RESTRICTED
WORLD TRADE G/SCM/N/3/CRI
L/7611/Add.17
ORGANIZATION 4September 1995
(95-2543)
Committee onSubsidies andCountervailing Measures
SUBSIDIES
Notifications Pursuant toArticle XVI.1 OftheGATT 1994
andArticle 25oftheAgreement onSubsidies and
Countervailing Measures
COSTA RICA
Thefollowingnotification,dated18August1995,hasbeenreceivedfromthePermanentMission
ofCosta Rica.
Inview ofthedecision taken bytheCONTRACTING PARTIES oftheGATT 1947 on
AvoidanceofProceduralandInstitutionalDuplication(L/7582,dated13December1994)thisnotification
isdeemed tobealsoanotification under Article XVI:1 oftheGATT 1947.
_______________
NOTIFICATION PURSUANT TOARTICLE 25.2OFTHE AGREEMENT ON
SUBSIDIES AND COUNTERVAILING MEASURES AND
ARTICLE XVIOFTHE GATT 1994
A. EXEMPTION FROM COMPANY TAX
1. Exemption fromcompany taxforenterprises thatsigned anexport contract before 3April 1992.
1. Description ofsubsidy
Enterprises thatsigned anexport contract before 3April 1992 are100percentexempt from
taxonthepartofnetprofits earned during theperiod bythedeclaring party, solely from theexport
ofnon-traditional products tothirdmarkets.
2. Period ofnotification
Theperiod covered bythenotification isthree years from 30June1995.
3. Policy objective
Thepolicy objective istopromote non-traditional exports tothirdcountries andtoattract foreign
investment.G/SCM/N/3/CRI
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4. Background andauthority
Company taxexemption forenterprises thatsigned anExport Contract before 3April 1992
issetforthinparagraph 60(a) oftheCompany TaxAct,No.7092of21April 1988andamendments
thereto, published inOfficial Gazette No.96of19May1988. TheNational Council forInvestment
andExport Promotion administers export contracts.
5. Form ofthesubsidy
Taxrelief along thelinesdescribed above.
6. Beneficiaries andmechanism
Allenterprises thatsigned anexport contract before 3April 1992 areentitled toexemption
from company tax.Anexport contract mayhavebeensigned byanynational orforeign natural or
legalperson whoundertook toproduce and/or export non-traditional goods tothirdmarkets (markets
incountries withwhich therearenoagreements granting free-trade treatment withregard totheexported
goods).
Themechanism consists ofanexemption fromthepayment ofcompany taxasdescribed above.
7. Estimated amount ofthesubsidy
Noamount isbudgeted forthissubsidy inviewofthekindoftaxexemption involved.
8. Duration ofthesubsidy
Inthecaseofenterprises thathavesigned anexport contract, thesubsidy begins onthedate
onwhich theExecutive Agreement approving theExport Contract ispublished intheOfficial Gazette.
Thesubsidy began in1984andwasscheduled tolastfor12years (until thelastdayofthe1996fiscal
period). There arenoplans toextend thistime-limit. However, thisparticular subsidy waseliminated
asfrom 3April 1992 andisnotincluded inexport contracts signed afterthatdate, although itstill
isforthose signed before then. Onthatdate, theActRegulating AllCurrent Exemptions, Waivers
andExclusions, ActNo.7293of31March 1992, which waspublished intheOfficial Gazette No.66
of3April 1992, abolished most taxandtariff exemptions inforce before thatdate.
9. Trade effects ofthesubsidy
There isnoinformation ontheeffects ofthissubsidy. Such information willbesupplied as
soonasitisavailable.
B. GRANTING OFTAX CREDIT CERTIFICATES (CATs)
1. Granting oftaxcredit certificates
Description ofsubsidy
Taxcredit certificates (CATs) areasubsidy included inallexport contracts signed before
2December 1992. ACAT isabondthatispayable tothebearer. Itisfreely negotiable, nointerest
accrues, anditexpires 24months afterthedateofmaturity. These certificates areissued bytheCentralG/SCM/N/3/CRI
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Bank ofCosta Ricainnational currency andareusedtopaydirect orindirect taxes, collected bythe
Central Bank, astheState Treasurer.
Thegranting ofaCATdepends onwhether theexporting enterprise thathassigned theExport
Contract hasaspecific percentage ofthenational content intheproduct. Ingeneral, thehigher the
national content, thehigher theamount oftheCAT. Theamount issetasapercentage ofthef.o.b.
value oftheexports bytheenterprise thathassigned thecontract.
Intheearly years, CATs were sometimes ashighas25percentofthef.o.b. value ofthe
products exported iftheproducts 'regional content was50percentormore. Now, under domestic
measures aimed atreducing itgradually, themaximum CAT thatcanbegranted is14percent, in
veryspecial circumstances, incases where thenational content oftheproduct exported isover
50.51 percent.
2. Period ofnotification
Theperiod covered bythenotification isthree years from 30June1995.
3. Policy objective
Thepurpose ofthesubsidy istopromote non-traditional exports tothirdcountries.
4. Background andauthority
CATs were introduced andgranted under theTaxAct,ActNo.7092, andtheamendments
thereto mentioned above, andarealsoregulated bytheRules ontheProfits, Time-Limits andConditions
ofExport Contracts of17October 1994 issued bytheMinistry ofForeign Trade 'sNational Council
forInvestment andpublished inOfficial Gazette No.229of1December 1994. TheNational Council
forInvestment isresponsible foradministering export contracts. CATs areissued bytheCentral Bank
ofCosta Rica.
5. Form ofthesubsidy
Thesubsidy consists ofadirect transfer offunds under theNational Budget, which arenon-
refundable, toenterprises thathavesigned Export Contracts andareentitled toCATs. Theyaregranted
inaccordance withthenational content ofthecommodity, aspointed outabove. They areusedto
paydirect orindirect taxes collected bytheCentral Bank, astheState Treasurer.
6. Beneficiaries andmechanism
Thisisageneral measure. Thecriterion forallocating CATs isthatthebeneficiary signed
anexport contract. Anynational orforeign natural orlegalperson engaged inexporting products with
aspecific national content cansignanexport contract withtheStateofCosta Ricaand,ifitwassigned
before 2December 1992, wasissued withaCAT asanincentive. Atpresent, contracts arestillbeing
signed, butasoftheabove date, CATs were nolonger granted asaconstituent element.
Theexporter furnishes proof totheCentral Bank ofCosta Ricaoftheamount oftheexport.
TheCentral Bank, onthebasisoftheinformation provided toitbytheNational Council forInvestment,
issues theCAT fortherelevant amount, inthename oftheexporter. CATs mature inayear, i.e.,
ingeneral terms, theycanbecashed untilthetime-limit expires.G/SCM/N/3/CRI
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7. Estimated amount ofthesubsidy
Theamount ofthesubsidy perunitdepends ontheproduct 'snational content. Atpresent,
themaximum CAT is14percent, where theproduct 'snational content is50.51 percentormore.
AcopyofCAT tables isenclosed asAnnex I.
Since CATs mature inoneyear, theNational Budget isprepared onthebasis ofinformation
sentbytheCentral Bank totheMinistry ofFinance 'sPlanning Department, andontheCATs issued.
These amount mayvaryfromyeartoyear, depending ontheamount exported bytheenterprises issued
withacertificate.
8. Duration ofthesubsidy
CATs havebeenissued since 1988, when theTaxAct,ActNo.7092, came intoforce. CATs
arenotgranted toenterprises thatsigned export contracts after2December 1992because itwasdecided
thatthesubsidy would beabolished asofthen. However, withregard tocontracts signed before that
date, CATs aregranted upto1996, asexpressly provided forunder theAct. Nevertheless, since
7January1992,enterprisesthathavesignedexportcontractsandrequestedCATsmayoptforareduction
oftheCAT amount against anexpiry dateof1999. Inother words, atanytimebefore 1996, ifan
enterprise wants toobtain aCAT upto1999 itcandoso,butthepercentage oftheCAT percentage
amount, calculated onthef.o.b. value oftheexports, willbecutby30percentand,whatismore,
theenterprise willhavetopaythe5percenttaxdifferential ofthefullCAT ascompared withthe
reduced CAT.
There arenoprovisions onfurther extensions ofexport contracts orCATs beyond thelast
dayofthe1999company taxperiod. Onthatdate,thecontracts thathavebeenextended, along with
thebenefits, willexpire onceandforall.Theothers expire onthelastdayofthe1996 taxperiod.
9. Trade effects ofthesubsidy
There isnoinformation available onthetrade effects ofthesubsidy. Such information will
besupplied assoonasitisavailable.G/SCM/N/3/CRI
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ANNEX I
CAT TABLES APPROVED BYTHE NATIONAL COUNCIL FOR INVESTMENT
Original Table
National Value Added
NVA % CAT % Markets
From 35to50.50 15 United States, Puerto Ricoandother thirdmarkets,
Honduras andPanama.
From 50.51 andabove 20 Third markets (except United States, Puerto Rico,
Honduras andPanama.
CAT TABLES FOR CONTRACTS APPROVED BETWEEN
1JANUARY 1990 AND 8MAY 1990
NVA/Year 1992 1993 1994 1995 1996
From 35and39 10.00 9.00 8.00 7.00 7.00
From 40to44 10.50 9.50 8.50 7.50 7.50
From 45to49 11.00 10.00 9.00 8.00 8.00
From 50orabove 11.50 10.50 9.50 9.00 9.00
CAT TABLE FOR CONTRACTS APPROVED BETWEEN
8MAY 1990 AND 14JUNE 1992
NVA/Year 1992 1993 1994 1995 1996
From 35to39 7 5 3 3 3
From 40to44 8 6 4 3 3
From 45to49 9 7 5 4 3
From 50to54 10 8 6 5 4
From 55to100 11 9 7 6 5G/SCM/N/3/CRI
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CAT TABLE FOR CONTRACTS APPROVED BETWEEN 15JUNE 1990 AND
1DECEMBER 1992 AND FOR PRODUCT INCREASES AFTER 1DECEMBER 1992
WHICH DIDNOT CALL FOR ACHANGE INTHE PRODUCTION LINE
NVA/Year 1992 1993 1994 1995 1996
From 35to44 7 5 3 3 3
From 45to54 8 6 4 3 3
From 55to64 9 7 5 4 3
From 65to69 10 8 6 5 4
From 70to100 11 9 7 6 5
CAT TABLE FOR BENEFICIARIES ACCEPTING THE EXTENSION PROVIDED FOR
INARTICLE 60OFACT NO.7092 AND AMENDMENTS THERETO
(INFORCE ASOF7JANUARY 1992)
NVA % CAT %
From 35to50.50 10.5
From 50.51 andabove 14.0
Exports totheUnited States andPuerto Ricoandexports toPanama ofproducts notincluded
intheBilateral Free-Trade Treaty whose percentage ofNVA isover35percentwillbeentitled only
to10.5percentofCAT.
CAT TABLE FOR CONTRACTS APPROVED ASOF2DECEMBER 1992: OPERCENT