Nicaragua

Corporate - Income determination

Last reviewed - 07 July 2020

Taxable income is determined by the sum of all income derived from Nicaraguan sources, less allowable deductions, which generally include all expenses necessary to generate taxable income. Taxable income is computed according to International Financial Reporting Standards (IFRS) and modified, as required, by Nicaraguan income tax law.

Inventory valuation

Last in first out (LIFO), first in first out (FIFO), and the average cost methods are accepted for inventory valuation purposes. The tax authorities must authorise the change of a valuation method.

Capital gains and losses

Capital income and capital gains and losses are subject to definitive WHT and are not treated as ordinary taxable corporate income. The general rule is that capital income and capital gains are subject to 15% WHT; however, the following exceptions apply:

  • Capital income derived from the lease of fixed assets and non-fixed assets are subject to 12% and 10.5% WHT, respectively;
  • Capital gains derived from the transfer of assets subject to annotation in the public registry (e.g. real estate, vehicles) will be subject to a final WHT based on the amount of the transaction, as follows:

    Good value (USD*) WHT rate (%)
    From Through
    0.01 50,000.00 1
    50,000.01 100,000.00 2
    100,000.01 200,000.00 3
    200,000.01 300,000.00 4
    300,000.01 400,000.00 5
    400,000.01 500,000.00 6
    500,000.01 To more 7

    * United States dollars

Dividend income

Stock dividends paid by Nicaraguan entities to resident shareholders are subject to a 15% definitive WHT.

Interest income

Interest received from a Nicaraguan source, as well as the interest gained from deposits placed in the national financial system, is subject to a 15% WHT.

Investment grade interest paid to international banks is subject to a 10% WHT.

The WHT will not apply if the beneficiary of the interest payment is included in the list of exempt International Credit Institutions and Agencies or Foreign Governments Development Institutions, provided in the Ministerial Agreement 24-2014, which requires that the beneficiary should request the Finance and Public Credit Ministry for the corresponding exemption recognition.

Royalty income

Royalties are treated as capital income subject to a 15% WHT.

Foreign income

Business enterprises are subject to CIT only on Nicaraguan-source income.