Discover Nicaragua's tax incentives for investment
- 27 April 2021
Nicaragua has a legal framework that provides stability, security and several benefits to investments in the country.
Published by PRONicaragua
Recognizing foreign direct investment as a key element for the country's growing economy, Nicaragua strives to continue positioning itself as an important destination for investors. In addition to the multiple benefits that the country offers, such as its strategic location, high security rates, developed infrastructure, among others, one of the main elements that make Nicaragua an attractive country for investments is having a legal framework that provides stability, security and several benefits to investments in the country.
Within these, the main legislation that contemplates foreign investments is the Foreign Investment Promotion Law (Law 344), which contemplates the following benefits:
° Free currency convertibility
° Freedom to repatriate capital and profits
° 100 percent international ownership allowed
° Equal treatment for national and foreign investors
° Full protection of property rights
° Fixed currency devaluation against the US dollar
In addition to this law, there are other complementary laws that provide benefits and incentives for investments in specific sectors, such as the following:
Incentives for the Tourism Industry Law (306)
The Tourism Industry Law of Nicaragua offers various tax incentives for investment in this sector and are considered the most generous and competitive in the region. This provides incentives and benefits for investment in accommodation, food and beverage, tour operators, tourist transportation, airlines, among others. Some of the incentives are exemptions of the income tax (IR), value added tax (VAT), property tax (IBI) and import tax and duty.
Temporary Admissions Law (382)
The Temporary Admission Regime for Active Improvement is a tax system that allows both the import of goods into the national customs territory and local purchase of goods without payment of any duties and taxes. Companies that export directly or indirectly, at least 25 percent of its total sales and an export value not less than US$ 50,000, are eligible for this scheme.
Pensioners and Retirees Law (694)
Nicaragua passed legislation to encourage retirees and pensioners to retire in the country. The Law of Resident Pensioners and Retirees provides benefits mostly in the form of tax incentives that help retirees save money by allowing the following: importing household goods, building materials and new cars with tax exemptions.
Tax Concertation Law (822)
The Tax Concertation Law provides numerous tax benefits to certain productive sectors of the economy to promote their growth and development.
Tax benefits for exporters and agricultural producers
It provides a 0 percent Value Added Tax (VAT) rate to exports of domestically produced goods or services, and to some agricultural products.
Tax benefits for the forestry sector
The Tax Concertation Law (822) extended the benefits granted by the Forestry Incentives Law (462) up to the year 2023. This includes exemption of Municipal Taxes, Property Tax (IBIN) and other payment duties and taxes.
Law on the Promotion of Renewable Electricity Generation from Renewable Sources (532)
This law seeks to promote electricity generation from renewable sources by providing projects that are generating power with renewable sources with benefits, such as exemption of import duties and value added tax, municipal taxes, stamp taxes and any other taxes that may exist for exploitation of natural resources.
Likewise, Nicaragua offers attractive fiscal incentives through the Industrial Free Zones for Export Law (917) that can reduce the operating costs for companies interested in establishing export-oriented operations of goods or services. The tax incentives granted by this law include 100 percent exemption of the Income Tax (IR) during the first ten years of operation, as well as exception from custom duties and other taxes like municipal taxes, sales taxes, among others. Likewise, given the importance of the mining sector for economic development, there is the Special Law on Exploration and Exploitation of Mines (387), where the State guarantees fiscal stability for the domestic and foreign investment related to mining activities which benefits from the Temporary Admissions Law.
The existence of these laws and their incentives is an important added value that Nicaragua offers to its investors, since it allows them to access a variety of benefits that will make their investments less expensive and more profitable. This, in turn, allows Nicaragua to continue positioning itself as an ideal country for foreign investment within the region.