What is the status of law 9996 creating incentives for investors? The delay with the implementation of law has generated anxiety in the expat community.

In July of 2021, the CR Congress approved a law which created tax incentives for foreigners. Mainly, the incentives meant the creation of tax exemptions for the the importation of vehicles and household goods. This incentives are applicable to people  who obtain residency as investors, pensionado or rentista.

Under the law, the Customs Department and the Immigration Department (DGME) are required to create the regulations to implement the law. A deadline was established for September 26th 2021 for the regulations to be produced and enacted.

Why are these regulations important?

When a law is created, that law establishes the WHAT. On the other hand, the regulation establishes the HOW. In this case, the “WHAT” are the exemptions, and the “HOW” is the procedure people must follow to obtain those exemptions.

This law created two benefits. On the one hand, it lowered the investment amount for the Residency as Investor to $150,000 USD. On the other hand, it created the tax exemptions for people to import two vehicles and household goods. The DGME moved quickly to lower the requirement for Residency as Investor to $150,000 USD. However, the Customs Department has not completed their regulations.

Why is it taking so long?

The completion of the regulations have been delayed and people have been wondering about the status of these regulations. The Customs Department has not issued any statements regarding the status of the regulation. So, we decided to follow up with the Chaves Administration to determine the status of the regulation.

Attorney Mario Rodríguez, Regional Immigration Manager for Outlier Legal Services sent a public inquiry which was directed to the Presidential House. This is the respond they sent:

“In our opinion, the legislator did not have the knowledge or the wisdom to establish a deadline adequate to regulate Law 9996. Really two months is an extremely short term, thereby imposing an extremely difficult obligation for the Executive Power to fulfill.” […]

The Government stated that multiple agencie are involved in the process to created the regulation, this situation generates delayes in the process. They added: “We cannot [determine when the regulations will be completed], first because it is not for us to indicate when the regulations will be duly published, and second because it depends on a series of circumstances that are not in our control.”

Is it retroactive?

The President’s Office stated that according to “article 34 of the Political Constitution establishes the principle of non-retro activity of the law to the detriment of consolidated legal situations. Clearly, this implies that the rules that cause benefits to the people might be applied retroactively. Therefore, if the user requests it, the Administration must adjust its claim to the conditions established by the new legislation.”

While there is no clear indication about the retroactivity, these could be the forseeable scenarios:

1. People who:

   1. Obtained residency prior to the publication and validity of the law, and

   2. Paid taxes for the importation of those goods:
      Retroactivity does not apply and will not receive refunds for those payments.

2. People who:

   1. Obtained residency after the publication and validity of the law, and

   2. Paid taxes for the importation of those goods:
      Retroactivity applies, and should be able to receive refunds or credits. The question is: how easy will it be to get the refund? It may be very costly and cumbersome, I would not suggest going this route.

3. People who:

   1. Have obtained residency after the publication and validity of the law and after the expiration of the law (the law is valid for only five years)
      Can request the exemptions once the regulations are ready even if the law had expired. The period of time during which the regulations will be delayed (lets say two years, we are already in year one) will result in an equal period of time extending the validity of the law (under this example, another two years) during which they can apply for residency and request the exemptions.

In a nutshell:

While are people are anxious about being able to take advantage of the incentives for investors, this may not happen anytime soon. So, this what can be concluded about the current situation:

1. The Chavez Administration does not know when they will have the regulations ready for the tax exemptions for the importation of vehicles and household goods.

2. When it comes into effect, they will make them retroactive.

You can follow this link to access the letter we received regarding the regulation.

Respuesta a Oficio DG-1986-09-2022 Esatado actual del Reglamento a la Ley 9966