be one hundred percent (100%) for a period of time of twelve years and fifty percent (50%) for the following six years.

Terms will be considered from the start-up date of the manufacturing operations by the beneficiary firm, as long as the terms in question do not exceed two years upon the publication of the respective Executive Agreement.

Exemptions stated in this paragraph will not be applicable when potential beneficiaries may deduct in their countries of origin the taxes exonerated in Costa Rica

In order to determine “area of relative greater or minor growth” the Corporation shall comply with the definitions provided by the Ministry of National Planning and Economical Politics regarding this issue.

This paragraph has been amended by the article 1, paragraph h), of the Law No. 7830 dated September 22^nd of 1998.

h) Exemption of all taxes and municipal permits for a period of time of ten years. The companies referred in this article shall pay the municipal services utilized. In this case, the respective municipality may charge up to twice the amount charged by the established law regarding these services. However, the firms installed in the Free Zone are authorized to contract these services with any other individual or corporation.

i) Exemption of all taxes on import and export of commercial or industrial samples, upon authorization from the Corporation(*).

j) For a better development of their operations, the firms subscribed to the Free Zone Regimen may freely perform all types of transactions and contracts in foreign currency, in that case, the corresponding payments shall be necessary made in this type of currency, in what concerns to international transactions or those executed with the other firms established under the Free Zone Regimen.

Firms subscribed to the Free Zone Regimen will enjoy of free possession and handling of foreign currency acquired according to what is stated in the previous paragraph or obtained from normal activities and will not have to abide by foreign exchange regulation. The Central Bank shall establish a regulation regarding this benefit and the activities deriving from it. This regulation will be a mandatory requirement in order to be eligible of enjoying this benefit.

When national currency is required by these firms, the transactions must be executed by the authorized commercial banks, the foreign currency provided by the firms will be converted into national currency.

k) Firms established in the Free Zones located in areas of “minor relative growth”, as defined by the Ministry of Foreign Trade and previous statement submitted by the Ministry of National Planning and Economic Politics will be eligible to receive a bonus equivalent to ten percent (10%) of the total sum paid for salaries during the immediately preceding year, once the amount paid to the Social Security Office (Caja Costarricense de Seguro Social) has been deducted on those salaries and according to the payroll certification submitted to the Social Security Office. These firms may request the benefits granted by this law within a period of five years following the publication of this paragraph. The benefit will be granted for five years and will be decreased in two percent per year until its expiration in the last year. This bonus will be issued against the national budget under the conditions determined by the regulation of this law.

This paragraph is amended by the article 1, paragraph h),of the Law No. 7830 dated September 22^nd of 1998.

The Executive Power will include an entry in the annual budget for a total amount of forty million colons (C40.000.000) for the first year of the execution, this amount will be adjusted each year according to a percentage increase in the total amount of the payrolls submitted by the eligible firms in order to receive this bonus during the immediate previous year.

If the annual amount of this entry is depleted, the requests not been covered may be granted the benefit in the following fiscal period.

The issuing procedure and the conditions related to the bonus herein granted will be stated in the law regulation.

This paragraph is amended by the article 1, of the Law No. 7467 dated December 20^th of 1994.

l) The export manufacturing firms granted with the Free Zone Regimen, which have been operating for four years under said Regimen and that will reinvest in this country may receive an additional exemption of the income tax payment according to the following items:

1.- If the reinvestment exceeds twenty five (25%) of the original investment, the exemption will be granted for an additional year.

2.- If the reinvestment exceeds fifty percent (50%) of the original investment, the exemption will be granted for two additional years.

3.- If the reinvestment exceeds seventy five percent (75%) of the original investment, the exemption will be granted for three additional years.

4.- If the reinvestment exceeds one hundred percent (100%) of the original investment, the exemption will be granted for four additional years.

The additional exemptions will be of a seventy five percent (75%) of the income tax to be paid. Additional exemptions herein granted will be effective after completion of eight years of operation, without having any interference with the exemption corresponding with the final period of four years originally granted, which will be effective once the period of the original exemption herein regulated is expired. In case of firms installed in areas of “minor relative growth”, the additional exemption granted will be effective once the twelve year period of operation is expired, without having any interference with the exemptions corresponding to the final period of six years originally granted, this will be effective once the period of the additional exemption expires. The reinvestment responsible of the additional exemption must be completed after the fourth year and before the eight year period of operation initiates under the protection of the Free Zone Regimen. The additional exemption only may be granted to firms performing and initial original investment in fixed assets of at least two million U.S. Dollars (US$2.000.000,00).

This paragraph is added by the article 2, paragraph c), of the Law No. 7830 dated September 22^nd of 1998.

Firms indicated in paragraph b) of the article 17 will not enjoy the exemptions established in the paragraphs f) and g) of this article. When one of the firms mentioned in other paragraphs of the article 17, different from the article b), execute commercial activities in the same proportion , the income tax exemption will be reduced according to the regulation established in this law. The execution of commercial activities by non-commercial firms under the Regimen, will be identified only as complementary and not as main activities and will require from a previous authorization by PROCOMER.

This final paragraph is included by the article 2, paragraph c), of the Law No. 7830 dated September 22^nd of 1998.

(*) NOTE: This powers and duties currently correspond to the Foreign Trade Promoter PROCOMER, according to the article 13, paragraph a), of the Law No. 7638 dated October 30^th of 1996.

ARTICLE 20 bis.- The Free Zone Regimen will not be granted to individuals or corporations in order to operate or develop a company or project with investment already enjoying the benefits granted by the Regimen; even though this has been subscribed by a different individual or corporation. Exception can be executed by proving that there is a new project or for exceptional situations when the nature and magnitude of the additional investments may justify it. All of these must be performed in the judgement of the Ministry of Foreign Trade and in compliance with the regulation stipulated in this law.

This article is included by the article 2, paragraph d), of the Law No. 7830 dated September 22^nd 1998.

ARTICLE 21.- In addition to the fiscal incentives previously mentioned, the established firms under the Free Zone Regimen may request to the corresponding administrating Corporation(*), the following benefits:

a) Training Assistance coordinated by the National Training Institute (INA), for employees and aspiring employees of the firms established in the Free Zones.

Firms installed in Free Zones in areas of minor relative growth may be subscribed to the national program for the development of employment by the Ministry of Labor in order to train and provide job to unemployed, subcontracted individuals and persons in low income areas, according to what the regulation prepared by the Ministry of Foreign Commerce along with the Ministry of Labor states.

The Ministry of Labor and the firms will subscribe an agreement that must be adjusted to the following items:

1.- Training or re-training will be for a period of time of three months that may be extended for an equivalent period according to the complexity or the process and depending on the judgement of the Ministry of Labor and previous statement issued by the Ministry of Foreign Trade.

2.- Training will be in charge of the firm enjoying this benefit, providing the facilities, machinery and equipment required by the apprentice. Courses will be supervised by the Training National Institute according to the alignments established in the respective agreement.

3.- The Ministry of Labor will grant the apprentice a monthly allowance charged to the Program funds during the period of training. The amount of this allowance will be equivalent to a monthly minimum salary. Because this benefit is related to the technical development, the payment will not cause any labor relation and any other legal affairs

4.- The firm shall be obligated to contract the apprentice once he/she is trained, as long as the apprentice is suitable for the position according to the terms established in the respective agreement.

Paragraph amended by the article 1 of the Law No. 7467 dated December 20^th of 1994.

b) Assistance for selection of personnel to be employed by these firms. Selection activities will be coordinated by the Training National Institute and the Ministry of Labor, labor groups and other local and government entities.

c) Assistance and advice regarding requirements and necessities with governmental and private entities.

ch) Assistance concerning housing and educational needs for their employees and families through the coordination with the respective public entities.

(*) NOTE: These powers and duties currently correspond to the Foreign Trade Promoter PROCOMER according to the article 13, paragraph a) of the Law No. 7638 dated October 30^th of 1996.

ARTICLE 22.- Firms subscribed to the Free Zone Regimen, except the ones indicated in the paragraph b) of the article 17, may introduce into the national customs territory up to twenty five percent (25%) of their total sales, upon accomplishment of requirements stated in the regulation of this law. In the case of firms indicated in the paragraph c) of the article 17 the maximum percentage will be of fifty percent (50%).

Goods and services coming from outside the country and introduce in the national market will be subject to taxes and customs procedures of any similar import. Additionally, the percentage of exoneration of taxes on import of machinery, equipment and raw materials and taxes on incomes will be reduced in the same proportion of the value of goods and services introduce into the national customs territory in relation with the total value of sales and services of the firm, according to the regulation of this law.

Amended by the article 1, paragraph i) of the Law No. 7830 dated September 22^nd of 1998.

ARTICLE 23.- National companies providing to firms established in the Free Zones services , national raw material, products, parts or components which are partial or totally manufactured in the country will be exempted of the payment of sales and consumer’s taxes in these transactions. Additionally, sales made by national companies to firms subscribed to the Free Zone Regimen will be considered as exports and those national companies holding CATS or other export incentive may cash them in for the amount corresponding to the sale.

ARTICLE 24.- All the materials, goods, products, vehicles, equipment and machinery imported or produced in the Free Zones according to the provisions of this law, may be sold, interchanged and transferred among the firms established under this Regimen upon authorization by the Corporation (*). Firms subscribed to the Free Zone Regimen under the classification of the paragraph a) of the article 17, may subcontract in the national customs territory or with the firms under the Regimen part of their production or their production process, strictly in accordance with the established regulation related to this matter.

Also, the firms under the Free Zone Regimen may introduce into the national customs territory, machinery, vehicles or equipment originating in Free Zones, as long as this is performed with the purpose of reparation and modification of said goods.

To that effect, the General Customs Office will grant a respective permit, once a customs deposit has been made in order to guarantee the re-entry of said goods into the Free Zone or in other cases the payment of the corresponding taxes. In the event of these goods not re-entering the Free Zone, the payment of the respective duties must be executed.

This law’s regulation will establish requirements, conditions and control rules regarding the sale of goods and services between firms enjoying the benefits from the Free Zone Regimen and firms subscribed to other special import and export Regimens.

This final paragraph is included by the article 2, paragraph e) of the Law No. 7830 dated September 22^nd of 1998.

(*) NOTE: These powers and duties currently correspond to the Foreign Trade Promoter PROCOMER, according to the article 13, paragraph a) of the Law No. 7638 dated October 30^th of 1996.

CHAPTER VIII

Procedure for granting the Regimen

ARTICLE 25.- The individual or corporation interested in being eligible for the granting of the Free Zone Regimen under the classification of any of the categories appointed in the article 17 of this law, must submit the respective request to the Corporation(*), duly authenticated by a public notary along with detailed information concerning the pollution produced by the process and its scraps, as well as, any other document requested by the Board of Directors of the Corporation (*), all of these in compliance with the instructions submitted by the Corporation (*) for this purpose.

(*) NOTE: These powers and duties currently correspond to the Foreign Trade Promoter (PROCOMER), according to the article 13, paragraph a) of the Law No. 7638 dated October 30^th of 1996.

ARTICLE 26.- The Corporation (*) will evaluate the request and information submitted, upon verification that said request is complete and will deliver its recommendations to the Board of Directors that will proceed to resolve it, at the latest, in the ordinary meeting following the receiving of the evaluation or in an extraordinary meeting upon the approval of four of their members. If the information is not complete, the Corporation (*) should communicate the interested party of pertinent remarks and observations within eight working days since the receipt of the request. Once the requirement has been accomplished, the established procedure will be followed.

The Corporation (*) will request, when it considered suitable, the specialized advice to the different government entities in order to have a better analysis of the firms’ request.

(*) NOTE: These powers and duties current corresponding to the Foreign Trade Promoter PROCOMER according to the article 13, paragraph a) of the Law No. 7638 dated October 30^th of 1996.

ARTICLE 27.- If the recommendation or advice is accepted, the Executive Power will approve it through an agreement containing the items determined by the regulation of this law.

ARTICLE 28.- Abolished by article 13, paragraph a) of the Law No. 7638 dated October 30^th of 1996..

ARTICLE 29.- Abolished by the article 13, paragraph a) of the Law No. 7638 dated October 30^th of 1996..

CHAPTER IX

Sanctions and cancellation of the Regimen

ARTICLE 30.- If any of the infractions referred to in article 32 of the current law happen to be punishable by the law, the Ministry of Foreign Trade will advice all the facts to the Public Ministry in order to take and execute the pertinent legal actions.

ARTICLE 31.- Abolished by the article 3, paragraph b), of the Law No. 7830 dated September 22^nd of 1998.

ARTICLE 32.- The Ministry of Foreign Trade may impose a fine up to three hundred times of a minimum salary, according to the definition stated in the article 2 of the Law No. 7337 dated May of 1993, it may eliminate one or several incentives stated in the article 20 of this law for a period of time that ranges from one month to a year or the Free Zone Regimen may be revoked without responsibility for the State to the beneficiary firms incurring in any of the following infractions:

a) When false documentation has been submitted in the requests needed for the granting of the Regimen.

b) When a company fails to start up operations in the time period set forth in the Executive Agreement.

c) When a company disregards the new levels of investment, employment, national added value and others stipulated in the respective Executive Agreement.

d) When a company fails to submit in the time period stipulated in the Executive Agreement the annual activity report and any other report requested by PROCOMER or by the Ministry of Foreign Trade. Failing in the presentation of the annual report within the period of time established for this purpose will cause the automatic suspension of all benefits granted by the Regimen until the complete report is submitted.

e) Performance of sales in the local market without fulfillment of the requirements appointed in the article 22 of this law.

f) When a company fails to pay the corresponding fee for the utilization of the Regimen within the period of time established.

g) When a company fails to make a guarantee deposit stipulated in this law or when a company fails to renew this deposit before the expiration date.

h) To stop operations or abandon their facilities without previous authorization as indicated in the regulation of this law.

i) When the company, its shareholders, directors, employees or representatives have been sanctioned due to firm’s activities, through a firm legal resolution for incurring in administrative, customs, taxable or duty customs infractions. In this case, the imposing of fines do not proceed, but the revoking of the Regimen proceeds when incurs in severe or repeated infractions in the judgement of the Ministry of Foreign Trade.

j) When shareholders, directors, employees or representatives of a beneficiary firm have been sentenced in relation with the firm’s activities, through a firm legal resolution for incurring in customs and tax crimes. In this case imposing of fines will not proceed, but the revoking of the Regimen proceeds when incurs in severe or repeated infractions in the judgement of the Ministry of Foreign Trade.

k) When the company has ceased payments or has been declared in bankruptcy for preventive agreement or administration by legal intervention.

l) Any other unfulfillment concerning pertinent obligations according to the law, regulations and operation contracts.

m) Handling of scraps, subproducts and wastes without fulfillment of statement in the article 16 of the law and its regulation.

n) Use or destination, in a different manner, of what is stated in the Executive Agreement corresponding to machinery, equipment, vehicles, raw materials, semi-finished products and any other goods acquired by the firms under the incentives granted.

ñ) Unfulfillment of safety and control regulations established in the regulation of this

law by the firms in charge of the development of industrial parks.

In order to determine an applicable sanction, the magnitude of the infraction and its repetition will be taken into account, as well as the degree of the fault by the company’s employees or representatives; when it concerns to fines, the volume of the company’s income will be accounted.

The Ministry of Foreign Trade may grant for a maximum period of six months, a precautionary suspension of the incentives and benefits stated in this law, during the administrative procedures or legal investigations questioning the legality of the activity performed by a firm subscribed to the Free Zone Regimen, of related firms or its respective shareholders, directors, managers or representatives. Neither the precautionary suspension nor the elevation will pre-judge on the final resolution concerning the pertinent administrative procedure or legal process.

The Ministries of Foreign Trade and Treasury will determine the coordination mechanisms necessary for a more suitable and efficient application of all controls and sanctions to the firms subscribed to the Free Zone Regimen.

The amount generated by the fines established in the article will be distributed as follows: a fifty percent (50%) to PROCOMER and a fifty percent (50%) to the municipality of the area where the beneficiary company is located.

Against the imposition of the foreseen sanctions in this article, a reinstatement appeal may be filed within the five working days following the notification of the corresponding resolution, consequently the legal means will be completely terminated.

The resolution imposing a fine will be an executive action against the infractor and PROCOMER will have all the legal rights to proceed to execute the charge.

Amended by the article 1, paragraph j), of the Law No.. 7830 dated September 22^nd of 1998.

ARTICLE 33.- Once the Executive Power is been acknowledged of any infraction indicated in the article 32, will proceed to submit the corresponding information and after that, will give audience for a period of three working days to the infringing company so that it may offer its acquitting proof, which will be evaluated during the following eight working days. The Ministry will submit the resolution within the following fifteen working days upon the receipt of the proof.

The statement of cancellation of the Free Zone Regimen will be notified to the infringing company, and the company may file a claim within the following three working days upon the notification. The claim will be filed directly with the corresponding Ministry, who shall communicate the resolution within eight working days of receipt. If the claim is rejected, the administrative course is completely executed and shall proceed to the publication of the Executive Agreement revoking the concession.

CAPÍTULO X

Final Provisions

ARTICLE 34.- Regulations referred to the current law shall be promulgated by the respective entities in a period of time not exceeding ninety days upon the publication date.

ARTICLE 35.- The Corporation is not subject to the following laws: Law No. 6821, Budgetary Authority Law and its amendments dated October 19^th, 1982 and the Law No. 6955, Law for the Financial Equilibrium of the Public Sector and its amendments dated February 24^th, 1984, as well as the article 29 of the Law No. 5255, National Planning Law and its amendments dated May 2^nd, 1974; and consequently the decrees, resolutions, agreements or directions based upon these laws.

(*) NOTE: These powers and duties currently correspond to the Foreign Trade Promoter PROCOMER, according to the article 13, paragraph a) of the Law No. 7638 dated October 30^th of 1996.

ARTICLE 36.- The operation of dry and floating dams inside the Caldera Port is authorized under the Free Zone Regimen established in this law. The Executive Power will oversee directly the operation of said dams that may be executed by the Ministry of Public Works and Transportation, Costa Rican Pacific Ports Institute or through a concession granted to a private company with the authorization of the General Comptroller’s Office.

ARTÍCULO 37.- The companies in charge of the administration of industrial parks will assign a place for the employees in order to hold meetings and assemblies; additionally this place will be kept in good conditions. To attend these activities, free access will be permitted to the employees’ representatives into the park.

Article hereby is added and the enumeration of the following articles is transferred by the article 2, paragraph f, of the Law No. 7830 dated September 22^nd of 1998.

ARTICLE 38.- The following laws are hereby annulled: Law No. 6695, the Export Processing Zones and Industrial Parks Law, dated December 10^th, 1981; Law No. 6951 dated February 14^th, 1984 (it amends the article 18 of the Maritime-Shore Law number 6043 dated March 2^nd, 1977 and the articles 2, 10 and 12 of the Law of Export Processing Zones and Industrial Parks number 6695 dated December 10^th, 1981) and the article 10 (**) of the Law number 6999 dated August 28^th, 1985 (extension of a series of transitory provisions in order to transfer resources belonging to the public entities and companies to the Costa Rican Government and temporary destination of some taxes).

This article is amended by a List of Errata published in the official newspaper the Gaceta No. 5 dated January 8^th of 1991.

ARTICLE 39.- Effective upon publication.

Transitory Provisions

TRANSITORY PROVISION I.- The current members of the Board of Directors will remain in their positions for six months upon the publication date of this law. Once this term expires, the new Board of Directors will initiate functions.

TRANSITORY PROVISION II.- The Corporation (*) is authorized to administrate the Free Zones of Moin, in Limón and Santa Rosa, in Puntarenas as long as the concession for the management of these zones has not been granted.

(*) NOTE: These powers and duties currently correspond to the Foreign Trade Promoter PROCOMER, according to the article 13, paragraph a), of the Law No. 7638 dated October 30^th of 1996.

TRANSITORY PROVISION III.- The firms subscribed to the Free Zone Regimen at the moment of the publication of this law may, upon submitting of pertinent documents, request that the Corporation (*) provide benefits and incentives stipulated in this law. For these purposes, they may comply with all new obligations established in the law in a period of time not exceeding sixty working days upon the effectiveness of the law that must be detailed for each case in the new Executive Agreement.

(*) NOTE: These powers and duties currently correspond to the Foreign Trade Promoter PROCOMER, according to the article 13, paragraph a) of the Law No. 7638 dated October 30^th of 1996.

TRANSITORY PROVISION IV.- The Ministry of Labor is authorized to oversee the National Development Program for Employment, the obligations contracted, before the effectiveness of this law with companies installed in areas of minor relative growth and which are derived from the application of this Program.

It is added by the article 2 of the Law No. 7467 dated December 20^th of 1994.

NOTIFY THE EXECUTIVE POWER

Legislative Assembly.- San José, the twenty second day of the month of November of nineteen ninety

Juan José Trejos Fonseca

President

Ovidio Pacheco Salazar Victor E. Rojas Hidalgo

First Secretary Secretario Second Secretary

Presidency of the Republic.- San José, the twenty third day of the month of November of nineteen ninety.

Execute and publish

R.A. CALDERÓN F.- The Ministries of the Presidency, Rodolfo Méndez Mata, Treasury, Thelmo Vargas Madrigal, Economy, Industry and Commerce, Gonzalo Fajardo Salas and Foreign Trade, Roberto Rojas.

NOTE: The article 4 of the Law No. 7380 dated September 22^nd of 1998 states the following:

“ The Ministry of Treasury, by means of a regulation stated along with the Ministry of Foreign Trade, may exempt some specific procedures related to permanent and temporary import and export regimens to the firms operating under the Free Zone Regimen, taking into consideration the characteristics of this Regimen with the purpose of adapting the operations of the Free Zones to the service users’ necessities.”

Reviewed on November 30^th of 1998 J.C.

Ratification November 23^rd of 1990

Effective December 14^th of 1990

Publication December 14^th of 1990

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