Do you want to reduce taxes and grow your business faster? Would you like to establish a tax residence in this Central America to give your freedom and options? Learn all about Nicaragua’s Territorial Tax Regime taxes in our definitive guide.
If you want to relieve a tax burden, take advantage of the country’s territorial tax regime. You can relocate your tax residency when your home country doesn’t provide sufficient tax savings. Nicaragua offers tax incentives.
Nomad Capitalist knows all about offshore solutions. We help HNWIs lower their taxes legally as part of a unique, holistic Action Plan. Tax reduction is a promise we deliver on. We’re here to serve you.
Keep reading to discover more about the benefits of Nicaragua’s Territorial Tax Regime and what is required to take advantage of it.
Nicaragua is the largest Central American republic. Its northern neighbor is Honduras; the Caribbean Sea lies east, Costa Rica to the south, and the Pacific Ocean to the west. Nicaragua’s capital is Managua, and the country’s population is 6.8 million.
Nicaragua has maintained stable economic growth in recent years. Several key sectors, including agriculture and manufacturing, have fueled growth. Service sectors like tourism and finance are also expanding, with the government encouraging foreign investment.
If you’ve worked hard to secure a nest egg, you’ll appreciate the Nicaraguan Government’s minimum tax for retiree taxpayers. You’ll pay no taxes from money earned in other countries and can enter Nicaragua with up to $20,000 worth of household goods for your property, duty-free.
You can also bring one car with you as a pensioner and pay no import tax or protective tariff.
After five years, you will be able to sell this automobile, again exempt from consumer sales tax.
Finally, you can purchase up to $50,000 of construction materials without being hit with sales tax.
Generally speaking, any Nicaraguan source income is subject to income tax. This is 20% for non-residents and up to 30% for residents and citizens. That is what territorial taxable income translates as.
In addition, non-residents, whether domiciled or not, are subject to a 20% definitive withholding tax.
Nicaragua’s corporate tax rate is 30% or 1% on income over NIO 40 million ($1.10 million) for small to medium-sized businesses. Investors will benefit from the Pro Nicaragua tax incentive program established by Law 344.
This allows you to set up your own free trade zone, open bank accounts easily, and take advantage of a 10-year tax exemption, including import tax on goods brought in to help your business.
Industries targeted by the program include food processing, outsourcing services, offshore financial services, and tourism.
Become a Nomad Capitalist client, and we will help you to identify the tax jurisdiction that best suits your needs.
The Nicaraguan Government operates a territorial tax regime, meaning if you make money in Nicaragua or your income has an impact there, you have to pay income tax on it.
Personal income tax rates in Nicaragua are fixed at up to 30% for residents and a flat 15% for non-residents. As elsewhere, Nicaragua imposes personal income tax on varying sources of income such as dividends, employment earnings, interest, and pensions.
You are subject to income tax according to progressive tax rates shown below on annual income:
- Taxable income up to 100,000 Nicaraguan Córdobas (NIO): 0%
- Taxable income from 100,0001 to 200,000 NIO: 15%
- Taxable income from 200,001 to 350,000 NIO: 20%
- Taxable income from 350,0001 to 500,000: 25%
- Taxable income over 500,0000: 30%.
Nicaragua treats capital gains as regular income, so any profits from selling real estate or investments will be taxed as ordinary taxable income. Rental income is also considered regular income, and there is a rental income tax of 15% for non‐residents and 25% for residents.
Regarding inheritance tax, Nicaragua files this taxation under occasional gains. The rate is 1% up to $50,000 and 2% up to $100,000. Anything over $100,000 becomes a 3% inheritance tax.
If you provide professional services, expect a 10% withholding tax. You will pay 2% on the local purchase of goods and services.
The Treasury Ministry levies a corporate income tax on business and passive income sourced from within Nicaragua. It is determined at a flat rate and is not subject to progressive tax rates.
Nicaragua will charge the greater amount, either 30% of the net taxable income, gross income minus allowed deductions, or a definitive minimum tax of 1% to 3% on gross income obtained during the fiscal year.
Nicaraguan law establishes exceptions to the 1% to 3% definitive minimum tax. They include recently incorporated entities’ first three fiscal periods. Also, you are exempt from paying this definitive minimum tax if you are taxpayers who have halted their operations or taxpayers whose sales prices are controlled by the Government.
There is a capital gains tax in Nicaragua. Both capital gains and capital income are liable to a definitive withholding tax. Dividend payments to resident shareholders, whether corporations or individuals are subject to a 15% withholding tax.
Taxation law also allows general business expenses as a deduction in computing taxable income. Customs duties are applied to all imported goods and services.
In Nicaragua, there are progressive rates for personal income tax up to 30% for residents, and there’s a flat non‐resident 15% rate. The country imposes personal income tax on varying sources of dividends, employment earnings, interest, and pensions.
Nicaragua enforces corporate income taxes on business and passive income sourced from within the country. They will impose the greater amount, either 30% of the net taxable income, gross income minus allowed deductions, or a definitive minimum tax of 1% to 3% on gross income obtained during the fiscal year.
Are you considering whether Nicaragua or another jurisdiction could help you eliminate your tax burden? The Nomad Capitalist team can help you achieve greater freedom, and we’ll show you how to go where you’re treated best.
No. Nicaragua has not signed any double taxation agreement with any foreign country. So, be aware that any transactions you make in Nicaragua could be taxed twice. That includes income earned in Nicaragua and foreign-earned income.
Yes. All properties in Nicaragua are subject to yearly property taxes. So, please keep this in mind for any real estate investments in the country.
No. Nicaragua does not tax foreign-earned income.
We can advise you on much more than Nicaraguan corporate and personal income tax rates.
Our holistic strategies cover everything from business operations, tax bills, diversification, and investments. We are the top tier of international advisors, helping successful investors and entrepreneurs become global citizens and maximize their freedom.