On April 8, 2025, Costa Rica’s new Cinematography and Audiovisual Law (Law No. 10657) was published in the Official Gazette, representing a strategic step in strengthening the country’s cultural, economic, and creative sectors. From a tax and business advisory perspective, this regulation presents significant opportunities for investors, producers, educational institutions, and companies associated with the orange economy.
A comprehensive framework for the audiovisual industry
The objective of the Law is clear: to systematically promote the entire value chain of the audiovisual industry, from project conception to distribution, preservation, and audience development. This is articulated through the creation of the Costa Rican Film and Audiovisual Center (CCCA), attached to the Ministry of Culture and Youth, which is responsible for formulating policies, managing finances, promoting co-productions, granting certifications, and channeling public and private funds toward national audiovisual development.
The CCCA replaces the former Costa Rican Film Production Center and has a legal personality, allowing it to administer resources, sign agreements, and receive donations.
The “El Fauno” Fund: financial engine for the sector
One of the tools incorporated into the Law is the Fund for Audiovisual and Film Promotion (El Fauno). This fund is designed to support the training, production, distribution, research, and preservation of audiovisual works, as well as the establishment of cultural enterprises related to the sector.
The fund’s resources are derived from multiple sources, including budget allocations, service revenues, donations (both domestic and international), international cooperation, and administrative penalties. It should be noted that up to 10% of the fund may be used for operating and oversight expenses.
In addition, El Fauno establishes a gender equality policy: at least 50% of the selected projects must be directed by women, and the same proportion must be met in the leading technical teams.
Key tax incentives
From a tax perspective, Law 10657 incorporates significant reforms to the Income Tax Law (Law No. 7092):
• Expense deduction: Expenses related to the pre-production, production, and post-production of audiovisual works may be deducted, even if the person incurring them is not a producer or co-producer. This deduction is subject to regulation by the Ministry of Finance and the CCCA.
• Exempt earnings: Earnings obtained by individuals or legal entities (domestic or foreign) that participate in production stages and are registered with the CCCA will not be subject to income tax.
• Extension of loss carryforward: Companies in the audiovisual sector will be able to deduct tax losses for five consecutive periods, as will agricultural companies, which improves the financial outlook for long-term projects.
• Deductible donations: Donations to production or co-production projects approved by the CCCA will be deductible, creating an incentive for cultural patronage.
Conditions and transparency
The Law imposes strict requirements for the proper use of funds, including the signing of contracts with guarantees and audits, as well as penalties for non-compliance, which can include disqualification from accessing new incentives for up to five years. Beneficiaries are also required to submit a copy of the financed work for educational and cultural use at no cost.
Conclusions for companies and advisors
Law 10657 makes Costa Rica a more attractive fiscal and legal environment for audiovisual investment, aligning itself with international standards for promoting the creative economy. From a tax compliance and tax planning perspective, it is essential that companies interested in participating in the Costa Rican audiovisual ecosystem:
1. Evaluate the tax viability of new projects in light of the tax benefits.
2. Register and formally accredit themselves with the CCCA.
3. Consider co-production strategies and public-private partnerships.
4. Consult on the deductibility of donations or contributions as a form of corporate social responsibility.
As a firm specializing in tax, accounting, and legal advice, we are prepared to assist our clients in implementing these new legal frameworks correctly and designing sustainable and profitable strategies within the audiovisual sector.