Procedure for control and tax assessment of Free Trade Zone Regimes

Procedure for control and tax assessment of Free Trade Zone Regimes

Free Trade Zone beneficiary companies are subject to diverse control methods from authorities in charge of overseeing them, such as the Foreign Trade Ministry (Comex), the Foreign Trade Promotion Agency (Procomer), the Customs Administration and other departments from the Ministry of Finance.

It is clear that companies that benefit from FTZ regimes have an obligation to demonstrate the correct use of the benefits granted upon them, by providing authorities with information that supports there is no wrongdoing. Historically, such control has been exercised by Procomer, through an annual operations report that all companies must present and by performing audits periodically. These audits involve on-site visits to each company, where they must provide access to information and personnel to respond to any questions or provide any clarifications deemed necessary by the auditors.

With the objective of performing a more thorough control regarding the activities and benefits granted to FTZ beneficiary companies, by means of a recent decree “Procedure for control and tax assessment of Free Trade Zone Regimes”, dated March 1st, 2016, the Ministry of Finance and the Presidency of the Republic established that the following procedures will be in charge of the Finance Administration:


  1. Identification, assessment, coordination and supervision of activities regarding management, evaluation, oversight, and control over the use and destiny of the tax benefits; these procedures can be performed with independence from the specific competence over the subject that corresponds to the Customs Administration.


  1. Elaboration, in the third quarter of each year, of a control and evaluation plan directed toward the FTZ beneficiary companies, which will be put to action the year following its elaboration. The elaboration of such plan will be made in in conjunction with the administrations that compose the Ministry of Finance Revenue Area, and can be executed jointly or individually.


  1. In addition to the aforementioned plan, special plans can also be executed, which will pay attention to complaints, exceptional situations, recommendations from comptroller entities and evaluated risks identified in evaluations conducted by the Ministry of Finance Revenue Area.


As it was previously indicated, it is clear that these companies have an obligation to prove the correct use of the benefits granted upon them; however, authorities should also consider that the excess of redundant administrative and control procedures delays the daily operations of the companies and also implies an added cost towards them that make the country less competitive. It would be wise for the practical implementation of this decree to first coordinate at an institutional level, in such a manner that authorities do not duplicate tasks and efforts, and instead complement between them, not just to save administrative procedures to the companies, but to integrate the separately performed tasks that correspond to each one and avoid the inappropriate use of public resources.


Zurcher Odio & Raven

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