Please direct all inquiries regarding Nicaragua to the persons listed below in the San José, Costa Rica, office of EY. All engagements are coordinated by the San José, Costa Rica, office.
Managua GMT -6
EY
Centro Corporativo INVERCASA
Tower 3, 5th Floor Managua Nicaragua
Principal Tax Contact
+505 2253-8430
Rafael Sayagués +506 2208-9880 (resident in San José, New York: +1 (212) 773-4761 Costa Rica)
Costa Rica Mobile: +506 8830-5043
US Mobile: +1 (646) 283-3979
Efax: +1 (866) 366-7167
Email: rafael.sayagues@cr.ey.com
Business Tax Services
Lisa María Gattulli
+506 2208-9861 (resident in San José, Mobile: +506 8844-6778 Costa Rica)
Email: lisa.gattulli@cr.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory
Juan Carlos Chavarría
+506 2208-9844 (resident in San José, Mobile: +506 8913-6686 Costa Rica)
International Mobile: +1 (239) 961-5947
Email: juan-carlos.chavarria@cr.ey.com
Rafael Sayagués +506 2208-9880 (resident in San José,
New York: +1 (212) 773-4761 Costa Rica)
Costa Rica Mobile: +506 8830-5043
US Mobile: +1 (646) 283-3979
Efax: +1 (866) 366-7167
Email: rafael.sayagues@cr.ey.com
International Tax and Transaction Services – Transfer Pricing
Luis Eduardo Ocando B.
+507 208-0144 (resident in Panama)
Panama Mobile: +507 6747-1221
US Mobile: +1 (305) 924-2115
Fax: +507 214-4300
Email: luis.ocando@pa.ey.com
Paul de Haan (resident in +506 2208-9800 San José, Costa Rica)
Email: paul.dehaan@cr.ey.com
Business Tax Advisory
Juan Carlos Chavarría
+506 2208-9844 (resident in San José, Mobile: +506 8913-6686 Costa Rica)
International Mobile: +1 (239) 961-5947
Email: juan-carlos.chavarria@cr.ey.com
Tax Policy and Controversy
Rafael Sayagués
+506 2208-9880 (resident in San José, New York: +1 (212) 773-4761 Costa Rica)
Costa Rica Mobile: +506 8830-5043
US Mobile: +1 (646) 283-3979
Efax: +1 (866) 366-7167
Email: rafael.sayagues@cr.ey.com
Global Compliance and Reporting
Lisa María Gattulli
+506 2208-9861 (resident in San José, Mobile: +506 8844-6778 Costa Rica)
Email: lisa.gattulli@cr.ey.com
International Tax and Transaction Services – Transaction Tax Advisory
Antonio Ruiz +506 2208-9822 (resident in San José, Mobile: +506 8890-9391 Costa Rica)
International Mobile: +1 (239) 298-6372 Email: antonio.ruiz@cr.ey.com
Rafael Sayagués +506 2208-9880 (resident in San José, New York: +1 (212) 773-4761 Costa Rica)
Costa Rica Mobile: +506 8830-5043
US Mobile: +1 (646) 283-3979 Efax: +1 (866) 366-7167 Email: rafael.sayagues@cr.ey.com
People Advisory Services
Lisa María Gattulli
+506 2208-9861 (resident in San José, Mobile: +506 8844-6778 Costa Rica) Email: lisa.gattulli@cr.ey.com
A. At a glance
Corporate Income Tax Rate (%) 30
Capital Gains Tax Rate (%) 15
Branch Tax Rate (%) 30
Withholding Tax (%)
Dividends 15 (a)
Interest 15 (a)
Royalties from Patents, Know-how, etc. 15 (a) Payments for Movies, Films, Radio and Television 15 (a)
Income Derived from Leasing of Real Estate 2/12 (a)(b) Air and Maritime Transportation 3 (c) International Telecommunications 3 (c) Insurance and Bail Premiums 3 (c)
Reinsurance 1.5 (c)
Musical and Artistic Public Spectacles 0/15 (d) Compensation for Services 2/10/20 (c)(e)(f) Other Service Activities 20 (c)
Branch Remittance Tax 15
Net Operating Losses (Years)
Carryback 0 Carryforward 3
(a) The 15% rate applies to residents and nonresidents (also, see footnote [b] regarding the tax base for the tax on income derived from the leasing of real estate). A 10% rate applies to interest paid to foreign investment banks.
(b) For income derived from real estate property when the leasing of real estate is not the main activity of the taxpayer, the tax base equals the net income after applying a deduction of 20% of the gross income. As a result, the effec tive general rate for residents and nonresidents is 12% and this withholding tax is the final tax. The 2% rate applies if the economic activity of the resi dent taxpayer is real estate or the leasing of real estate, and this 2% withhold ing tax is creditable against income tax.
(c) This withholding tax applies to nonresidents. It is a final tax for nonresidents.
(d) The 0% rate applies to payments related to filming movies that will be trans mitted abroad and promote tourism in Nicaragua and to payments related to non-professional spectacles.
(e) Transactions with tax havens are subject to a 30% withholding tax. However, the list identifying such tax havens has not yet been issued.
(f) The 20% rate applies to nonresidents. The 10% applies to residents who are individuals. The 2% rate applies to residents that are legal entities. The withholding tax is creditable against income tax for residents and is final for nonresidents.
B. Taxes on corporate income and gains
Corporate income tax. The Nicaraguan tax system is based on an extended territorial principle. The following items are subject to corporate income tax:
• Income from business activities
• Income from capital income, capital gains and capital losses
Corporate income tax rates. The standard corporate tax rate for resident companies and branches of foreign companies is 30% of taxable income. A company is deemed to be resident for tax pur poses if it is incorporated in Nicaragua.
Companies operating under certain special incentive regimes, such as Free Trade Zone companies, are exempt from income tax.
After the third year of operations, companies are subject to tax on their Nicaraguan-source income, which equals the higher of the following:
• 30% of net taxable income
• A percentage of gross taxable income which is the following:
— 3% for large taxpayers (that is, income of NIO160 million or higher in the preceding fiscal year), except for taxpayers dedicated to fishing in the Caribbean coast of Nicaragua for which a reduced rate of 2% applies
— 2% for main taxpayers (that is, income of NIO60 million or higher but below NIO160 million in the preceding fiscal year)
— 1% for the other taxpayers (that is, income below NIO60 million in the preceding fiscal year)
Certain exceptions may be stated in the law.
Capital gains. Capital gains are realized gains resulting from the transfer of immovable and movable assets, goods and rights of the taxpayer. The following are the capital gain tax rates:
• Transfer of assets held in a trust: 5%
• Other capital gains derived by residents and nonresidents: 15%
A definitive withholding tax payment is required on the transfer of property subject to public registration. This payment ranges from 1% to 7% of the transfer value.
Administration. The statutory tax year runs from 1 January through 31 December. However, taxpayers may request a special fiscal year.
Annual income tax returns must be filed within two months after the end of the tax year.
Companies must make monthly advance payments for purposes of income tax equal to 1%, 2% or 3% of their monthly gross income. The advance payments are applied to the annual income tax liabil ity. In addition, for large collectors of the excise tax and financial institutions supervised by the Superintendent of Banks and Other Financial Institutions, the minimum monthly payment is the greater of 30% of monthly profits and 1% of gross monthly in come. The advance payments are applied to the annual income tax liability.
The 3% rate applies to large taxpayers (that is, income over NIO160 million in the preceding fiscal year), except for taxpayers dedicated to fishing in the Caribbean coast of Nicaragua for which a reduced rate of 2% applies. The 2% applies to main taxpayers (that is, income over NIO60 million but below NIO160 million in the preceding fiscal year). The 1% rate applies to the other taxpayers (that is, income below NIO60 million in the preceding fiscal year).
Dividends. A 15% withholding tax is imposed on dividends paid to resident individuals and business entities. For dividends paid to nonresident individuals and business entities, the withholding tax rate is 15%.
Foreign tax relief. A direct tax credit for foreign taxes against cor porate income tax is not provided in Nicaragua. However, foreign taxes may be deducted from taxable income if the deductibility requirements are met.
C. Determination of trading income
General. Taxable income is calculated in accordance with gener ally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS), subject to adjustments re quired by the Nicaraguan income tax law.
In general, taxable income includes Nicaraguan-source income derived from goods, services, assets, rights and any other eco nomic activity in Nicaragua, even if such income is accrued or realized abroad, and regardless of whether the taxpayer has physi cal presence in the country.
Allowable deductions generally include all expenses necessary to generate taxable income. The deduction must be taken in the year in which the expense was incurred and the corresponding tax is withheld (if applicable).
Expenses paid or credited by a resident taxpayer or a permanent establishment of a nonresident to a person or entity resident in a tax haven are subject to a final withholding tax rate of 30%.
Inventories. If inventories are a significant element in the deter mination of a company’s taxable income, the company must value each item based on the lower of the acquisition cost or market price. The law allows companies to use the weighted average cost, first-in, first-out (FIFO) or last-in, first-out (LIFO) methods to determine the cost of merchandise sold. The tax administration may authorize other methods.
Provisions. In general, companies may deduct 2% of the balance of accounts receivable from customers.
Two percent of the provisions for severance payments can also be deducted.
Banks may deduct increases in minimum reserves for debtors in accordance with the standards of the Superintendent of Banks in Nicaragua.
Tax depreciation. Regulations under the income tax law allow the use of the straight-line method to calculate depreciation. However, the tax authorities may authorize certain exporters to use
accelerated depreciation methods. The regulations containing the applicable straight-line rates are pending.
Relief for losses. Companies may carry forward their net operat ing losses for three years to offset all types of income. Net oper ating losses may not be carried back.
Groups of companies. Nicaraguan law does not allow consolidated income tax returns or provide any other tax relief to consolidated groups of companies.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax Rate (%)
Value-added tax; the 0% rate applies to exports of goods produced in Nicaragua and exports of services 0/15
Municipal taxes
Monthly tax on gross income 1 Annual municipal registration tax; tax base equals one-third of the gross income for the last three months of the preceding tax year 2 Real estate tax; imposed on 80% of the appraised value of the property 1 Payroll taxes; paid by employers (average rate) 22.5
E. Foreign-exchange controls
The Nicaraguan currency is the córdoba (NIO). Effective from 14 March 2022, the official exchange rate for the córdoba against the US dollar is NIO 35.6619 = USD1.
No restrictions apply to foreign-trade operations or to foreigncurrency transactions.
F. Tax treaties
Nicaragua has not entered into any income tax treaties with other foreign countries.