Nicaragua is a great place for international companies to do business. Starting a business there is easy, and the tax system is favorable for ventures in tourism, energy, and innovation. However, it is important to understand corporate compliance in Nicaragua before launching a company in the country. The laws and regulations around corporate compliance can differ from country to country. To help make this process easier, we have put together this article on corporate compliance in Nicaragua to provide guidance on what steps to take.
Legal System in Nicaragua
The Judicial Branch in Nicaragua is responsible for overseeing all national trials and executing judicial sentences. Justices and judges operate independently, adhering to constitutional and legal mandates. The Organic Law of the Judicial Branch, established in 1998, governs this power and sets up a two-tier system with the Supreme Court having the authority to modify or revoke sentences. The legal system includes local judges, district judges, Courts of Appeals, and the Supreme Court of Justice.
Corporate Compliance
To register a company in Nicaragua, organizations need to follow specific steps including drafting an Act of Incorporation, purchasing necessary accounting and corporate books, submitting the Act of Incorporator at the Investment Service, registering as a trader and accounting books, and securing a Single Registration Document. It is also important to appoint local legal representation when incorporating a company in Nicaragua.
Liabilities
In Nicaragua, directors of corporations are generally not personally liable for the company’s obligations according to the Code of Commerce. However, they can be held accountable if they fail to fulfill the company’s administrative duties, violate its bylaws, or breach the law, facing liabilities to both the corporation and third parties. Criminal sanctions, including imprisonment, can be imposed if directors participate in self-serving decisions harmful to the company or the public.
Corporate Income Tax (CIT) and Permanent establishment (PE) laws
In Nicaragua, Corporate Income Tax (CIT) is based on income sourced within the country and is determined by the higher figure of either 30% of net taxable income or a definitive minimum tax ranging from 1% to 3% of the gross income earned during the fiscal year. The country also has clear laws on ‘permanent establishment’ within its income tax system.
Free Trade Zones and Taxable Period
Nicaragua has established various types of export-free zones, including those for processing, industrial production, logistics, and outsourcing services. The country’s typical taxable period runs from January 1 to December 31, but businesses can request approval from tax authorities to adopt different fiscal year-end dates.
Biz Latin Hub can help with Corporate Compliance in Nicaragua
At Biz Latin Hub, we offer a wide range of market entry and back-office solutions in Latin America and the Caribbean. We have expertise in corporate compliance in Nicaragua, providing legal services, accounting and taxation, hiring, and visa processing. Our extensive presence in LATAM and strong partnerships throughout the region allows us to assist with international projects and entering new markets in different countries. Get in touch with us today to learn more about our services and how we can help you achieve your business goals in Latin America and the Caribbean.
Biz Latin Hub’s Corporate Compliance Services in Nicaragua
