Nicaragua, located in Central America, presents excellent investment opportunities. It offers steady economic growth, a safe environment, and a strategic position. Establishing a business in Nicaragua is a quick and simple process with low barriers to entry. Investors can take advantage of a growing middle class, thriving tourism industry, and government incentives that support various sectors. The first step to enter this promising market is company formation/incorporation in Nicaragua. Below, we outline the six steps required for investors to establish a company in Nicaragua:
Step 1: Draft Act of Incorporation: This document requires a minimum of two shareholders, who can be individuals or corporations, and a starting capital of C$10,000 (approximately US$400). A legal representative with Nicaraguan residency must be appointed, and the final act must be authorized and certified by a Nicaraguan public notary.
Step 2: Purchase Accounting and Corporate Books: These books are necessary for company registration and can be obtained from local bookstores.
Step 3: Submit Act of Incorporation at VUI: The Act of Incorporation should be submitted to the Ventanilla Unica de Inversiones (Investment Service) and processed by the Commercial Registry. A payment of 1% of the company’s capital, up to a maximum of C$30,000 (approximately US$1,200), is required.
Step 4: Register as a Trader and Register Accounting Books: After the incorporation process, it is necessary to register as a trader and register the accounting books with the Commercial Registry. This procedure is also conducted at the VUI.
Step 5: Obtain the Single Registration Document: This document can be obtained simultaneously with the previous step. It is completed and submitted at the VUI and provides the investor with the Municipal License, the License of the Nicaraguan Social Security Institute (INSS), and the Tax Payer Registration (RUC) of the General Revenue Department. A payment of 1% of the company’s capital is required for the Single Registration Document.
Step 6: Legal Representation: For a corporation, shareholders must appoint a legal representative who is a Nicaraguan resident or citizen residing in the country. Choosing a trusted individual is crucial, and the representative’s powers can be limited by the Board of Directors as deemed reasonable.
Doing business in Nicaragua has its challenges, including inadequate rule of law, political instability, and arbitrary government regulations. There has been a crackdown on dissent and arrests of business leaders, leading to an exodus of the private sector. Customs delays, arbitrary valuations, excessive fines, and frequent audits also burden businesses. Property rights are difficult to defend due to increasing expropriations and land seizures. High energy costs and nationalization of the electricity distribution company add to the challenges for businesses’ long-term planning.
After incorporation, businesses have obligations to report taxes each month to national and municipal tax authorities. An annual year-end inventory declaration is also due within the first 30 days of January for businesses with inventory. Additionally, all corporations must submit an annual year-end income tax declaration before the last day of February each year. It is essential for corporations to maintain accounting records in compliance with Nicaraguan regulations and use fiscal documents as required by the Nicaraguan Tax Authorities.
When incorporating a company in Nicaragua, foreigners are allowed to own and operate businesses without restrictions. The process typically takes 4 to 6 weeks once the Articles of Incorporation and Bylaws have been finalized and signed. “S.A.” stands for “Sociedad Anónima,” which is the legal structure that separates the company from its shareholders. “CompañÃa Colectiva” is a partnership with limited liability for its shareholders.
Both “S.A.” and “CompañÃa Colectiva” offer limited liability in Nicaragua. “S.A.” is suitable for larger companies that prioritize shareholder anonymity, while “CompañÃa Colectiva” is more suitable for smaller companies where partners want to disclose their identities. The regulatory requirements for both structures are generally similar.
Biz Latin Hub can assist with company formation/incorporation in Nicaragua. They provide a comprehensive range of market entry and back-office solutions in Latin America and the Caribbean, including legal services, accounting and taxation, hiring, and visa processing. With a strong network and expertise in Nicaragua, they can help businesses achieve their goals in the region.
