SIGNIFICANT DEVELOPMENTS
There have been no significant tax or regulatory developments in the past year.
TERRITORIALITY AND RESIDENCE
Nicaragua taxes its citizens and all residents and nonresidents on their income originating in Nicaragua. Taxable income that originates in Nicaragua obtained by nonresidents or nondomiciled persons is determined as a percentage of gross income, depending on the nature of the income.
Gross income
Employee gross income/The taxable compensation of employees, resident or nonresident, includes all types of income (salary, bonuses, overtime, paid vacations, housing and car allowances, reimbursement for tax and children’s educational expenses, benefits-in-kind, etc.). There are no concessions of any kind to foreigners. Total personal gross income can be estimated ex officio by the fiscal establishment.Capital gains and nvestment income/Capital gains on the sale of property and real estate or shares of other companies are taxable as ordinary income. Investment income earned in Nicaragua is taxable. Interest income from savings and time deposits is not taxable. Dividends paid to Nicaraguan citizens are exempt from income tax.
DEDUCTIONS
Business deductions/Personal business-related expenses are deductible if properly documented and accounted for and if accepted by the fiscal authorities as proportional to income originated by the business activities. Total business expenses can be determined ex officio by the fiscal authorities as a percentage of gross income.
Nonbusiness expenses/Such expenses are not recognized as deductible expenses.
TAX CREDITS
Tax credits are not permitted.
OTHER TAXES
Social security taxes/Tax approximates 6.25% of salaries and wages with no maximum limit for employees; 15.00% is payable by the employer.
TAX ADMINISTRATION
Returns/A corporation has the obligation to withhold monthly the income tax applicable to the employees that earn more than C$50,000 and must prepare and present at the end of August an annual report to the fiscal authorities indicating the total income and the withheld tax. No income tax return is required by the employee. An employee that received other income provided by other activities is obligated to file an income tax
return. The tax year for individuals that are not employees ends June 30； this return must be filed within 90 days of this date.
Payment of tax/There is income tax withholding from salaries. All other income is subject to 1% withholding tax.
TAX RATES
A partial tax rate table is as follows.
Taxable income Tax on Percentage
Over Not over Column 1 on excess
(Column 1)
0 C$ 50,000……………………………… - -
C$ 50,000 100,000……………………………… - 10
100,000 200,000……………………………… C$ 5,000 15
200,000 300,000……………………………… 20,000 20
300,000 400,000……………………………… 40,000 25
INDIVIDUAL TAX CALCULATION
Assumptions
Resident employee with wife and two children; one spouse earns income.
TAX COMPUTATION
Gross income:
Salary and personal business activities……………………………… C$ 400,000
Interest income from savings and time deposits …………………… 30,000
Dividends received ………………………………………………… 10,000
Total gross income …………………………………………………… 440,000
Less:
Interest income from savings and time deposits………… 30,000
Personal business expenses properly documented……… 75,000
Dividends received……………………………………… 10,000 115,000
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