Nicaragua legal and accounting and tax considerations in 2024

1. The standard corporate tax rate levied on all net profits derived from Nicaragua is 30%. An Alternative Minimum Tax may be imposed at a rate of 1% of the taxpayer’s gross income. The fiscal year runs from 1st July to 30^th June but a taxpayer may request for permission to adopt a fiscal year running from 1^st April to 30th March 1^st October to 30^th September or 1^st January to 31^st December. Tax returns must be filled within 3 months of the company’s year-end, failure to which a penalty will be imposed;
2. Branches also pay a corporate tax rate of 30%. An additional 15% is levied on remittances;
3. The standard VAT rate levied on provision of goods and services in Nicaragua is 15% and all companies carrying out activities in Nicaragua must be registered. All VAT returns must be filed in the month subsequent to the tax period. Large corporations must file VAT returns every 15 days;
4. Capital gains are taxed at the rate of 5% on transfer of assets and 10% on other gains in Nicaragua;
5. Withholding tax is levied i) on dividends paid to a non-resident company at a rate of 10% ii) on interest paid to a non-resident or non-financial institution company at a rate of 20% iii) on royalties paid to a non-resident patent at a rate of 21% and iv) on technical services fees paid to a non-resident company at 10.5%;
6. Capital losses may be carried forward for a period of three years. Carryback of losses is not allowed;
7. Consumption tax is levied at the rate of 9%;
8. Stamp duty is levied in Nicaragua on certain documents at varying amounts depending on the nature of the transaction;
9. Real property tax is levied by the municipalities at a rate of 1% of the value of the real estate;
10. Nicaragua offers a variety of tax incentives within different industries. The mining industry tax incentives include i) exemption from import and customs duties ii) exemption from property taxes within the mining concession iii) exemption from mineral exploration taxes and iv) zero rated exports. The free zone incentives include i) permanent exemption from all import duties and taxes levied on raw materials, machinery and supplies ii) exemption from income tax payment for 10 years and a subsequent payment of 60% after the 10 years iii) total exemption from excise and sales taxes iv) exemption from property transfer taxes in case the company closes down v) total exemption from export taxes on products processed within the free zone vi) total exemption from VAT and consumption taxes vii) exemption from municipal taxes viii) exemption from transport taxes and ix) exemption from merger, transformation and stamp duties. Tourism industry tax incentives include i) upto 100% income tax exemption for a maximum of 10 years ii) real property tax exemption for 10 years and iii) import and VAT tax exemption on supplies;
11. Employers must submit to the relevant authorities social security contributions on behalf of their employees at 16%. Payroll tax must also be withheld at varying rates from 10% to 30% monthly;
12. There are no restrictions imposed on foreign trade operations or foreign currency transactions in Nicaragua;
13. Nicaragua’s does not have any income tax treaties;
14. Healy Consultants Compliance Department will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budget and sensitivity analysis.