Docstoc

NICARAGUA

Document Sample
NICARAGUA Powered By Docstoc
					NICARAGUA




     The law firm for Central America
              INDEX

GENERAL ASPECTS OF THE COUNTRY
	        	        									•	Government	             	
																															•	Safety	   	         	
																															•	Economy	 	
	        	        									•	Political	Stability		
	        	        									•	Limitation	or	incentives	to		foreing		investment		


CONSTITUTIONAL LAW
																															1.1)	EQUAL	RIGHTS	FOR	FOREIGNERS	AND	NICARAGUANS																															



CORPORATE LAW
																																2.1)	INCORPORATION	UNDER	NICARAGUAN	LAW	
																																2.2)	MINORITY	SHAREHOLDER´S	RIGHTS	UNDER	NICARAGUAN	LEGISLATION				



BUSINESS ENTITIES
																																4.1)	INCOME	TAX	“IMPUESTO	SOBRE	LA	RENTA”	(IR)	
																																4.2)	VALUE	ADDED	TAX	“IMPUESTO	AL	VALOR	AGREGADO”	(IVA)
																																4.3)	MUNICIPAL	TAXES
																																4.4)	FREE	TRADE	ZONES
																																4.5)	INCENTIVES	TO	EXPORTS
																																4.6)	TERRITORIALITY	PRINCIPLE	
																																4.8)	DEDUCTIONS	
																																4.9)	TAX	ON	SALARIES	
																																4.10)	STAMP	TAX									
LABOR LAW

																															5.1)	GENERAL
																															5.2)	INDIVIDUAL	LABOR	RIGHT
																															5.3)	RIGHTS	GRANTED	TO	EMPLOYEE´S	UNDER	NICARAGUAN	
																																							LABOR	LEGISLATION

PROPERTY


INTELLECTUAL PROPERTY


FINANCIAL MARKETS
                                                       NICARAGUA

DOING BUSINESS IN NICARAGUA

Nicaragua	has	been	working	for	the	past	years	towards	creating	a	comfortable,	transparent	
and	beneficial	environment	for	investors.		It	is	of	most	relevance	to	attract	foreign	investors	for	
the	growth	of	the	country	and	work	towards	a	sustainable	economy.	

Arias	&	Muñoz	has	supported	such	initiative,	and	we	do	our	part	in	making	the	investor	feel	
comfortable	and	safe	in	our	country.		As	part	of	such	commitment,	we	provide	the	investor	all	
necessary	knowledge	for	a	better	understanding	a	more	transparent	atmosphere,	so	that	he/
she	knows	the	legal	environment	he/she	is	participating.	Please	find	in	this	document	a	gen-
eral	outline	of	the	applicable	legislation	on	foreign	investment.

Official Name: Republic	of	Nicaragua
Location: Nicaragua	is	located	in	Central	America,	between	Caribbean	Sea	and	Pacific	
Ocean	and	also	between	Honduras	and	Costa	Rica	Republic.	
Capital: Managua
Inhabitants: 5,142,098	inhabitants	approximately
Official Language: Spanish
Currency: Cordoba
Surface: 130,373.47km2	
Main Airport: International	Airport	of	Managua

• GOVERNMENT

Nicaragua	 is	 a	 democratic	 and	 representative	 Republic.	 	 It	 has	 four	 Government	 Powers.	
Those	are:	Congress,	Judicial,	Executive	and	Electoral.	

The	entity	in	charge	to	issue	the	laws	of	the	country	is	the	Congress	of	the	Republic.	
The	economy	is	fully	open	to	private	competition	and	Nicaraguan	government	is	promoting	
foreign	investment	through	various	mechanisms	in	order	to	establish	favorable	and	attractive	
condition	for	the	investor.

• SAFETY
There	exists	a	Juridical	System	regarding	to	the	civil	safety	and	related	with	the	principal	prob-
lems:	drugs,	gangs,	domestic	and	sexual	violence,	thefts	that	affect	the	citizenship.	They	are	
dispersed	in	different	articles	in	the	Political	Constitution,	Laws	with	constitutional	range,	Codes	
and	Conventions	signed	by	Nicaragua.

                                                                     DOING BUSINESS IN NICARAGUA
The	 Political	 Constitution	 recognizes	 the	 impor-
tance	of	the	citizenship	safety;	it	is	included	as	fun-
damental	 right	 and	 recognized	 by	 the	 State	 as	 a	
compromise	in	Humans	Rights.	

Additionally	the	Nicaraguan	State	extends	and	re-
inforces	the	guarantees	for	all	the	persons	in	the	ar-
ticle	46	of	the	Political	Constitution	that	includes	a	
list	of	international	instruments	of	protection	of	Hu-
man	rights	of	which	Nicaragua	is	a	member.	

• ECONOMY

Nicaragua	 is	 primarily	 an	 agricultural	 country,	 but	
construction,	 mining,	 fisheries,	 and	 general	 com-
merce	 also	 have	 been	 expanding	 during	 the	 last	
few	years.	In	recent	years,	tourism	has	grown	quick-
ly	 to	 become	 Nicaragua’s	 third	 largest	 source	 of	
foreign	capital.

The	 U.S.	 is	 the	 country’s	 largest	 trading	 partner,	 providing	 25%	 of	 Nicaragua’s	 imports	 and	
receiving	about	60%	of	its	exports.	About	25	wholly	or	partly	owned	subsidiaries	of	U.S.	com-
panies	operate	in	Nicaragua.	The	largest	of	those	investments	are	in	the	energy,	communica-
tions,	manufacturing,	fisheries,	and	shrimp	farming	sectors.

There	exists	good	opportunities	to	continue	investment	in	traditional	sectors,	as	well	as	in	tour-
ism,	mining,	franchising,	and	the	distribution	of	imported	consumer,	manufacturing,	and	agri-
cultural	goods.

• POLITICAL STABILITY

According	 to	 our	 Political	 Constitution	 we	 cross	 presidential	 elections	 every	 five	 years.	 The	
above	mentioned	elections	are	effected	by	the	universal,	equal,	direct,	free	and	secret	suf-
frage,	from	which	will	turn	out	elect	who	obtain	35	%	of	the	votes.	Every	presidential	period	
lasts	5	years.

In	the	last	elections	on	November,	2006	was	elected	as	President	of	Nicaragua	Republic	Mister	
Daniel	Ortega	Saavedra	from	“Frente	Sandinista	de	Liberación	Nacional”	party	(FSLN)	and	his	
period	will	finish	until	the	year	2011.

• LIMITATION OR INCENTIVES TO FOREIGN INVESTMENT

In	Nicaragua	a	lot	of	laws	have	been	amended	in	order	to	protect	and	promote	the	invest-
ment.

                                                                        DOING BUSINESS IN NICARAGUA
Actually	in	Nicaragua	we	have	a	“Foreign	Investment	
Promotion	 Law”	 which	 purpose	 is	 the	 contribution	 to	
the	economical	and	social	development	of	the	coun-
try.		

This	Law	promotes	foreign	investment	and	grants	rights	
to	free	access	and	convertibility	to	foreign	currency.		

CONSTITUTIONAL LAW

EQUAL RIGHTS FOR FOREIGNERS AND NICARA-
GUANS

The	Constitution	establishes	that	all	individuals,	national	
and	 foreigners,	 have	 equal	 rights,	 including:	 the	 right	
not	to	be	discriminated	based	on	birth,	nationality,	po-
litical	 preferences,	 race,	 gender,	 language,	 religion,	
opinion,	 origin,	 economic	 position	 or	 social	 condition	
(Article	27	Cn).
Foreigners	have	the	same	rights	and	obligations	as	Ni-
caraguan	citizens,	with	the	exception	of	political	rights.	
Political	rights	enclose	the	right	to	vote	and	to	be	elect-
ed	for	public	office.
However,	there	are	some	laws	that	do	restrict	the	for-
eign	 participation	 in	 certain	 businesses.	 One	 of	 these	
laws	is	the	Law	of	Financial	Entities.	

CORPORATE LAW

INCORPORATION UNDER NICARAGUAN LAW

Nicaragua’s	corporate	laws	are	very	ample.	There	is	a	
Public	Mercantile	Registry	in	charge	of	registering	all	in-
corporation	 and	 corporate	 documents.	 The	 system	 is	
public	and	transparent.
The	process	of	successfully	registering	the	articles	of	in-
corporation	for	a	new	corporation	is	simple.	Registration	
before	Public	Mercantile	Registry	takes	approximately	
four	weeks.	A	corporation	will	not	obtain	its	legal	status	
until	 it	 is	 registered.	 The	 cost	 of	 registration	 varies	 de-
pending	on	the	capital	stock.	
For	a	corporation	to	be	able	to	initiate	operation	and	
start	doing	business	in	Nicaragua	shall	to	carry	out	the	
following	requirements:
                               DOING BUSINESS IN NICARAGUA
1.	According	to	the	Commerce	Code	a	corporation	must	be	granted	before	a	Notary	Public	
by	a	
minimum	of	two	incorporators.

2.	Submitting	before	the	Public	Registry	the	articles	of	incorporation	and	Bylaws	Company	in	
order	to	
register	it.

3.	Registering	the	commercial	books,	the	minute	book	and	share	registry	book	before	the	Pub-
lic	Registry.

4.	Registering	the	corporation	as	a	commercial	entity	before	the	Public	Registry.	

5.	Registering	the	commercial	books	before	the	Nicaraguan	tax	authority	“General	Income	
Direction”	(GID)

6.	Obtaining	of	the	tax	authorization	number,	better	known	as	RUC	before	the	GID	and	autho-
rization	to	issue	invoices.	

7.	It	must	register	with	the	municipality	of	the	place	where	operates.		The	registration	fee	is	1%	
of	the	initial	paid	in	equity.		

In	order	to	proceed	with	the	incorporation,	two	partners	must	grant	the	incorporation	deed	
and	articles	of	incorporation.	Capital	stock	is	represented	by	shares,	is	usually	nominal,	and	
must	be	expressed	in	Nicaragua’s	official	currency,	the	Cordoba.		Transfers	of	stock	must	be	
registered	by	the	corporation	in	its	internal	books,	duly	registered	before	the	Public	Mercantile	
Registry.	

The	Shareholder’s	Meeting	is	the	maximum	authority	of	the	corporation.	Such	entity	has	the	
most	ample	powers	to	represent	and	resolve	on	any	issues	of	the	corporation,	For	executive	
decision	making	and	management	they	usually	delegate	some	powers	to	the	corporate	of-
ficers.	The	Shareholder’s	Meeting	must	be	celebrated	at	least	once	a	year.

Nicaraguan	corporations	have	a	one	tier	management	structure.	The	Board	of	Directors	takes	
the	 place	 of	 both	the	Board	 and	 the	Executive	 Committee	 that	may	 exist	 in	 the	 American	
equivalent.	The	Board	of	Directors	must	have	a	minimum	of	three	members:	President,	Sec-
retary	 and	 Treasurer	 or	 Vice-President.	 Nicaraguan	 legislation	 requires	 that	 members	 of	 the	
Board	of	Directors	be	Shareholders.		The	Board	of	Directors	must	meet	at	least	once	every	year.

Nicaraguan	corporations,	additionally,	may	have	other	employees,	directly	reporting	to	the	
Board	of	Directors,	in	various	administrative	capacities,	such	as	General	Manager.	These	em-
ployees	may	have	powers	and	faculties	to	represent	the	corporation,	if	the	board	of	Directors	
or	the	shareholders	determines	so,	and	may	be	employed,	designated	or	otherwise	promoted	
or	selected	by	decision	of	either	the	Board	of	Directors	or	the	shareholders.
                                                                      DOING BUSINESS IN NICARAGUA
Corporate	law	establishes	that	each	corporation	must	have	a	comptroller,	who	is	not	a	mem-
ber	of	the	Board	of	Directors.		In	general,	the	comptroller’s	obligations	are	to	oversee	man-
agement	of	the	corporation	and	operation	of	the	Board	of	Directors.

Members	of	the	Board	of	Directors,	the	comptroller	and	all	shareholders	may	all	be	Nicara-
guan,	foreign	or	residents;	however,	the	corporation	must	be	represented	by	a	Nicaraguan	
citizen	or	a	foreign	resident	of	Nicaragua.

Members	of	the	Board	of	Directors	can	be	elected	for	a	maximum	period	of	10	years	and	they	
may	be	reelected.	They	may	also	be	removed	from	office	at	any	time.	These	decisions	rest	
with	the	Shareholders	Meeting.	The	Shareholders	Meeting	may	revoke	all	powers	granted,	by	
itself	or	the	incorporators,	to	any	officers,	employees	or	groups	thereof,	at	any	time.	

The	corporation’s	fiscal	year	ends	on	30	June.

Dividends	 can	 only	 be	 distributed	 if	 previously	 agreed	 to	 by	 a	 Shareholders	 Meeting	 and	 if	
they	originate	from	profits	as	determined	by	a	duly	approved	balance	statement.

In	order	to	begin	operations,	all	corporations	must	register	before	the	Tax	Authority	and	the	
Municipality.	The	registration	fee	at	the	Municipality	is	1%	of	the	capital	stock.	

• BRANCH OF FOREIGN COMPANY

The	 Nicaraguan	 Commerce	 Code	 establishes	 that	 any	 Corporation	 duly	 incorporated	 in	 a	
foreign	country	that	wishes	doing	business	in	Nicaragua	may	establishes	a	branch	office	and	
for	that,	requires	to	do	the	following:	(i)	Registration	of	the	articles	of	incorporation	and	bylaws	
before	the	Public	Registry,	as	well	as	the	designation	of	the	attorney.	(ii)	The	Publication	in	the	
Official	Gazette	of	the	general	balance	sheet	containing	the	assets	and	liabilities,	as	well	as	
the	designation	of	the	individuals	in	charge	of	its	administration	and	direction,	in	the	case	of	
Share	 Corporation.	 (iii)	 Appoint	 and	 maintain	 a	 social	 domiciled	 in	 Nicaragua	 with	 a	 most	
general	attorney.	

• INCORPORATION COSTS

1.	    Registration	fees	before	the	Public	Registry	which	depends	of	the	capital	stock	of	the	
company	will	be	paid	ten	cordobas	per	each	one	thousand	cordobas	or	fraction	over	the	au-
thorized	capital	stock.	The	amount	can	be	neither	less	than	five	hundred	cordobas	nor	more	
than	twenty	hundred	cordobas.	
2.	    Acquisition	of	accounting	and	corporate	books,	US$20.
3.	    Fees	for	registration	of	accounting	books,	approximately	US$	5.00.
4.	    Registration	 before	 municipal	 authorities,	 which	 would	 be	 1%	 over	 the	 equity	 of	 the	
company.



                                                                       DOING BUSINESS IN NICARAGUA
MINORITY SHAREHOLDER´S RIGHTS UNDER NICARAGUAN LEGISLATION

Corporations	and	its	operations	are	regulated	by	the	Code	of	Commerce	of	the	Republic	of	
Nicaragua,	as	well	as	the	incorporation	deed	and	articles	of	incorporation.

The	incorporation	deed	and	its	articles	should	not	contradict	the	Code	of	Commerce,	and	in	
case	the	shareholders	omit	to	regulate	a	certain	matter	in	the	incorporation	documents,	it	will	
be	regulated	by	the	Code	of	Commerce.		This	Code	provides	for	a	series	of	arrangements	in	
order	to	protect	the	right	of	minority	shareholders,	such	as:

A.	Qualified	quorum	absolute	majority	of	shareholders	positive	vote	is	required	for	the	amend-
ment	of	the	articles	of	incorporation	(Articles	211	and	262	of	the	Commercial	Code).

The	article	262	of	the	Commercial	Code	states	that,	unless	otherwise	established	in	the	articles	
of	incorporations	or	bylaws,	a	minimum	quorum	of	three	fourths	of	the	paid	in	capital	is	re-
quired	to	modify	the	articles	of	incorporation.

B.	Term	of	15	days	to	summon	shareholders	meeting	and	assistance	of	majority	of	shareholders	
present	to	celebrate	a	shareholders’	meeting	(Article	253	of	the	Commercial	Code).
The	Commercial	Code	establishes	that	a	quorum	of	more	than	50%	of	the	paid	in	equity	and	
a	15	day	term	are	required	to	summon	and	celebrate	shareholders	meetings.

C.	Possibility	of	dissolution	when	the	corporation	has	less	than	three	shareholders	(Article	270	
of	the	Commercial	Code).

If	the	number	of	shareholders	of	the	corporation	is	less	than	three	during	a	more	than	6	months,	
any	of	the	shareholders	may	request	the	dissolution	of	the	corporation.	


                                                                  DOING BUSINESS IN NICARAGUA
D.	 Appointment	 of	 the	 directors	 “among	 the	 shareholders”	 (Article	 244	 of	 the	 Commercial	
Code).
The	Commercial	Code	provides	that	to	be	a	member	of	the	Board	of	Directors	one	must	be	
a	shareholder.	If	a	corporation	is	a	shareholder,	of	its	representatives	may	take	a	seat	at	the	
Board	of	Directors,	or	whomever	it	designates	as	representative	for	such	post.

E.	Limitation	to	the	quantity	of	votes	that	Shareholders	can	exercise	(Article	260	of	the	Com-
mercial	Code).

The	 Commercial	 Code	 establishes	 that	 no	 shareholder	 will	 be	 able	 to	 represent	 more	 than	
10%	of	the	issued	stock,	nor	more	than	20%	of	the	present	stock	in	the	Board.	The	Commercial	
Code	 does	 not	 establish	 specifically	 that	 this	 limitation	 may	 be	 eliminated	 in	 the	 articles	 of	
incorporation.

BUSINESS ENTITIES

• TYPES OF ENTITIES

Nicaraguan	Commerce	Code	establishes	four	types	of	companies:

1.	Limited	liability	Company
2.	Limited	Partnership
3.	Corporation
4.	Limited	share	partnership

• PROS AND CONS OF EACH

Pros	and	Cons	of	the	Limited	Liability	Company:

•	The	Firm	Name	must	to	express	the	partner’s	name	who	have	the	management	of	the	com-
pany,	it	helps	for	identify	the	people	related	with	the	company.		
•	The	registered	signature	stops	the	possibility	than	another	person	can	use	it.	
•	The	full	partners	are	responsible	joint	and	severally	of	whole	obligations	legally	constituted	
under	the	corporate	name,	however	they	can	limit	these	liability,	in	order	to	do	that,	it	has	to	
be	added	the	word	“limited”.
•	Partners	can	do	not	require	the	restitution	of	their	capital	before	to	conclude	the	company	
liquidation,	unless	if	it	consist	on	usufruct	of	the	object	of	the	general	fund.	

Pros	and	Cons	of	the	Limited	Partnership:	

•	A	lot	of	people	are	responsible	unlimited,	joint	and	severally	of	the	social	obligations,	with	
another	people	that	are	not	responsible	about	debts	and	loss	of	the	company	until	the	con-
currence	of	the	social	stock	that	they	obligate	to	import	to	the	company.


                                                                          DOING BUSINESS IN NICARAGUA
Pros	and	Cons	of	the	Corporations:	

•	The	stockholders	are	responsible	until	the	amount	of	their	contribution.		
•	The	capital	stock	is	divided	into	stocks	easy	to	transfer.	
•	The	Board	of	Directors	is	approved	only	by	stockholders.		
•	Corporations	can	merge	with	other	corporations.			
•	They	are	anonymous;	as	a	consequence	any	social	denomination	can	be	used	without	em-
ploy	names	of	the	stockholders.		

Pros	and	Cons	of	the	Limited	share	partnership:

•	This	company	is	constituted	by	stockholders	unlimited,	joint	and	severally	responsible	about	
the	social	obligations	and	their	liability	is	limited	to	the	contribution	of	their	stock	share.




•	The	names	of	the	stockholders	can	be	present	on	the	Corporate	Name,	if	the	above	case	
do	not	occurs,	the	Corporate	Name	will	ended	with	the	words	“and Company”.		When	a	par-
ticular	denomination	is	determinate	will	be	added	to	this	one	the	words	below:	Limited Share
partnership.

•	The	stock	shares	of	the	partners	never	can	be	to	the	titleholder.	

• REQUIREMENTS

The	Limited	liability	Company	and	Limited	Partnership	must	contain	the	following	requirements	
in	order	to	be	enforceable:

1.	Name,	Last	Name	and	domicile	of	the	partners.	
2.	Business	of	the	company.	
3.	The	Corporate	Name	expressing	the	partners	who	have	the	management	of	the
		         company		 and	the	use	of	the	above	mentioned	corporate	name.		
4.	The	capital	contributed	by	each	partner,	it	can	be	by	money	or	credit,	it	must	
											indicate	the	value	of	each	one,	or	the	bases	on	the	evaluation	be	done.	
                                                                  DOING BUSINESS IN NICARAGUA
5.	Domicile	of	the	company.
6.	The	duration	of	the	company	and	the	way	of	calculating	the	above	mentioned	
											duration

The	 Corporation	 and	 Limited	 Share	 Partnership	 must	 contain	 the	 following	 requirements	 in	
order	to	be	enforceable:

1.	Name,	Last	Name	and	domicile	of	the	grantor.	
2.	The	Firm	Name	and	domicile	of	the	company
3.	The	corporate	purpose	and	the	activities	for	what	its	capital	is	destined	
4.	The	method	to	elect	the	persons	who	will	exercise	the	management	of	the	company.	
5.	The	manner	to	elect	the	vigilant.
6.	The	system	of	convocation	and	celebration	for	the	general	shareholder’s	ordinary	
											and	extraordinary	meeting.	
7.	Capital	Stock.
8.	Number,	quantity,	quality	and	the	value	of	the	stocks.	(Nominatives	and	titleholder)
9.	The	term	and	manner	to	inform	the	subscribed	capital.		
10.	The	advantages	or	particular	rights	that	are	reserved	by	the	founders.	
11.	Rules	in	order	to	create	the	balances,	calculation	and	distribution	of	the	benefits	
12.	Reserve	fund
13.	The	time	that	the	society	must	begin	and	conclude
14.	The	persons	who	have	provisional	representation	of	the	company

TAX REGULATIONS

The	most	relevant	tax	deductions	in	Nicaragua	are	the	following:

• INCOME TAX “IMPUESTO SOBRE LA RENTA” (IR)

“Taxable	Revenue”:	Taxable	revenue	is	the	net	revenue	that	results	from	applying	the	deduc-
tions	permitted	by	the	law	called	“Ley de Equidad Fiscal”	(Article	20).
For	an	individual,	the	tax	is	calculated	in	accordance	to	the	progressive	table	described	be-
low:


    TAXABLE REVENUE           APPLICABLE BASE                  TAX            IN EXCESS OF
   FROM C$ UNTIL C$                                        PERCENTAGE
   1.00	 									50,000.00    0                          0%                 0
   50,001.00			100,000.00      0                          10%                50,000.00
   100,001.00		200,000.00      5,000.00                   15%                100,000.00
   200,001.00		300,000.00      20,000.00                  20%                200,000.00
   300,001.00		500,000.00      40,000.00                  25%                300,000.00
   500,001.00		and	up          90,000.00                  30%                500,000.00


                                                                    DOING BUSINESS IN NICARAGUA
Corporations	pay	a	fixed	percentage	of	30%	of	their	taxable	revenue.	It	is	important	to	em-
phasize	that	in	Nicaragua,	dividends	are	exempt	from	paying	the	IR	in	Nicaragua.	
“Fiscal	Year”:

For	the	effects	of	the	application	of	IR,	the	ordinary	taxable	year	is	from	1st	of	July	of	a	year	
until	30th	of	June	of	the	following	year	(Article	67	Reglamento de Ley de Equidad Fiscal).
“Not	taxable	Income:

Article	11	of	the	law	“Ley de Equidad Fiscal”	lists	the	types	of	income	or	patrimony	increases	
that	are	not	encumbered	by	IR.	We	consider	that	the	following	are	the	most	important:

A.	Interest,	capital	earnings	and	other	revenues	that	are	perceived	by	a	foreign	individual	or	
legal	entity,	originating	from	bonds	acquired	in	the	Stock	Exchange	Market	duly	authorized	
to	operate	in	Nicaragua.

B.	Interest	accrued	from	loans	by	international	credit	institutions	(IIC,	IDB)	and	agencies	or	
development	institutions	of	foreign	governments.

C.	 Interest	 accrued	 from	 loans	 of	 short,	
medium	 and	 long	 term,	 granted	 by	
banks	 or	 foreign	 institutions	 to	 national	
financial	 institutions,	 and	 to	 Nicaraguan	
individuals	or	corporations.	

• VALUE ADDED TAX “IMPUESTO AL VAL-
OR AGREGADO” (IVA)

Transactions	 that	 are	 affected	 by	 the	
IVA:
-	Transfer	of	goods
-	Rendering	of	services
-	Import	and	admission	of	goods	
Applicable	Rate	to	each	transaction:

This	 tax	 is	 applied	 to	 the	 sale	 of	 goods	
and	 on	 the	 rendering	 of	 services.	 The	
rate	 of	 this	 tax	 is	 15%t	 over	 the	 price	 of	
the	goods	or	services	rendered.




                                                                   DOING BUSINESS IN NICARAGUA
• MUNICIPAL TAXES

All	 corporations	 and	 individuals	 that	 customarily	 or	 sporadically	 are	 devoted	 to	 the	 sale	 of	
goods	or	to	industrial	or	professional	activities,	or	to	the	rendering	of	services	shall	pay	monthly	
a	municipal	tax.	The	tax	rate	is	1%	on	the	total	amount	of	the	perceived	gross	income.	Gross	
income	is	understood	as	the	sales	and/or	credit	or	any	other	perceived	revenue	deriving	from	
its	commercial	activity.	

“Registration	Tax:

All	corporations	or	individuals	that	are	in	the	line	of	business	of	the	sale	of	goods,	industries	or	
rendering	services	must	register	annually	with	the	Municipality.
The	registration	fee	is	2%	of	the	monthly	average	gross	income	obtained	by	the	sales	of	goods	
or	 rendering	 services	 from	 last	 three	 months	 or	 from	 the	 months	 elapsed	 from	 the	 opening	
date,	if	they	are	less	than	the	three	months.

• FREE TRADE ZONES

Free	 Trade	 Zone	 corporations	 enjoy	 a	 special	 fiscal	 regime	 and	 have	 greater	 benefits	 than	
corporations	not	located	in	such	zones.
Corporations	established	in	Free	Trade	Zone	enjoy	the	following	fiscal	benefits:

1.	Exemption	of	100%	of	payment	of	the	IR	generated	by	its	activities	during	the	first	ten	years	
of	operation.	From	the	tenth	year	on,	they	are	exempt	from	payment	of	60%	the	IR.	The	ac-
tivities	 included	 in	 these	 exemptions	 are	 the	 payments	 of	 the	 loan	 interest	 done	 by	 foreign	
nonresidents,	or	by	abroad	legal	services	in	or	out	of	Nicaragua.	The	activities	not	included	in	
these	exemptions	are	the	taxes	paid	for	personal	income,	wages,	salaries	or	perquisites	paid	
to	the	employee	of	the	corporation	established	in	the	Free	Trade	Zone.

2.	Exemption	of	all	taxes	and	customs	tariffs	applicable	to	the	importation	of	material,	equip-
ment,	machinery,	counterfoils,	or	parts,	samples,	molds	and	accessories	for	their	operation	in	
the	Zone;	as	well	as	applicable	taxes	for	the	installation	of	dining	rooms,	health	services,	medi-
cal	assistance,	day	care	centers,	scattering	and	any	other	type	of	goods	that	tend	to	satisfy	
the	needs	of	the	personnel	of	the	company	that	work	in	the	zone.

3.	Exemption	of	transportation	tax	of;	loading	vehicles	for	the	use	of	the	company	or	for	the	
use	of	any	personnel	of	the	company.	

4.	Total	exemption	of	municipal	taxes.

5.	Total	exemption	of	export	taxes	on	products	manufactures.

• INCENTIVES TO EXPORTS

                                                                        DOING BUSINESS IN NICARAGUA
Exporters	enjoy	the	following	benefits:	

1.	There	is	no	IVA	tax	on	exports.

2.	Producers	or	manufacturers	have	the	right	to	
refund	equivalent	to	1.5	%	of	the	FOB	value	of	the	
exports.	The	payment,	of	the	mentioned	refund,	
will	be	paid	in	a	term	not	greater	than	60	days.

• TERRITORIALITY PRINCIPLE

The	 income	 tax	 relapses	 on	 any	 revenue	 that	
comes	from	any	Nicaraguan	source.	

• EXEMPTIONS

A	lot	of	institutions	are	exempt	from	the	Income	
Tax,	some	of	them	are:	
1.	Universities	and	technical	top	education	centers;	as	well	as	technical	vocational	education	
centers,	the	workers’	unions,	political	parties,	the	Fire	brigades	and	the	Red	Nicaraguan	Cross,	
providing	that	they	do	not	chase	purposes	of	profit.	

2.	 Governmental	 Powers,	 municipalities,	 autonomous	 regions,	 the	 indigenous	 communities,	
autonomous	and	decentralized	entities	and	other	state	organisms.
                                               3.	Diplomatic	representations,	the	missions	and	
                                               international	organizations,	the	diplomatic	and	
                                               consular	representatives	of	foreign	nations,	pro-
                                               viding	that	reciprocity	exists

                                               4.	 The	 churches,	 denominations,	 confessions	
                                               and	religious	foundations	that	have	juridical	

                                               5.	Cooperatives	legally	constituted.	

                                               • DEDUCTIONS

                                               In	order	to	calculate	the	revenue,	is	necessary	
                                               to	make	some	deductions,	some	of	them	are:




                                                                  DOING BUSINESS IN NICARAGUA
1.	Cost	for	sale	of	the	produced	and	acquired	merchandise	in	any	business,	and	cost	of	the	
services	and	other	economic	activities	that	are	necessary	to	generate	taxable	revenue.

2.	Payment	made	by	the	contributor	in	order	to	rendering	services	freely	to	the	employees	
destined	for	the	cultural	overcoming	and	the	material	welfare	of	them.	

3.	The	effective	cost	of	the	contributions,	paid	by	the	contributor	regarding	to	the	quota	de-
rived	from	the	insurance	of	the	employee,	until	the	amount	established	by	laws,	in	fault	up	to	
10	per	cent	of	the	wages.	

4.	A	10	per	cent	of	the	utilities	that	a	contributor	pays	to	his	employees	as	bonuses	or	gratifica-
tions;	in	cases	of	being	members	of	the	companies	or	relatives	of	these	members,	there	will	be	
able	to	be	deduced	only	the	quantities	paid	as	wages	and	bonuses.	

5.	Losses	that	come	from	bad	credits,	duly	justified.	

6.	Losses	for	destruction,	break,	subtraction	or	appropriation	of	the	inverted	elements	in	the	
production	of	the	taxable	revenue,	if	they	do	not	were	covered	by	assurances	or	indemnifica-
tions;	neither	for	quotas	of	amortization	or	depreciation	necessary	to	renew	them.	

7.	Contributor	taxes.	

• TAX ON SALARIES

The	 wage	 of	 individuals	 will	 be	 fastened	 to	 the	 Income	 Tax	 only	 when	 it	 exceeds	 the	 C$	
50,000.00	at	year	equivalent	to	U$	905,	450	according	to	the	official	valuation	published	by	
Central	Bank	on	February	13,	2007.

The	thirteenth	month	or	“bonus”	will	not	be	understood	as	constitutive	income	tax	and	there-
fore	will	not	be	taxed	by	Income	Tax.	

• PROPERTY TAX

Taxes	related	to	the	Property	are	governed	by	Decree	number	3-95,	this	one	indicates	that	the	
properties	located	on	the	territorial	circumscription	of	each	municipality	of	the	country	and	
possessed	until	December	31	of	each	taxable	year,	will	be	taxed	by	the	“Real	State	Property	
Tax”.	
This	tax	is	1%	over	the	determinate	basis	according	to	Decree	number	3-95.	
Each	individual	or	juridical	personal	that	is	contributor	of	Real	State	Property	Tax	is	forced	to	
declare,	liquidate	and	to	pay	in	the	territorial	circumscription	of	each	municipality	where	the	
real	states	taxed	are	located.	
The	tax	to	be	paid	because	of	the	transfer	of	real	property	is	1%	over	the	higher	value	between	
the	agreement	value	and	the	value	pertaining	to	Catastro.	This	tax	is	known	as	Occasional	
Increase	and	will	be	paid	before	General	Income	Direction.
                                                                      DOING BUSINESS IN NICARAGUA
• STAMP TAX

The	stamp	tax	relapses	on	the	documents	established	by	the	Fiscal	Equity	Law,	when	those	
documents	 are	 issued	 in	 Nicaragua	 or	 in	 another	 country	 but	 their	 legal	 effects	 are	 in	 this	
country.	
This	tax	will	be	paid	simultaneously	with	the	granting	of	the	taxed	document,	and	the	stamps	
are	stick	on	it.	The	cancellation	occurs	when	the	stamps	are	sealed.	

In	cases	when	a	document	has	different	acts	granted	by	different	people,	the	stamp	tax	will	
be	paid	per	each	act	or	contract.	The	above	information	is	according	to	the	Fiscal	Equity	Law.

LABOR LAW

• GENERAL

The	 Labor	 Code,	 “Código del Trabajo”,	 regulates	 the	 relationship	 between	 employee	 and	
employer,	labor	and	all	matter	related	to	employment	in	Nicaraguan.	It	establishes	the	most	
basic	principals	such	as	the	non-waiver	of	employee’s	labor	rights.

More	than	90%	of	the	employees	of	a	business	must	be	Nicaraguan	nationals.	The	percent-
age	may	be	lower	if	authorized	by	“Ministerio del Trabajo”,	the	government	entity	in	charge	
of	regulating	labor	relationships.	

• INDIVIDUAL LABOR RIGHT

An	individual	labor	contract	or	labor	relationship	is	terminated	by:




                                                                         DOING BUSINESS IN NICARAGUA
A.-	The	expiration	of	the	agreed	term	upon	by	the	conclusion	of	the	task	or	service	that	origi-
nated	the	contract.

B.-	 The	 death	 or	 permanent	 incapacity	 of	 the	 employer;	 or	 the	 death	 or	 incapacity	 of	 the	
employee.

C.-	The	conviction	or	imprisonment	of	the	employee.

D.-	Definitive	shut	down	of	the	employer.

E.-	A	judicial	decision	providing	for	the	definitive	liquidation	of	the	company.

F.-	The	termination	of	the	contract	in	accordance	with	the	law.

G.-	The	retirement	of	the	employee.

H.-	A	force	major	or	Act	of	God	when	it	causes	the	termination	of	the	company.




Regardless	the	cause	of	termination	of	the	labor	contract,	the	employer	is	obligated	accord-
ing	to	the	law,	to	pay	the	employee,	or	to	whomever	corresponds	in	case	of	death	or	per-
manent	incapacity	of	the	employee,	the	accrued	portion	of	vacations	and	the	mandatory	
thirteenth	month	bonus.

When	the	term	of	the	contract	is	not	defined,	the	employee	may	terminate	the	labor	relation-
ship	by	giving	a	written	notice	to	the	employer	with	fifteen	days	of	anticipation.




                                                                       DOING BUSINESS IN NICARAGUA
The	termination	of	the	labor	relationship	by	mutual	consent	or	resignation	does	not	affect	the	
seniority	acquired	by	the	employee	in	terms	of	severance	payment.

When	the	employer	terminates	the	labor	contract	without	a	just	cause,	the	employee	is	en-
titled	to	an	indemnification	equivalent	to:	

A.-	One	month	salary	for	each	of	the	first	three	years	of	work.

B.-	Twenty	days	salary	for	each	year	work	counting	after	the	fourth	year.

In	any	case,	the	indemnification	will	not	be	lower	than	one	month	or	higher	than	five	months.	
The	fractions	between	years	worked	will	be	liquidated	proportionally.

The	 employer	 may	 terminate	 the	 contract	 without	 additional	 responsibility	 than	 paying	 ac-
crued	proportion	of	vacation	and	mandatory	thirteenth	month	bonus,	when	the	worker	incurs	
in	any	of	the	following	offenses:

A.-	Lack	of	moral	integrity	and	ethics.

B.-	Serious	offenses	against	the	life	and	physical	integrity	of	the	employer	or	of	the	work	mater.

C.-	Libelous	or	defamatory	expressions	against	the	employer	that	caused	harm	to	the	com-
pany.	

D.-	Any	violation	to	the	clauses	that	are	established	in	his/her	contract	or	internal	labor	
regulations	of	the	company	that	have	caused	harm	to	the	employer.

4.3) RIGHTS GRANTED TO EMPLOYEE´S UNDER NICARAGUAN LABOR LEGISLATION

Minimum	Wage:

As	October	1st	of	2008,	minimum	wage	rates	were	the	following:



            SECTOR                        MONTHLY                           DAILY                         PER HOUR
                                         C$ (Cordoba)
  Farming		  																																		1,392.15	    																				46.40	    																							5.80
  Fishing	   	          																								2,195.98	   																					73.19	   																							9.15
  Mines	and	Quarries	              													2,593.75	   																					86.45	   																							10.80
  Manufacturing	industry	 													1,941.92	            																					64.73	   																								8.09




                                                                                          DOING BUSINESS IN NICARAGUA
         SECTOR                   MONTHLY                          DAILY                       PER HOUR
                                 C$ (Cordoba)
Industries	subject	to	Spe-    2,367.31	     																										78.91	      	         						9.86
cial	Fiscal	Regime	

Electricity,	Gas	and	
Water;	Trade,	
Restaurants	and	Hotels,	      2,648.98	     																											88.29	     																	11.03
Transport,	Storage	and	
Communications

Construction,	Financial	
and	Security	                  3,232.02	    																											107.73	     																	13.46
Establishments

Community,	Social,	
domestic	and	Personal	        2,024.64	     																												67.48	    																			8.43
services

Central	and	Municipal	
government                     1,801.03	    																													60.03	    																			7.50


Vacation:

The	employee	shall	have	the	right	to	enjoy	a	15	continuous	and	remunerated	rest	days	per	
each	six	months	of	non-interrupted	service	to	the	same	employer.	

Holidays:

Our	legislation	establishes	as	holidays,	with	right	to	rest	and	salary	the	following	days:	
January	 1st,	 Easter,	 Labor’s	 Day,	 Revolution’s	 Day,	 Independence’s	 Day,	 Virgin’s	 Day	 and	
Christmas.	

Maternity:
Pregnant	employees	will	have	right	to	rest	during	four	weeks	previous	to	the	childbirth	and	for	
eight	weeks	after	that,	if	multiple	childbirths	occurs,	the	employee	will	rest	during	ten	weeks,	
without	prejudice	of	the	medical	assistance	that	must	be	given	her	by	the	social	institutions	in	
charge	to	protect	the	maternity.	

If	the	childbirth	occurs	before	the	programmed	day,	the	time	not	used	by	the	employee	be-
fore	the	childbirth,	will	be	added	to	the	time	for	the	postnatal	rest.	
The	 pregnant	 employee	 could	 not	 be	 farewell,	 except	 for	 a	 justified	 reason	 established	 by	
that	Ministry	of	Labor.

                                                                                  DOING BUSINESS IN NICARAGUA
Mandatory	bonus:

The	employee	has	the	right	of	a	mandatory	bonus	consisting	of	one	month	of	salary	after	an	
interrupted	year	of	work,	or	the	proportional	part	thereof,	greater	than	a	month	and	less	than	
a	year.		Such	bonus	should	be	paid	within	the	first	ten	days	of	the	month	of	December.
“Employer’s	obligation	to	register	the	employee	in	Social	Security	Institution:	
The	employer	is	obligated	to	register	immediately	on	the	second	day	of	work.	

• FOREIGN EMPLOYEES

The	Labor	Law	establishes	that	the	employer	must	to	contract	90	%	Nicaraguan	employees	as	
minimum.	The	Ministry	of	Labor	can	do	an	exception	to	this	limitation	due	to	technical	reasons.

• SOCIAL SECURITY/PENSION FUNDS

The	 employer	 must	 register	 to	 his	 employees	 under	 the	 Social	 Security,	 on	 the	 third	 day	 of	
having	being	contracted.	The	employer	assumes	a	15%	over	the	employee’s	wage	and	the	
employee	a	6.25	%	of	the	same	one.	
The	Social	Security	has	been	established	as	a	public	service	of	national	character	which	pur-
pose	is	the	protection	of	the	employees.

The	Social	Security	will	cover	gradually	and	progressively	the	following	social	contingencies:	
invalidity,	oldness,	death,	professional	risks	and	familiar	subsidies.	Likewise	it	will	give	the	ser-
vice	of	paying	the	subsidies	for	disease,	maternity	and	professional	risks.	If	the	employee	is	not	
covered	by	the	social	safety	regime	or	the	employer	it	has	not	affiliated	to	the	same	one,	the	
employer	will	have	to	pay	the	indemnifications	for	death	or	for	disability	caused	by	accidents	
or	professional	risks.

On	January	6th,	2006	was	published	a	law	which	annuls	“Pension	Saving	System	Law”	and	also	
“Superintendence	Organic	Pensions	Law”.	

PROPERTY

- ACQUIRING A PROPERTY
The	commonly	form	to	acquire	a	property	is	through	the	selling;	however	there	are	another	
form	for	acquiring,	for	example	the	gift.	

•	TAXES
•	PROPERTY	TAXES

In	Nicaragua	there	exists	a	tax	denominated	“Real	State	Property	Tax”,	which	is	established	in	
favor	to	the	municipalities	of	the	country.	This	tax	is	for	the	real	state	properties	located	on	the	
territorial	circumscription	of	each	municipality	of	Nicaragua	and	that	have	been	possessed	
until	December	31	of	each	taxable	year.
                                                                        DOING BUSINESS IN NICARAGUA
- CONVEYANCE TAXES
The	tax	to	be	paid	because	of	the	transfer	of	real	property	is	1%	over	the	higher	value	be-
tween	the	agreement	value	and	the	value	pertaining	to	Catastro.	This	tax	is	known	as	Oc-
casional	Increase	and	will	be	paid	before	General	Income	Direction.	

• ENVIRONMENTAL ISSUES

In	Nicaragua	there	exists	an	Environmental	and	Natural	Resources	General	Law	which	pur-
pose	is	the	protection,	preservation,	improvement	as	well	as	restoration	for	the	environmental	
and	natural	resources,	guarantee	his	rational	use	according	to	the	Political	Constitution.	

Additionally,	this	law	regulates	that	the	Property	Right	has	a	social	and	environmental	func-
tion	that	limits	his	exercise	according	to	the	above	mentioned	law.			

Nicaraguan	State	assumes	almost	in	its	entirety	the	environmental	task	of	the	rendering	of	ser-
vices;	such	as	water	and	sewer,	compilation,	treatment	and	elimination	of	tailing,	cleanliness	
and	reparation	of	streets,	and	control	of	emission.	

INTELLECTUAL PROPERTY

A. TRADEMARKS

The	procedure	for	a	trademark	registration	is	governed	by	Law	number	380	and	its	respective	
bylaw.	This	law	protects	trademarks,	tradenames	and	publicity	slogan.	

After	a	trademark	has	been	registered	it	is	important	to	use	it	in	the	country,	otherwise	any	
person	may	request	the	cancellation	of	the	same	one.	

A	trademark	is	registered	with	the	purpose	to	being	used	by	his	proprietor	or	the	person	who	
is	authorized	to	do	it.

B. PATENTS

The	Nicaraguan	Legislation’s	establishes	legal	rules	in	order	to	protect	the	inventions,	design,	
industrial	designs	and	utility	models	likewise	prevent	unfair	competition.	According	to	our	leg-
islation	the	inventions	that	are	capable	of	industrial	application	can	be	patent.	

The	Ministry	of	Foment,	Industry	and	Commerce	is	the	entity	in	charged	to	apply	this	law.	

The	patent	application	will	be	filed	before	the	Intellectual	Property	Office	and	it	must	contain	
a	lot	of	requirements	contained	in	the	law.	




                                                                   DOING BUSINESS IN NICARAGUA
FINANCIAL MARKETS

The	credit	instruments	do	not	produce	effects	to	the	issuer	and	third	parties,	if	the	provisional	
property	registration	over	the	title	does	not	produce	them.	

The	legitimate	possessor	of	a	credit	instrument	is	not	subject	to	repossession	unless	if	
has	acquired	it	by	bad	faith.		If	the	possessor	lost	the	credit	instrument	he	can	request	
	neither	the	cancellation	nor	the	reposition	according	to	the	General	Value	Law.

The	emission	of	debts	will	have	to	be	realized	through	commercial	paper	if	the	term	is	lesser	
than	360	days,	if	the	term	is	above	or	equal	360	days	the	emission	will	be	realized	by	bonds.	

The	Board	of	Directors	of	Superintendence	of	Banks	and	Other	Financial	Institutions	can	
determine	another	kind	of	commercial	instruments	as	debts	titles	with	its	corresponding	
characteristics.	

The	bonds	issued	according	to	this	law,	will	not	be	governed	for	the	articles	285	to	324	of	the	
General	Titles	Value	Law.	

• BANKING SYSTEM

In	October,	2005	a	new	law	that	regulates	the	banks	was	approved,	the	financial	not	bank	
institutions	and	the	financial	groups,	“General	Banking	Law,	Not	Banking	Financial	Institutions	
and	Financial	Groups	“,	(Law	561)

One	of	the	changes	that	the	new	law	includes	is	the	fact	that	no	one	can	own	more	than	the	
20%	of	the	total	shares	of	a	bank,	unless	being	authorized	by	the	“Superintendence	of	Banks	
and	Other	Financial	Institutions”	and	the	stock	participation	of	this	institutions	stays	opened	to	
many	possibilities.	

This	Law	contemplates	to	the	Financial	Companies	of	Special	Regime,	which	are	considered	
as	constituted	either	in	Nicaragua	or	in	abroad	and	have	property’s	link	with	Banks	and	Not	
Banking	Financial	Institutions.	

In	October,	2005	the	minimum	capital	required	in	Nicaragua	to	open	a	bank	was	increased	
to	C$	200.000.000.00	




                                                                   DOING BUSINESS IN NICARAGUA
• RELEVANT GOVERNMENTAL ENTITIES

The	Nicaraguan	Banking	System	as	well	as	the	
issuance	 and	 registration	 of	 securities	 and	 com-
mercial	papers	is	regulated	and	supervised	by	the	
Superintendence	of	Banks	and	Other	Financial	In-
stitutions




                                                         DOING BUSINESS IN NICARAGUA

				
DOCUMENT INFO