Tax Incentives to Encourage Investment in Costa Rica
Costa Rica New Tax Law Helps Local Business
Costa Rica will attempt to mitigate the effects of the global economic crisis by authorizing the Costa Rica Tax Administration to offer a special accelerated depreciation for all new assets from 50% tio 60%. This measure applies to all new assets purchased from January 2009 until the end of the fiscal year. The move comes as part of President Arias’s new “Shield Plan” where he hopes to protect the country from recession by implementing a series of temporary fixes to promote commerce and protect Costa Rican jobs.
Accelerated depreciation refers to any one of several methods by which a business depreciates a fixed asset in such a way that the amount of depreciation taken each year is higher during the earlier years of an asset’s life. For tax purposes, accelerated depreciation provides a way of deferring business income taxes by reducing taxable income in current years, in exchange for increased taxable income in future years.
According to the Costa Rica Tax Administration, the accelerated depreciation is a smart move to confront the weakening economy by promoting investment because this measure allows companies a larger deduction when determining how much income tax is due. This should help soften the decision to acquire new assets when the world’s economists are telling people to put off big purchases for later.
Once this resolution is published in “La Gaceta” it won’t be necessary for companies to specifically request authorization to use the special accelerated depreciation from the Tax Administration. The only requirement is that the owner prove that the assets were acquired during 2009.
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