Annual Operations Report

Free Trade Zone Companies’ Reporting Obligations

As part of their commitment to the country, companies benefiting from the Free Trade Zone regime are required to submit an annual operations report. According to Article 67 of the Free Trade Zone Regulations, this report must be submitted to PROCOMER within 4 months after the end of the regular fiscal period or the special period authorized by the General Directorate of Taxation.

Preparing the Annual Report

For the preparation of the annual report, companies have the necessary information at hand, including: the Executive Agreement detailing their commitments and any amendments, their monthly sales reports for fee payments, Financial Statements, and their Income Tax Declaration, among others. It is important to note that, while this documentation provides the primary information needed for the report, companies may include explanatory notes in each section and present any justifications they deem necessary.

Common Errors in Annual Reports

However, it is noted that common errors frequently occur in the annual operations report. These include: inventory details being in a language other than Spanish; assets listed in incorrect sections of the established format; missing identification numbers as required in the asset ledger; assets not valued at historical cost; failure to identify assets outside the regime or assets in consignment inventories.

Other common mistakes include errors in the breakdown of costs and expenses, such as including foreign professional services in the Net Present Value (NPV) calculation, incorrectly recording entries into the regime (e.g., listing “raw materials” when it is actually “machinery and equipment”), inconsistencies in Social Security payroll reports, and including assets not covered by predefined accounts in Accumulated Investment, among others.

Required Accompanying Documents

The report must be accompanied by a copy of the D101 tax return, fiscal vs. accounting reconciliation, the Income Statement (both Excel and PDF formats), the Trial Balance (both Excel and PDF formats), the Balance Sheet (both Excel and PDF formats), a certification of legal status and equity issued within the last 3 months, and a special power of attorney if submitted by someone other than the legal representative, among other documents.

It is crucial to ensure that the report is digitally signed by the Legal Representative, is prepared in Spanish, and uses colones as the currency.

Consequences of Non-Compliance

If the report is not submitted within the established deadline or is submitted incomplete, PROCOMER will grant an additional 15 business days to submit the report, correct defects, or provide missing documents. If the company fails to meet this extended deadline, PROCOMER will issue a final warning with an additional 10 business days to rectify the non-compliance. Should the company still fail to submit the report or address the defects or omissions after the additional deadlines, PROCOMER will automatically suspend all benefits of the regime until the obligation is fulfilled, and will inform the General Directorate of Customs, the General Directorate of Finance, and the management of the industrial park where the company is located.

We trust this information will prove highly beneficial to you.

Alejandra Arguedas M.
aam@quatro.legal
Free Trade Regime Director

Disclaimer: The information provided in this blog post is for general informational purposes only and is not intended to constitute legal advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change. For the most accurate and up-to-date information, please contact our office directly. Some images may be AI generated.