A person’s liability to Costa Rican income tax is determined by the territoriality principle, as opposed to residency based taxation. However, residents and nonresidents receive different tax treatment. Furthermore, the Costa Rican income tax legislation also differentiates in the tax treatment given to individuals working independently to those working under an employment relationship. Whereas residents working independently are subject to a progressive tax schedule with the highest bracket being 25 percent of net income (which is computed by deducting certain expenses from total taxable income), resident individuals working under an employment relationship are subject to a progressive tax schedule for which the highest tax rate is 15 percent.
Nonresidents working under an employment relationship are subject to a flat tax rate of 10 percent on gross Costa Rican-sourced income.'
Self-employed nonresidents working in Costa Rica are subject to a 15 percent tax rate on gross Costa Rican-sourced income received.