Nicaragua’s tax system stands out for its simplicity and focus on local income. Both corporate and personal income tax rates top out at 30%, while taxes on wealth, inheritance, and gifts are non-existent. Designed with a territorial approach, only income earned within Nicaragua is taxed, offering clarity for residents and businesses. While these features make it attractive to certain investors, the lack of global tax agreements and transparency measures means careful planning is essential for international operations.
Nicaragua’s Tax System overview
| Corporate Income Tax: | 30% |
| Personal Income Tax: | 30%, progr. |
| Inheritance Tax: | None |
| Gift Tax: | None |
| Wealth Tax: | None |
Territorial Tax Regime
Corporate Income Tax
Corporations are subject to tax only on Nicaraguan source income at progressive rates with a maximum rate of 30%. Capital gains are subject to a 15% tax rate.
Personal Income Taxation
Residents of Nicaragua are subject to tax only on Nicaraguan source income at progressive rates up to a maximum rate of 30%. Capital gains are generally subject to a 15% tax rate. Nicaragua does not levy gift, inheritance or wealth tax. However, although Nicaragua does not have a per se gift tax, certain gifts may be subject to capital gains tax.
Anti-Avoidance Rules
Nicaragua has no General Anti-Avoidance Rules (GAARs). Nicaragua has Transfer Pricing rules based on OECD guidelines, but has no Thin Capitalization rules. Nicaragua has no Controlled Foreign Corporation (CFC) rules.
Transaction with Tax Havens
Expenses paid by Nicaraguan resident taxpayers, or foreign taxpayers with a permanent establishment in Nicaragua, to residents of tax havens are subject to a 30% withholding tax. Tax havens are defined as jurisdictions where the income tax rate is substantially lower than the Nicaraguan income tax rate, jurisdictions listed as un-cooperative by the OECD’s Global Forum, or jurisdictions identified as tax haven by the Nicaraguan tax authorities.
Double Tax Treaties (DTTs)
Foreign Investment Protection
Tax Info. Exchange Agreements (TIEAs)
OECD Multilateral Convention
Common Reporting Standard (CRS)
FATCA
Nicaragua’s tax system offers simplicity and clear benefits for those with domestic income, thanks to its territorial focus and absence of wealth-related taxes. However, its limited global agreements and rules may pose challenges for international businesses. Overall, it’s a tax-friendly environment for local operations but requires thoughtful strategy for cross-border activities.
