As said above, only income sourced in Costa Rica is subject to income tax therein. That being so, in order to mitigate withholding taxes on outbound income streams, one strategy could be to structure the operation is such a way that the income transferred is considered foreign source. Under Costa Rican domestic law, the following could be considered, when properly structured, foreign source income:

Services: fees of services provided abroad on behalf of a Costa Rican resident are considered of foreign source. Thus, if income transferred abroad is used to pay fees for services provided in a foreign country, no withholding tax will be levied. This rule has an exception regarding consulting services fees which, if provided on behalf of a Costa Rican resident, are considered Costa Rican sourced even if rendered abroad. When structuring a tax planning strategy in this matter, it will be necessary to take into account the interpretation given by the Tax Administration with respect to the abovementioned exception.
Royalties: according to the Tax Administration, income received by a Costa Rican resident arising from licensing a patent or IP used and exploited abroad, is foreign sourced. That being so, a structure in which the Costa Rican company is the owner of the IP and licenses them to the foreign companies of the group, could reduce the withholding tax levied.
Foreign goods and capital: As said above, article 6 of Law 7092 excludes from the income tax base profits arising from contracts or negotiations regarding assets or capital located abroad, even if these were concluded or executed, totally or partially, within Costa Rica. Thus, income transferred abroad arising from the above mentioned hypothesis would not be subject to income tax in Costa Rica. Nonetheless, the Tax Administration and other administrative and judicial authorities have considered that when the income is connected with an habitual business activity taking place within Costa Rica, it is Costa Rican source, regardless of the location of the good or capital.

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