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)
Rafael Sayagués
International Mobile: +1 (239) 298-6372
Email: antonio.ruiz@cr.ey.com
+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
(a) Transactions with tax havens are subject to a 30% withholding tax. However, the list identifying such tax havens has not yet been issued.
(b) The 15% rate applies to residents and nonresidents (also, see footnote (c) 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.
(c) 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 effective 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 resident taxpayer is real estate or the leasing of real estate, and this 2% withholding tax is creditable against income tax.
(d) This withholding tax applies to nonresidents. It is a final tax for nonresidents.
(e) The 0% rate applies to payments related to filming movies that will be transmitted abroad and promote tourism in Nicaragua and to payments related to non-professional spectacles.
(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 purposes 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 liability. 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 income. 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