Legal entities considered as a tax resident must comply with one of the following criteria:
- Registered according to the Laws of Nicaragua.
- Have their fiscal domicile in the territory of Nicaragua.
- Have their place of management located in the territory of Nicaragua.
The legal forms permitted in Nicaragua to constitute a corporation are stock corporations or limited liability companies, either as subsidiaries or branches.
Permanent establishment (PE)
Law 822 has incorporated a definition of ‘permanent establishment’ into the Nicaraguan income tax regime. This term means a place through which a non-resident taxpayer wholly or partially carries on business, including, inter alia, the following: a place of management; a branch; an office or agent; a factory; a workshop; and a mine, an oil or gas well, a quarry, or any other place of extraction of natural resources.
Such definition also includes a building site or construction or installation project or connected supervision activities, but only if its duration exceeds six months; and the performance of consultancy services, provided that they exceed six months within an annual period.
A PE may also be created where a person other than an agent of independent status acts on behalf of a non-resident taxpayer if:
- this person has in Nicaragua authority to habitually conclude contracts or undertake acts in the name of the non-resident taxpayer, or
- even though this person does not have such authority, this person habitually maintains in Nicaragua a warehouse of goods or merchandise from which this person regularly delivers goods or merchandise in the name of the non-resident taxpayer.
These PE rules will not apply to a branch or PE of non-resident taxpayers operating business activities of marine and air transportation of cargo and passengers, as well as land cargo transportation.