Resident and nonresident individuals, regardless of their nationality, are taxed on their income earned in Nicaragua. Foreign-source income is not taxed.
Nicaraguan nationals are considered resident.
A foreign individual is considered a resident for tax purposes if he or she meets either of the following criteria:
- He or she stays in Nicaragua for more than 180 consecutive or non-consecutive days during the calendar year.
- The center of his or her economic interests is located in Nicaragua, unless he or she can prove his or her residence or tax domicile is located in another country by submitting a certificate issued by the relevant tax authorities, provided that the country of domicile is not considered a tax haven under the Nicaraguan income tax law.
Income subject to tax. The taxation of various types of income is described below.
Employment income. Annual employment income in excess of NIO100,000 is taxable, including salary, pensions, bonuses, premiums, commissions and allowances (for example, housing and educational allowances). However, the 13th month salary (aguinaldo), labor indemnification (up to five months’ base salary), indemnification up to NIO500,000 received in addition to five months’ salary and social security contributions are exempt from tax.
Self-employment and business income. Income derived from self-employment or from trade or business activities is taxable. Resident individuals are subject to progressive tax rates ranging from 10% to 30% of net self-employment and business income.
Nonresident individuals are subject to a flat 15% withholding tax on this income.
Investment income. Dividends paid or credited by local companies to resident or nonresident individuals are subject to a 10% withholding tax.
Per diem directors’ fees. Per diem directors’ fees paid to resident and nonresident individuals are subject to withholding tax at a rate of 12.5% for residents and 20% for nonresidents.
Capital gains. Capital gains are subject to the following final withholding taxes:
- 5% on the transfer of assets held in trust by residents and nonresidents (Law No. 741 on Trust Agreements, effective from 19 January 2011)
- 10% on other capital gains derived by residents and nonresidents
A special rule applies to transfers of property subject to registration with a public deed in the Public Registry. Progressive withholding tax rates ranging from 1% to 4% of the value of the property apply to these transfers.
Deductions. The following are personal deductions and allowances:
- Social security contributions of employed individuals
- Contributions of employed individuals to pension or savings funds that are not part of the social security system, provided that these funds are approved by the relevant authority in Nicaragua
- 25% of expenses on education, health and professional services, up to a maximum amount of NIO5,000 per year (maximum amount will be increased to NIO20,000 in 2017)
Rates. Employment income earned by resident individuals is taxable at the following rates for the period of 1 January 2016 through 31 December 2016.
Annual taxable income
Exceeding Not exceeding Rate
NIO NIO %
0 100,000 0
100,000 200,000 15
200,000 350,000 20
350,000 500,000 25
500,000 — 30
Payments to nonresident individuals for employment income (salaries, other remuneration, pensions, commissions, directors’ fees and similar compensation items) are subject to a 15% final withholding tax.
Self-employment and business income earned by resident individuals (with annual gross income of NIO12 million or less) is taxable at the following rates for the period of 1 January 2016 through 31 December 2016.
Annual taxable income
Exceeding Not exceeding Rate
NIO NIO %
0 100,000 10
100,000 200,000 15
200,000 350,000 20
350,000 500,000 25
500,000 — 30
If an individual’s gross income exceeds NIO12 million, the tax rate for self-employment and business income is 30%.
Payments to nonresident individuals for professional services or technical advice are subject to a 15% final withholding tax.
Inheritance and gift taxes
Gifts or inheritances from Nicaraguan sources are treated as capital gains and subject to a flat 10% tax.
Social security
Social security contributions are levied on salaries at a rate of 18.5% for employers and 6.25% for employees for the 2016 tax year. These rates will be increased annually. For 2016, the maximum monthly salary subject to employer and employee social security contributions is NIO77,934.88.
Tax filing and payment procedures
The ordinary tax year runs from 1 January through 31 December.
Employers are responsible for withholding income taxes and social security contributions from the employees’ salaries on a monthly basis. Employees are not required to file an annual income tax return if their only source of income is employment compensation.
Returns must be filed and any tax due must be paid within three months after the end of the tax year. Self-employed individuals and individuals with a trade or business must pay installments of advance income tax.
Double tax relief and tax treaties
Nicaragua has not entered into tax treaties with any other countries.
Temporary visas
Nicaraguan law provides a three-tier classification system that imposes visa requirements based on the nationality and passport type of the traveler.
Tier A. Nonresident foreign nationals holding passports issued by Tier A jurisdictions are visa exempt. On arrival into Nicaragua, travelers are issued tourist permits valid for up to 90 days that may be extended for up to a total of 180 days.
The following are the Tier A jurisdictions.
Andorra Greece St. Kitts and Nevis
Antigua and Hungary St. Lucia
Barbuda Iceland St. Vincent and the
Argentina Iran Grenadines
Australia Ireland San Marino
Austria Israel São Tomé and
Bahamas Italy Príncipe
Bahrain Japan Saudi Arabia
Barbados Korea (South) Singapore
Belarus Kuwait Slovak Republic
Belgium Latvia Slovenia
Belize Liechtenstein Solomon Islands
Brazil Lithuania South Africa
Brunei Darussalam Luxembourg Spain
Bulgaria Macedonia Sweden
Canada Madagascar Switzerland
Chile Malta Taiwan
Costa Rica Marshall Trinidad and
Croatia Islands Tobago
Cyprus Mexico Turkey
Czech Republic Monaco Tuvalu
Denmark Netherlands Ukraine
Ecuador New Zealand United Arab
Estonia Norway Emirates
Fiji Panama United Kingdom
Finland Paraguay United States
France (including Poland Uruguay
overseas territories Portugal Vanuatu
and collectivities) Qatar Vatican City
Germany Romania Venezuela
Tier B. Nonresident foreign nationals holding passports issued by Tier B jurisdictions are subject to visa requirements. An entry visa may be obtained at a Nicaraguan consular bureau before travel or at the port of entry. However, Nicaraguan authorities strongly recommend travelers to check in advance as to whether airlines allow boarding in the absence of a visa stamped on the passport. Normally, visas are valid for up to 30 days, renewable for up to a total of 90 days.
The following are the Tier B jurisdictions.
Algeria Georgia Namibia
Angola Ghana Nauru
Azerbaijan Grenada Niger
Benin Guinea Oman
Bhutan Guinea-Bissau Palau
Bolivia Guyana Papua New Guinea
Burkina Faso Indonesia Peru
Burundi Jamaica Philippines
Cambodia Jordan Rwanda
Cape Verde Kazakhstan Samoa
Central African Kiribati Senegal
Republic Korea (North) Serbia
Chad Kyrgyzstan Seychelles
Colombia Lesotho Suriname
Comoros Libya Swaziland
Côte d’Ivoire Malawi Tajikistan
Cuba Malaysia Tanzania
Djibouti Maldives Thailand
Dominica Mauritius Togo
Dominican Mauritania Tonga
Republic Micronesia Tunisia
Egypt Moldova Turkmenistan
Equatorial Guinea Montenegro Uganda
Ethiopia Morocco Uzbekistan
Gabon Mozambique Zambia
Gambia Myanmar Zimbabwe
Tier C. Visas for nonresident foreign nationals holding passports from Tier C jurisdictions are issued on a case-by-case basis and only on express authorization from the General Directorate of Migrations and Foreign Citizens. The authorities may require extensive documentation, and the process may take from two months to one year.
The following are the Tier C jurisdictions.
Afghanistan Hong Kong Nigeria
Albania SAR Pakistan
Armenia India Sierra Leone
Bangladesh Iraq Somalia
Bosnia and Kenya Sri Lanka
Herzegovina Laos Sudan
Botswana Lebanon Syria
Cameroon Liberia Timor-Leste
China Mali Vietnam
Eritrea Mongolia Yemen
Haiti Nepal
General. The immigration authorities require that passports of nonresident foreign nationals be valid for at least six months beyond the date of expected departure from Nicaragua.
The above lists, immigration requirements and interpretation of existing regulations may change from time to time and without notice. It is therefore suggested that professional advice be obtained regarding entry requirements.
Work visas (and/or permits)
Under Nicaraguan law, travelers seeking to enter the country to perform professional activities or undertake employment must obtain a work permit following admission into the country. However, according to the Visa and Residence Permits subdivision of the General Directorate of Migrations and Foreign Citizens, travelers seeking to enter Nicaragua to exercise professional activities for short time periods (up to 90 days) are not normally issued any type of special permit. The issuance of work visas requires the submission of extensive documentation. Please consult a professional advisor for further information.
Residency visas (and/or permits)
Foreign nationals may apply for permanent or temporary residency permits on admission into the country. The application process requires documentation issued and authenticated or apostilled in the foreign national’s home country. Please consult a professional advisor for further information.
Family and personal considerations
Family members. Dependents are not entitled to work in Nicaragua without a valid work permit. The application process for obtaining a Nicaraguan work permit may involve the submission of extensive documentation. Please consult a professional advisor for further information.
Marital property regime. Under Nicaraguan law, all assets acquired after the commencement of a marriage, with the exception of those received as a donation by either spouse, are assumed to be community property.
Forced heirship. Nicaraguan law requires intestate estates be settled through probate. In the case of intestacy, the Civil Code lists the order in which eligible persons may inherit.
Driver’s permits. Holders of foreign-issued driver’s licenses can drive in Nicaragua as long as their existing license is valid. On expiration, drivers are expected to obtain a local driver’s license.