Corporate Tax 2010 - BMR Advisors

Arias & Muñoz
Nicaragua
the average value of sales of goods and services at 2% on a yearly
basis.
5 Capital Gains
6.3 How would the taxable profits of a local branch be
determined
The taxable profits of any branch are determined by its net income.
5.1 Is there a special set of rules for taxing capital gains and
losses
There are no special rules for taxing capital gains in Nicaragua.
As of October 2009, the Nicaraguan Government has presented a
proposal to the different commercial sectors in Nicaragua dealing
with reforms to be applied to the current tax legislation. If
approved, these reforms would affect capital gains with an income
tax withholding of 10%.
6.4 Would such a branch be subject to a branch profits tax (or
other tax limited to branches of non-resident companies)
There is no branch profits tax in Nicaragua. Branches are subject
to same taxation scheme as other business entities.
6.5 Would a branch benefit from tax treaty provisions, or some
of them
No, it would not.
Nicaragua
5.2 If so, is the rate of tax imposed upon capital gains
different from the rate imposed upon business profits
There is no separate capital gains tax. The income accrued from a
capital gain is taxed at the applicable income tax rate. But, the
taxable portion of the capital gain varies depending on what type of
transaction produces the capital gain.
5.3 Is there a participation exemption
As to Nicaraguan residents, there is no participation exemption.
The taxable portion of any capital gain from the sale of stock is
calculated by subtracting the book value of the stock from its sale
price. However, if the sale price of the stock is lower than its book
value, then the book value is used as the taxable portion.
As to non-residents, both natural and juridical persons, there is a
participation exemption. Any capital gains (or any other rents) that
come from shares of stock purchased on a stock exchange duly
authorised to operate in Nicaragua are not subject to the income tax.
5.4 Is there any special relief for reinvestment
No, there is no special relief for reinvestment.
6 Branch or Subsidiary
6.1 What taxes (e.g. capital duty) would be imposed upon the
formation of a subsidiary
No taxes would be imposed upon the formation of a subsidiary in
Nicaragua.
6.2 Are there any other significant taxes or fees that would be
incurred by a locally formed subsidiary but not by a
branch of a non-resident company
No, there are no other significant taxes or fees.
6.6 Would any withholding tax or other tax be imposed as the
result of a remittance of profits by the branch
This would depend on whether the branch pays income tax or not.
See also the answer to question 3.1.
7 Anti-avoidance
7.1 How does Nicaragua address the issue of preventing tax
avoidance For example, is there a general anti-avoidance
rule or a disclosure rule imposing a requirement to
disclose avoidance schemes in advance of the company’s
tax return being submitted
Tax evasion in Nicaragua has several civil and criminal
consequences laid out in the Penal Code and the Tax Code.
Disclaimer:
As discussed above in the particular questions, as of October 2009,
the Nicaraguan Government has presented its intention to promote
a reform to the tax regulations currently in effect in the country.
These will be presented before the Nicaraguan Parliament for
approval in the remaining of the year (2009). As of the date of
drafting of this chapter, the formal proposal has not been disclosed
to the general public and specific considerations cannot be made.
As of October 2009, the government has only presented brief and
general provisions to be contained in the proposed reform.
Therefore it is recommended to consider that some or most of the
above answers can be subject to review once the reform is
approved, passed as a law and executed. These will mostly happen
during the first quarter of the year 2010. Our above answers are
based solely on the current valid legislation in the Republic of
Nicaragua.
ICLG TO: CORPORATE TAX 2010
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