Discusses pricing formula and other fees, value-added tax (VAT), etc.
Last Published: 7/21/2019

The Harmonized Tax Law (2012/822) passed in  December 2014 (2014/891) was revised in February 27, 2019 in an effort to raise revenue to cover the government’s current deficit.  There are three main sources of taxes in Nicaragua: income tax (IR), a value-added tax (IVA), and a selective consumption tax (ISC).  The Nicaraguan fiscal year runs from January 1 to December 31.

Income tax (IR) has three different categories: a) employment income, b) income from economic activities and c) capital income.  Nicaragua applies a graduated income tax with rates from 10 to 30 percent.  In addition, individual and corporate taxpayers whose income originated from industries such as agriculture, cattle ranching, forestry, fishing, mining, manufacturing, construction, hotels, restaurants, financial services, and others, were  subject to a 1% minimum tax on gross sales.  This 1% minimum tax on gross sales was raised to 2% for medium-sized businesses and 3% for most large businesses under the new recently approved law.

As of July 2018, the government has failed to apply several legally established tax exonerations.  Tax exoneration policy has existed since the 1950s and permits local purchases and importation of raw materials, intermediate goods, capital goods, spare parts, and parts and accessories for machinery and equipment.   According to industry executives, the policy is a key competitive advantage for the country and promotes exports and consumption of locally produced goods. 

A value added tax (IVA) of 15% applies to the sale of domestic and imported goods and services.  The new law also extended this 15% value added tax (IVA) to previously exempt products like agriculture products (fertilizers, tractors, etc.),  meats, natural beverages, dairy products, coffee, rice, some national vegetables, imported onions and potatoes, refined sugar, and oil (except for soy and palm oil). 
A selective consumption tax (ISC) is levied on a variety of goods.  The tax generally ranges from 10% to 30% but is as high as 60% for tobacco products and alcoholic beverages.  The ISC on domestic goods is based on the manufacturer's sale price, while the ISC on imported goods is based on the cost of goods, insurance, and freight (CIF) value.

Commodity transactions on the Nicaraguan exchange market are subject to a 1.5% tax.

Based on the Consumers’ Rights Protection Law (2013/842), the Nicaraguan Ministry of Development, Industry and Trade regulates maximum prices for retail and wholesale generic and branded pharmaceutical products.  The Nicaraguan Energy Institute regulates liquefied natural gas prices.  Prices for public utilities such as water and electricity are also regulated. See the Investment Climate Statement for more information.
 

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