Corporate Tax 2010 - BMR Advisors

Chapter 34
Nicaragua
Ana Teresa Rizo
Arias & Muñoz
Ramón Castro Romero
1 General: Treaties
1.1 How many income tax treaties are currently in force in
Nicaragua
There are no income tax treaties currently in force in Nicaragua.
1.2 Do they generally follow the OECD or another model
Not applicable.
1.3 Do treaties have to be incorporated into domestic law
before they take effect
Yes, treaties must be incorporated into domestic law before they
take effect. The applicable procedure is the following:
1. The treaty must be approved by the National Assembly
(Congress).
2. The treaty must be ratified by the President of Nicaragua.
3. The treaty must be published in the government’s Official
Publication (La Gaceta).
1.4 Do they generally incorporate anti-treaty shopping rules (or
“limitation of benefits” articles)
Not applicable.
1.5 Are treaties overridden by any rules of domestic law
(whether existing when the treaty takes effect or
introduced subsequently)
Treaties may be overridden by the Nicaraguan Constitution or any
law that has the status of a Constitutional law (i.e. the Electoral
Law, the Emergencies Law and the Amparo Law).
2.2 Do you have Value Added Tax (or a similar tax) If so, at
what rate or rates
Nicaragua has a Value Added Tax at a rate of 15%.
2.3 Is VAT (or any similar tax) charged on all transactions or
are there any relevant exclusions
Generally, the VAT is applied to the transfer of goods, services and
importations. Relevant exclusions are transfers of real estate,
transfers of second hand movable assets, health related services,
and others included in the Tax Equity Law.
2.4 Is it always fully recoverable by all businesses If not,
what are the relevant restrictions
Generally, a business may recover from the VAT that it withheld for
the contributor the amount that the business paid as VAT to acquire
any part of the good or service sold to the contributor.
2.5 Are there any other transaction taxes
No, the VAT is the only transaction tax applicable in Nicaragua.
2.6 Are there any other indirect taxes of which we should be
aware
There are several indirect taxes such as: Importation Tariffs
(Derechos Arancelarios a la Importación); excise taxes (Selective
Consumption Tax, and the Special gasoline and diesel tax for road
maintenance (T-FOMAV); the Real Estate Tax; and other municipal
taxes.
3 Cross-border Payments
2 Transaction Taxes
3.1 Is any withholding tax imposed on dividends paid by a
locally resident company to a non-resident
2.1 Are there any documentary taxes in Nicaragua
Nicaragua has a documentary tax. The Tax Equity Law determines
the value of the documentary tax according to the type of document
requiring the stamp.
ICLG TO: CORPORATE TAX 2010
© Published and reproduced with kind permission by Global Legal Group Ltd, London
Corporate dividends are not taxable income subject to income tax
withholding as long as the Corporation itself pays income tax.
However, if the Corporation itself does not pay income tax then
income tax must be withheld from any dividends that are paid to
shareholders. If income tax is to be withheld from a dividend paid
to a non-resident who is a natural person, the rate is 20%. The rate
lowers to 10.5% if the non-resident is a juridical person.
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