Costa Rica EV Tax Incentives Face Early Repeal Proposal

Bill 25797 Targets Electric Vehicle Tax Benefits

On September 22, Costa Rica’s government submitted Bill No. 25797, proposing an earlier end to several tax incentives for electric vehicles that were established under the country’s electric transportation framework. The proposal would repeal Articles 9 and 11 of Law 9518, as amended by Law 10209, removing preferential treatment for electric vehicles and certain components. The measure is part of a broader proposal concerning fiscal benefits and tax expenditure management. If enacted, the changes would alter the current tax treatment of electric vehicles and related equipment in Costa Rica before the existing incentive schedule reaches its planned conclusion.

Proposed Changes to EV Incentives

Bill 25797 specifically proposes repealing provisions that provide fiscal benefits to electric vehicles and exemptions for components associated with electric propulsion. The affected items include batteries, traction motors, controllers, and inverters. The proposal also addresses exemptions involving import duties, value-added tax, selective consumption tax, and vehicle property tax without creating a specific electric-mobility exemption. These changes would move affected vehicles and components toward the standard tax framework rather than maintaining the preferential treatment established under Law 9518.

Current Tax Treatment Under Law 9518

Under the current framework, electric vehicles receive tax benefits that are being reduced progressively over time. The supplied legislation describes a 4% VAT rate for EVs in 2026, compared with the initial 1% rate applicable in 2023, while eligible vehicles receive a 75% exemption from applicable import duties and selective consumption tax. The existing framework also provides specific treatment for electric-vehicle components. Bill 25797 would remove the relevant provisions rather than allowing those scheduled incentives to continue under the existing timetable.

Potential Effect on Vehicle and Component Costs

If the proposal becomes law, affected electric vehicles and components would be subject to standard tax rates that currently do not apply under the preferential framework. This could increase acquisition costs for buyers and raise the tax burden associated with components used to maintain electric vehicles. The practical effect would depend on the final legislation and how the applicable taxes are calculated for individual vehicles and parts. The proposal therefore represents a potential change in the cost structure for electric mobility in Costa Rica, rather than an immediate change to current tax treatment.

Government Proposal Enters Legislative Review

Bill 25797 has entered the legislative process and remains subject to congressional consideration and possible amendments. Its submission does not itself repeal the existing electric-vehicle incentives. The proposal is part of a wider effort to establish a unified framework for administering and controlling fiscal benefits, with the government seeking to review which exemptions should remain in place. The treatment of electric vehicles is therefore one component of a broader fiscal policy measure rather than a standalone bill focused exclusively on transportation.

Electric Vehicle Adoption Adds Context

The proposal comes as electric-vehicle adoption has continued to expand in Costa Rica. According to reporting based on Ministry of Environment and Energy data, 44,430 electric vehicles were registered in the country as of March 2026. That growing vehicle base means changes to tax treatment could affect an established and expanding segment of the automotive market, including vehicle buyers, importers, distributors, and businesses involved with electric-vehicle components. The ultimate effect will depend on the legislative outcome and the final scope of any amendments.

Industry Impact & Outlook

The proposal could change the economic conditions surrounding electric-vehicle purchases and related components if lawmakers approve the repeal provisions, potentially affecting consumers, importers, distributors, and other participants in the electric-mobility market. Because Bill 25797 is still under legislative review, the final effect cannot yet be determined, and amendments could alter the proposed treatment. The key issue for the automotive industry is whether Costa Rica retains its existing preferential framework or moves affected electric vehicles and components toward standard taxation before the previously scheduled incentive period ends.

Frequently Asked Questions

What does Costa Rica Bill 25797 propose for electric vehicles?
The proposal would repeal key provisions of Law 9518 that provide tax incentives for electric vehicles and related components. It targets Articles 9 and 11 and would also remove certain exemptions involving import duties, value-added tax, selective consumption tax, and vehicle property tax. The bill has entered the legislative process and remains subject to congressional review and possible amendments. Until lawmakers enact a final measure, the existing tax framework remains applicable to eligible electric vehicles and components.