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Please direct all inquiries regarding Nicaragua to the persons listed below in the San José, Costa Rica, office of EY. All engagements are coordi nated by the San José, Costa Rica, office.
Managua GMT -6
EY
INVERCASA Center Tower 3
5th Floor Managua Nicaragua
Executive and immigration contacts
Lisa María Gattulli +506 2208-9861 (resident in San José, Fax: +506 2208-9999 Costa Rica) Email: lisa.gattulli@cr.ey.com Rafael Sayagués +506 2208-9880 (resident in San José, Fax: +506 2208-9999 Costa Rica) Email: rafael.sayagues@cr.ey.com
Immigration contacts
Fernando Vargas +506 2505-0900 (resident in San José, Fax: +506 2208-9999 Costa Rica) Email: fernando.vargas.winiker@cr.ey.com Juan Carlos León +506 2505-0900 (resident in San José, Fax: +506 2208-9999 Costa Rica) Email: juan.leon@cr.ey.com
A. Income tax
Who is liable. Resident and nonresident individuals, regardless of their nationality, are taxed on their income earned in Nicaragua. Foreign-source income is not taxed. Nicaraguan nationals are considered resident.
A foreign individual is considered a resident for tax purposes if he or she meets either of the following criteria:
• He or she stays in Nicaragua for more than 180 consecutive or non-consecutive days during the calendar year.
• The center of his or her economic interests is located in Nicaragua, unless he or she can prove his or her residence or tax domicile is located in another country by submitting a certifi cate issued by the relevant tax authorities, provided that the country of domicile is not considered a tax haven under the Nicaraguan income tax law.
Income subject to tax. The taxation of various types of income is described below.
Employment income. Annual employment income in excess of NIO100,000 is taxable, including salary, pensions, bonuses, pre miums, commissions and allowances (for example, housing and educational allowances). However, the 13th month salary (agui naldo), labor indemnification (up to five months’ base salary), indemnification up to NIO500,000 received in addition to five
months’ salary and social security contributions are exempt from tax.
Self-employment and business income. Income derived from selfemployment or from trade or business activities is taxable. Resident individuals are subject to progressive tax rates ranging from 10% to 30% of net self-employment and business income. Nonresident individuals are subject to a flat 20% withholding tax on this income.
Investment income. Dividends paid or credited by local compa nies to resident or nonresident individuals are subject to a 15% withholding tax.
Per diem directors’ fees. Per diem directors’ fees paid to resident or nonresident individuals are subject to 25% withholding tax.
Capital gains. Capital gains derived by residents and nonresidents are subject to a final withholding tax at a rate of 15%.
A special rule applies to transfers of property subject to registra tion with a public deed in the Public Registry. Progressive with holding tax rates ranging from 1% to 7% of the value of the property apply to these transfers.
Deductions. The following are personal deductions and allow ances:
• Social security contributions of employed individuals
• Contributions of employed individuals to pension or savings funds that are not part of the social security system, provided that these funds are approved by the relevant authority in Nicaragua
• 25% of expenses on education, health and professional servic es, up to a maximum amount of NIO20,000 per year
Rates. Employment income earned by resident individuals is tax able at the following rates for the period of 1 January 2021 through 31 December 2021.
Payments to nonresident individuals for employment income
commissions, directors’
subject to a 20% final
Self-employment and business income earned by resident indi viduals (with annual gross income of NIO12 million or less) is taxable at the following rates for the period of 1 January 2021 through 31 December 2021.
Annual taxable income
exceeding Rate
If an individual’s gross income exceeds NIO12 million, the tax rate for self-employment and business income is 30%.
to nonresident individuals for professional services or technical advice are subject to a 20% final withholding tax.
B. Inheritance and gift taxes
Gifts or inheritances from Nicaraguan sources are treated as capital gains and subject to a flat 15% tax.
C. Social security
Social security contributions are levied on salaries at a rate of 21.5% for employers and 7% for employees for the 2021 tax year. These rates are increased annually.
D. Tax filing and payment procedures
The ordinary tax year runs from 1 January through 31 December. Employers are responsible for withholding income taxes and social security contributions from the employees’ salaries on a monthly basis. Employees are not required to file an annual income tax return if their only source of income is employment compensation.
Returns must be filed and any tax due must be paid within two months after the end of the tax year. Self-employed individuals and individuals with a trade or business must pay installments of advance income tax.
E. Double tax relief and tax treaties
Nicaragua has not entered into tax treaties with any other coun tries.
F. Temporary visas
Nicaraguan law provides a three-tier classification system that imposes visa requirements based on the nationality and passport type of the traveler. Tiers may be amended from time to time without prior notice.
Tier A. Nonresident foreign nationals holding passports issued by Tier A jurisdictions are visa exempt. On arrival into Nicaragua, each traveler must pay a USD10 fee (cash only) and is issued a tourist permit valid for up to 90 days that may be extended for up to a total of 180 days.
The following are the Tier A jurisdictions.
Andorra Greece
St. Kitts and Nevis
Antigua and Hungary St. Lucia
Barbuda Iceland St. Vincent and the Argentina Iran Grenadines
Australia Ireland San Marino Austria Israel
São Tomé and Bahamas Italy Príncipe Bahrain Japan Saudi Arabia
Barbados Korea (South) Singapore Belarus Kuwait Slovak Republic Belgium Latvia Slovenia
Belize Liechtenstein Solomon Islands
Brazil Lithuania South Africa
Brunei Darussalam Luxembourg Spain Bulgaria Madagascar Sweden Canada Malta Switzerland Chile Marshall Taiwan
Costa Rica Islands Trinidad and Croatia Mexico Tobago Cyprus Monaco Turkey Czech Republic Netherlands Tuvalu Denmark New Zealand Ukraine Ecuador North Macedonia United Arab Estonia Norway Emirates Fiji Panama United Kingdom Finland Paraguay United States France (including Poland Uruguay overseas territories Portugal Vanuatu and collectivities) Qatar Vatican City Germany Romania
Tier B. Nonresident foreign nationals holding passports issued by Tier B jurisdictions are subject to visa requirements. An entry visa may be obtained at a Nicaraguan consular bureau before travel or at the port of entry. However, Nicaraguan authorities strongly recommend travelers to check in advance as to whether airlines allow boarding in the absence of a visa stamped on the passport. Normally, visas are valid for up to 30 days, renewable for up to a total of 90 days. Tier B travelers who arrive in Nicaragua without a visa stamped on the passport may be required to pay an entry fee of up to USD50 (cash only).
The following are the Tier B jurisdictions.
Algeria Gambia Myanmar Angola Georgia Namibia Azerbaijan Ghana Nauru
Benin Grenada Niger Bhutan Guinea Oman Bolivia Guinea-Bissau Palau Burkina Faso Guyana Papua New Guinea
Burundi Indonesia Peru Cambodia Jamaica Philippines Cape Verde Jordan Rwanda
Central African Kazakhstan Samoa Republic Kiribati Senegal Chad Korea (North) Serbia
Colombia Kyrgyzstan
Comoros Lesotho
Côte d’Ivoire Libya
Seychelles
Suriname
Tajikistan
Tanzania Dominica Malaysia Thailand Dominican Maldives
Djibouti Malawi
Togo Republic Mauritania
Tonga Egypt Mauritius Tunisia Equatorial Micronesia Turkmenistan Guinea Moldova Uganda
Eswatini Montenegro Uzbekistan Ethiopia Morocco
Zambia
Gabon Mozambique Zimbabwe
Tier C. Visas for nonresident foreign nationals holding passports from Tier C jurisdictions are issued on a case-by-case basis and only on express authorization from the General Directorate of Migrations and Foreign Citizens. The authorities may require extensive documentation, and the process may take from two months to one year.
The following are the Tier C jurisdictions.
Afghanistan Haiti Nigeria Albania Hong Kong SAR Pakistan
Armenia India Sierra Leone Bangladesh Iraq Somalia Bosnia and Kenya Sri Lanka
Herzegovina Laos Sudan Botswana Lebanon Syria Cameroon Liberia Timor-Leste China Mainland Mali Venezuela Cuba Mongolia Vietnam Eritrea Nepal Yemen
General. The immigration authorities require that passports of nonresident foreign nationals be valid for at least six months beyond the date of expected departure from Nicaragua.
Travelers entering Nicaragua from certain countries, including Argentina, Bolivia, Brazil, Colombia, Ecuador, French Guiana, Panama, Paraguay, Peru, Venezuela and most African countries are required to present proof of yellow fever vaccination as a condition for entry into Nicaragua. This requirement applies to Nicaraguan and foreign nationals who have visited or been in transit for more than 12 hours in any of these countries. Travelers affected by this requirement must show an International Certificate of Vaccination issued at least 10 days prior to arrival in Nicaragua as proof of immunization at the port of entry.
G. Work visas (and/or permits)
Under Nicaraguan law, travelers seeking to enter the country to perform professional activities or undertake employment must obtain a work permit following admission into the country. However, according to the Visa and Residence Permits subdivi sion of the General Directorate of Migrations and Foreign Citizens, travelers seeking to enter Nicaragua to exercise profes sional activities for short time periods (up to 90 days) are not normally issued any type of special permit. The issuance of work
visas requires the submission of extensive documentation. Please consult a professional advisor for further information.
H. Residency visas (and/or permits)
Foreign nationals may apply for permanent or temporary resi dency after entry into the country. The application process requires documentation issued and authenticated or apostilled in the foreign national’s home country and, if necessary, translated into Spanish.
I. Entry and exit restrictions as a result of the COVID-19 outbreak
In the current COVID-19 outbreak, to enter Nicaragua, nationals and foreigners must carry proof of a negative polymerase chain reaction (PCR) test within 72 hours prior to entry into Nicaragua. Nationals and foreigners with fever or respiratory symptoms may not enter Nicaragua. If the PCR test result is negative and if the national or foreigner does not have fever or respiratory symp toms, he or she will be able to circulate freely in Nicaragua. He or she will receive follow-ups by telephone from health personnel during his or his or her initial 14 days in Nicaragua. Nationals and foreigners who develop symptoms of COVID-19 after enter ing Nicaragua will be quarantined.
Nicaragua has not announced the implementation of any exit restrictions. The only measures affecting departure from Nicaragua are those implemented by the airlines, which at the time of writing were expected to resume outbound travel in the first week of October.
Citizens and foreigners who test positive for COVID-19 are being quarantined and hospitalized if needed.
Airport officials are taking the following measures in connection with new arrivals to Nicaragua:
• Taking the temperature of new entrants
• Referring foreigners traveling from jurisdictions with high numbers of COVID-19 cases (or exhibiting symptoms on arrival) to medical facilities for monitoring
• Quarantining (and hospitalizing) foreigners who test positive (as needed)
For visa extensions or renewals, no special processes are fol lowed.
J. Family and personal considerations
Family members. Dependents are not entitled to work in Nicaragua without a valid work permit. The application process for obtain ing a Nicaraguan work permit may involve the submission of extensive documentation. Please consult a professional advisor for further information.
Marital property regime. Under Nicaraguan law, all assets acquired after the commencement of a marriage, with the exception of those received as a donation by either spouse, are assumed to be community property.
Forced heirship. Nicaraguan law requires intestate estates be set tled through probate. In the case of intestacy, the Civil Code lists the order in which eligible persons may inherit.
Driver’s permits. Holders of foreign-issued driver’s licenses can drive in Nicaragua as long as their existing foreign license is valid. On expiration, drivers are expected to obtain a local driver’s license.