Offshore Tax Summaries-Nicaragua

Offshore Tax Summaries-Nicaragua Few countries offer as light a tax burden as Nicaragua does. Generally, taxes are relatively low. And if an expatriate is starting a business, few places offer better incentives than Nicaragua. Law 306 allows him to open a tourism-related business and pay no taxes for 10 years, and also import (or purchase locally) all the supplies he needs, from furniture, boats, linens and cash registers, all tax-free.

Income tax

For individuals, income tax is calculated on a progressive tax rate, up to a maximum of 35%. Taxable income is based on Nicaraguan-source income. As a foreign retiree, an expatriate pays no taxes on out-of-country earnings. Any income originating from within Nicaragua is taxed at a flat 15%.

Transfer tax

Property transfers are subjected to a 4% transfer tax on the purchase price. While most sellers ask the buyer to pay it, it should be known that it is a prepayment of income tax. The seller is the only one benefitting from its payment. Annual property taxes are approximately 1% of the assessed value of the property.

Rental income tax

Earnings from rental properties are treated as normal income for tax purposes, i.e. 15%. Nicaragua taxes its citizens, residents, and nonresidents on all income that originates in the country. In March 1999, the National Assembly passed very attractive tax reductions which made Nicaragua one of the most progressive in this area in all of Central America.

Among its many benefits, the law allows for:

Exemptions on import taxes.
Lower taxes on importation of U.S. cars whose larger engines were being taxed at a higher rate than the smaller ones in Japanese cars.
Elimination of taxes on capital goods, intermediary goods, and raw materials destined for the agricultural sector, small handicraft industry, fishing, and aquaculture.