Incentives to Import Electric Vehicles to Costa Rica May End in 2023

Costa Rica passed a law in 2018 to encourage the importation of electric cars, in order to transform the country’s vehicles fleet, since transportation is the biggest emitter of carbon dioxide in the relatively green country. But this law has two big problems: first, the incentives will end in 2023 unless the government calls a bill to extend them; and second, for some importers it is better to pay taxes than to wait months for the exoneration.

Update — May 16, 2022: Costa Rica Extends Benefits to Electric Vehicles Until 2035 (Including Used Cars)

The aforementioned law gave incentives like 0% sales tax to electric vehicles with a cost lower than $30.000, as well as exoneration on the selective consumption tax and the customs tax. Other benefits include the exemption to pay for the “marchamo” (an annual tax on cars to allow their circulation) and that electric car owners will not need to comply with vehicle restrictions and will be exempt from payment of parking meters.

The news was well-received by the industry in 2018 and by citizens interested in changing from fuel-powered cars to electric vehicles. At the end of 2021, there were more than 4.000 electric vehicles (cars, motorcycles and buses) registered in the country (less than 0,15% of the fleet), and almost 3% of the cars that entered Costa Rica that year were electric. Because of these numbers, some legislators feel like the results of the law are not encouraging and they should change it to extend and improve the benefits.

This is why some deputies presented a bill to perfect the law and to extend the exoneration for ten more years. But the government is yet to call the bill (the Legislative Assembly agenda is on its hands for the next months). The Costa Rican Association of Electric Mobility has asked the Executive power many times to call the legislation project, but it is still not happening.

“Economic incentives should be maintained”

“For us in the Association it is essential that the economic incentives be maintained. The Law 9518, which is the one in force, was valid for five years, it was signed in 2018, which means that these incentives will exist until January 2023, so we only have the next year of incentives left,” the Association said in October 2021. “We believe that it is essential to give continuity to the incentives for sustainable mobility, which will allow the country to continue leading the change towards the massive use of renewable sources and become independent from fossil fuels,” it added in November.

“The promotion of electric mobility in Costa Rica focuses on responsibly taking advantage of our eminently renewable electric matrix in the transportation sector, a sector that contributes about half of polluting gases to the air. This national strategy has been supported by multiple studies that demonstrate the benefits that replacing combustion vehicles with electric vehicles brings in the fight against climate change and in the decarbonization of the national economy, a strategy that has also earned Costa Rica the international recognition that we can maintain if we advance with electric mobility,” the Association said.

Since the government currently controls the legislative agenda, no one knows if it will listen to the Association and the electric car sector’s demands. And because the country is in the process of migrating to a new government (there will be a run-off election on April 3, 2022, and a new administration will begin in May), it is likely that no decision will be taken before the political landscape calms down.

Importers have to wait up to three months to sell their electric cars

Even with the 2018 law, electric vehicle importers have had problems bringing these cars to the country. Local media has told horror stories of electric car promoters that prefer to pay taxes rather than to wait for the customs process, which can take months. “The exoneration is a disaster. It can’t be that I last exonerating a vehicle for three months. The motorcycles, instead of exempting them, I pay the taxes,” a merchant said. A bonded warehouse may charge around $15 per day, which can bring up costs up to $900 after the first two months of waiting for customs.

“The procedure with electric vehicles is a headache,” a spokesperson from BMW in Costa Rica told the media. “The process lasts approximately a month and a half, but we have had cases of up to three months.” “At least 20% of deals fail due to delays that occur in the nationalization process. It’s time for the system to run automated and for there to be no delays because the managers are on vacation or have a lot of work,” another seller told the media.

The bill proposed to extend the benefits on electric vehicles also aims to solve some of the problems of its implementation until now, like the long-term waiting importers have to deal with.