Doing Business in Nicaragua Overview

Doing Business in Nicaragua: Overview, Practical Law Country Q&A 5-604-7372
Doing Business in Nicaragua: Overview

by Claraliz Oviedo Maglione, Jazmin Garcia Toruño, Zayda Elizabeth Cubas Chavarría and Yury Fernando Cerrato
Espinoza, Alvarado y Asociados
Country Q&A | Law stated as at 01-Nov-2021 | Nicaragua
A Q&A guide to doing business in Nicaragua.
This Q&A gives an overview of key recent developments affecting doing business in Nicaragua as well as an
introduction to the legal system; foreign investment, including restrictions, currency regulations and incentives;
and business vehicles and their relevant restrictions and liabilities. The article also summarises the laws regulating
employment relationships, including redundancies and mass layoffs, and provides short overviews on competition
law; data protection; and product liability and safety. In addition, there are comprehensive summaries on taxation
and tax residency; and intellectual property rights over patents, trade marks, registered and unregistered designs.
Overview
Legal System
Foreign Investment
Business Vehicles
Environment
Employment
Laws, Contracts, and Permits
Termination and Redundancy
Tax
Taxes on Employment
Business Vehicles
Dividends, Interest, and IP Royalties

Groups, Affiliates, and Related Parties
Customs Duties
Double Tax Treaties
Competition
Anti-Bribery and Corruption
Intellectual Property
Marketing Agreements
E-Commerce
Advertising
Copyright © Thomson Reuters Canada Limited or its licensors. All rights reserved. 1
Data Protection
Product Liability
Regulatory Authorities
Other Considerations
Contributor Profiles
Claraliz Oviedo Maglione, Senior Associate
Jazmin Garcia Toruño, Associate

Zayda Elizabeth Cubas Chavarría, Junior Partner
Yury Fernando Cerrato Espinoza, Senior Associate
Overview
1. What is the general business, economic and cultural climate in your jurisdiction?
Economy and Dominant Industries
Nicaragua has emerged as one of Central America's fastest growing economies during the last decade. Nicaragua gross domestic
product has experienced steady growth, with an average rate of 3.3% and total exports grew by 5% in 2019. (PRONicaragua:
https://pronicaragua.gob.ni/en/).
One of the reasons for this positive performance is that, according to the World Bank, Nicaragua has the lowest export
management costs in Central America, which makes it a very attractive country for export-oriented companies.
Nicaragua has an open economy and its key industries are agribusiness, light manufacturing, and outsourcing services
(PRONicaragua).
Population and Language
The estimated national population is 6.5 million people, 51% of whom are female and 49% male (National Institute of
Development Information (INIDE)). Nicaragua's population is characterised by its youth, 76% of the population is below the
age of 40, which is a competitive advantage for the country. Nicaragua's official language is Spanish. Managua is the capital
and the seat of government.
Business Culture
Employees in Nicaragua are entitled to nine paid holidays per year: 1 January, Easter Thursday, Good Friday, 1 May, 19 July,
14 and 15 September, and 8 and 25 December. In addition, employees are entitled to paid days off (asueto) on the days of the
patron saint of the city where they work, which in the city of Managua are 1 and 10 August.
The state must guarantee national and foreign investments, to contribute to the economic and social development of the country,
without detriment to national sovereignty and workers' labour rights .The state must also provide a legal framework to promote
public-private projects and facilitate, regulate, and stimulate medium- and long-term investments to improve and develop
infrastructure. (Article 100, Nicaraguan Political Constitution.)
2. What are the key recent developments affecting doing business in your jurisdiction?
New Legislation
A number of business, economic, political, and legislative developments have had an effect on doing business in Nicaragua.
In particular, Law No. 1035 Law of Reforms to Law No. 698 General Law of Public Registries was approved and published
in La Gaceta No. 158 of 25 August 2020. This reform creates the Registry of Final Beneficiaries of Nicaraguan Mercantile
Companies. The Supreme Court of Justice is in the process of issuing special regulations for final beneficiary registry, which
will state the process for the registration, companies' obligations and fines for non-compliance.
This reform to Law No. 698 was made in response to the Financial Action Task Force's International Co-operation Review
Group's (ICRG) recommendation that Nicaragua take action to prevent commercial companies being used for money laundering.
It aims to implement systems to provide adequate, timely, and updated information of the final beneficial owners of legal entities
who exercise control over a company.
The main terms of Law No. 1035 are as follows:
• Definition of final beneficial owner. Law No. 1035 defines the final beneficiary as the natural person who directs
company operations, and who has either direct ownership or control, or directs them through a chain of ownership or
other means of control. The final beneficiary must be successively identified by following the chain of ownership until
reaching the natural person who exercises control.
The law applies to all commercial companies in Nicaragua whether their ownership is foreign or national.
• Registration requirements for companies formed before Law No. 1035. The schedule for the registration of
commercial companies before Law No. 1035 and its regulations enters into force is as follows:
• companies with a name starting with the letters A to H had until 18 October 2021 to register; and
• companies with a name starting with the letters I to Z have from 19 October 2021 to 18 April 2022 to register.
• Registration requirements for companies formed after Law No. 1035. Companies formed after Law No. 1035
entered into force must identify the final beneficial owner in their deed of incorporation and when they are registered
provide documents proving the chain of ownership.
• Additional requirements for companies owned by foreign legal entities. When the directors of a company are
foreign legal entities they must also submit apostilled copies to the registry of the following documents:
• the foreign entity's deed of constitution or articles of incorporation and by-laws;
• the foreign entity's national certificate of registration; and
• up-to-date certification of the foreign entity's shareholding composition, following the chain of ownership to its
final beneficiary.
• The registry's obligations. The registry must ensure the integrity, confidentiality, traceability, and security of the data
it holds in accordance with generally accepted international standards in data management and protection.
• Access to the registry. Only the company itself (through the person named for this purpose), the competent authorities,
and pertinent institutions will have access to the information.
• Updates to the registry. Companies must keep their final beneficiary information up to date, at the times established in
the regulations. They must register changes:
• of participation or ownership in the shareholding structure of both the company and its shareholders throughout
the shareholding chain;
• to the company's controlling bodies and their legal representatives; and
• that modify the identification and updating of the information of the register.
• Penalties for not registering. Companies that are not registered, in addition to the administrative sanctions established
by the regulations, for example fines, cannot:
• register any other document at the Public Registry, or take advantage of the legal effects of that registration; or
• Bring any legal actions.
Nicaragua has not issued any official provision, recommendation, or regulation related to the novel coronavirus disease
(COVID-19) pandemic.
Key Business and Economic Events
There have been no recent key business and economic events.
Political Events
There have been no recent key political events.
Legal System
3. What is the general legal system in your jurisdiction?
Nicaragua has a unitary system of government, based on the constitutional rule of law, and the Political Constitution of
Nicaragua is the supreme law.
Nicaragua is a presidential representative democratic republic. The President is both head of state and head of government. There
is a multi-party system, and executive power is exercised by the government. Legislative power is exercised by the government
(which issues, for example, regulations and presidential decrees) and the National Assembly. The judiciary is independent of
the executive and the legislature.
The general legal system is based on civil law, and includes a wide range of special laws, codes, regulations, and other forms
of legislation.
Foreign Investment
4. Are there any restrictions on foreign investment, ownership or control?
Government Authorisations
There are no authorisations required by the central or local government.
Restrictions on Foreign Shareholders
Foreign nationals can be shareholders in Nicaraguan entities. The requirements and procedures are the same for both national
and foreign investors. Legal entities in Nicaragua (including entities with foreign national shareholders) must have a legal
representative who must be either:
• A Nicaraguan national.
• A foreign national residing in Nicaragua.
Restrictions on Foreign Acquisition of Shares and Real Estate
The following developments have placed some restrictions on foreign investment:
• Article 21 of Law No. 977 prohibits the issuance of shares and certificates of bearer shares, and the conversion
of registered shares to bearer shares, with the purpose of controlling the structure of public limited companies.
Accordingly, public notaries are prevented from authorising public deeds of companies' incorporation with bearer
shares and bearer certificates.
• Foreign individuals, whether natural or legal, cannot in fact or in law, acquire real estate in the border security area
under any title and grants concessions because of social or public interest (Law No. 749, Law Regime Border law,
published in the Official Gazette No. 244 of December 13, 2010 and its regulations Decree 06-2011). The law goes
further and prohibits national companies with registered shares from registering or transferring their shares to foreign
investors. This is to guarantee that a company cannot be used as a vehicle for a foreign investor to purchase a property
within the border security area.
Specific Industries
There is a small number of business sectors where there are restrictions on foreign national shareholders, and in these business
sectors a majority of capital stock percentage must be held by Nicaraguan nationals.
5.Are there any restrictions or prohibitions on doing business with certain countries, jurisdictions, entities,
organisations or individuals?
There are no restrictions on Nicaragua doing business with other countries, jurisdictions, entities, organisations, or individuals.
However, the repatriation of profits to countries considered as tax havens are taxed differently from profits repatriated to other
non-tax haven countries. There is no official list of countries classified as tax havens. Nicaragua has signed trade agreements and
collaboration agreements with a number of different countries, including the US, Central-American countries, the Dominican
Republic, and Mexico.
6. Are there any exchange control or currency regulations or any registration requirements under anti-money
laundering laws?
There are no bank deposit reporting requirements.
Law No. 732, the Organic Law of the Central Bank of Nicaragua (Law No. 732) establishes that the official currency in
Nicaragua is the córdoba (NIO), and all prices, payments, fees, and charges must be expressed (or cancelled) in NIO (except for
those made by banks and financial institutions). Law No. 732 provides for certain exceptions for those obligations expressed in
a currency other than NIO, provided that they can be converted into NIO by applying a determined (or determinable) currency
exchange rate at the moment of payment. Other legal conditions may also apply in these cases. These are provided for in Law
No. 732.
Under the regulatory framework of the exchange market in Nicaragua, banks, financial corporations, exchange offices, and
natural and legal persons can freely buy and sell to the public United States dollars (USD) or any other freely convertible
currency, without any limitations.
The prevailing regime has been a "crawling peg" since January 1993, that is, a predetermined daily devaluation of the NIO
against the USD.
An entity's beneficial ownership must be recorded, see Question 2.
7. What grants or incentives are available to investors?
There are tax incentives available in the following sectors (among others) for both national and foreign investors:
• Exports.
• Free zones.
• Foreign investments.
• Exploration and exploitation of hydrocarbons and geothermic resources.
• Fishing.
• Coffee.
• Energy.
• Tourism.
Business Vehicles
8. What are the most common forms of business vehicle used in your jurisdiction?
Main Business Vehicles
Most common business vehicles in Nicaragua are:
• Corporations (sociedades anónimas), which comprise capital divided and incorporated into shares.
• Limited liability companies (LLC) (sociedades colectivas de responsabilidad limitada), which are formed by partners
whose capital in the company is in the form of a participation or contribution (as opposed to shares in corporations).
• Branches of foreign entities (branch) (sucursales de entidades extranjeras), which are established as branches of
foreign parent companies.
Trusts can also be used in Nicaragua.
Foreign Companies
Foreign investors most frequently use one of the three vehicles above. When it comes to choosing a specific vehicle, most
foreign investors consider their pre-existing corporate or organisational structure and try to keep it, or to follow it (to the extent
that that is possible), for their business in Nicaragua. The most flexible corporate structure can be found in corporations, as
a result of their share structure and the corporate governance requirements. Trusts are also available, but the costs associated
with these can be considerable.
9.What are the main formation, registration and reporting requirements for the most common corporate business
vehicle used by foreign companies in your jurisdiction?
Registration and Formation
Whether a corporation, LLC or a branch is being used, they must all be incorporated by a public deed before a Nicaraguan
public notary, and should be recorded with the Mercantile Registry, Nicaraguan Tax Authority, and municipal authority where
the company is doing business.
LLCs must contain at least one of the names of their partners in their legal name, followed by the words "y compañía limitada"
to limit the responsibility of the partners. Corporations should include the words "sociedad anónima"; and branches must
include the words "sucursal Nicaragua". These vehicles can be incorporated and registered in about 35 days. Some additional
permits and registrations may apply, depending on the business sector, and the timescales for obtaining permits and registrations
can vary, depending on the permit to be obtained and the governmental agency involved. The following can provide further
information:
• Mercantile Registry (www.registropublico.gob.ni).
• Municipal Authority of Managua.
• Tax Authority.
Reporting Requirements
Generally, the reporting requirements are as follows:
• Tax Authority: the following must be provided online:
• monthly tax returns for value added tax (VAT);
• income tax payments;
• minimum definitive payment; and
• withholding tax payments.
• Municipal Authorities: the following must be provided:
• income municipal tax and certain contribution rates (on a monthly basis);
• real estate municipal tax (paid annually in arrears); and
• tax returns.
Tax returns and payments are made directly at the Municipal Authority's Headquarters.
Share Capital
There are generally no capital, registration, or reporting requirements for share capital. However, some regulations on minimum
capital and adjustment of capital are applicable to the banking and financial sector.
Non-Cash Consideration
Shares can be issued for cash or in-kind consideration.
Rights Attaching to Shares
Restrictions on rights attaching to shares. The articles of incorporation and bye-laws can establish restrictions on rights
attaching to shares, which can vary on a case-by-case basis.
Automatic rights attaching to shares. The Nicaraguan Code of Commerce establishes that shares in corporations give
shareholders equal rights, unless there are provisions stating otherwise in the corporation's articles of incorporation.
10. What is the standard management structure and key liability issues for the most common form of corporate
business vehicle used by foreign companies in your jurisdiction?
Management Structure
The highest authority for corporations is the shareholders' meeting. The board of directors administer the corporation. Directors
should also be shareholders. LLCs can appoint administrators with the authority to legally represent and act on behalf of the
company, and these administrators may or may be not partners in the company. If administrators are not appointed, then any
partner is lawfully entitled to act on behalf of the company. Branches are managed by their parent company's board of directors
and/or shareholders, as applicable, though the branch in Nicaragua must also have an individual granted with full power-of-
attorney to represent the branch in the country.
Management Restrictions
There are no restrictions on foreign managers, but the legal representative must be either a Nicaraguan citizen or a foreign citizen
resident in Nicaragua. However, if a foreign manager is appointed who will be working in Nicaragua, certain immigration
requirements may apply.
Directors' and Officers' Liability
For corporations, the Nicaraguan Code of Commerce provides that directors are not liable (either personally, jointly, or
severally) for the corporation's obligations. However, directors will be liable (either personally, jointly, or severally) to the
corporation and third parties in the event of:
• Failure to execute the corporation's administrative mandate.
• Breach of the corporation's bye-laws.
• Breach of the law.
In addition, the Criminal Code establishes criminal sanctions including imprisonment for directors and officers:
• Participating in the decision-making process or in agreements which are in their interest but are harmful to the
corporation.
• Consenting to agreements in breach of the corporation's bye-laws or the law, which are harmful to the corporation or
the public.
Parent Company Liability
There are no specific provisions on parent company liability. However, claimants can try to pursue legal action against a parent
company where they have claims or disputes.
Consumers can exercise legal rights against suppliers. A supplier is defined as a public, private, or combined individual or legal
entity that usually engages in production, manufacture, import, distribution, commercialisation, or renting of goods or providing
services to consumers or users (Law No. 842, Law for the Protection of Consumers and Users (Law No. 842)). Therefore,
consumers may be able to bring a claim against a parent company where:
• The consumers have a claim related to goods.
• The Nicaraguan distributor's parent company is the company in charge of the production or manufacture, distribution,
or commercialisation of those goods in Nicaragua. In this case the parent company, and the Nicaraguan distributor,
would be suppliers for the purpose of Law No. 842.
Environment
11. What are the main environmental regulations and considerations that a business must take into account when
setting up and doing business in your jurisdiction?
In Nicaragua, regulations on environmental issues can change depending on the corporate business. Companies' commercial
activity is regulated by the laws of the sector in which they are engaged. Decree 20-2017 regulates the environmental evaluation
of permits and authorisations to promote the sustainable use of natural resources.
Companies that want to carry out any construction or renovate a building must obtain an Environmental Endorsement from
the municipality and formal permits.
Employment
Laws, Contracts, and Permits
12. What are the main laws regulating employment relationships?
Foreign Employees and Mandatory Rules of Law
The main governing law regulating employment relationships in Nicaragua is the Labour Code. It applies to all employees
working in Nicaragua, whether they are nationals or foreign nationals. Immigration law establishes the rules applicable to a
non-resident worker, who must obtain a work permit in order to work in Nicaragua. The Labour Code is a law of public order,
and the provisions under the Labour Code apply over any choice of law stipulated in the employment contract. Any provisions
in the employment contract which contradict the provisions of the Labour Code are inapplicable. Provisions under the Labour
Code cannot be waived.
The Law of Vested Rights also regulates employment relationships. This law provides in general terms that all the benefits and
rights granted to the employees through a contract or contained in any law or regulations must be considered as acquired rights
and cannot be diminished or reduced against the employee. In practice, the Labour Ministry has also stated that those benefits
granted by custom would be considered as vested or acquired rights.
Employees Working Abroad
Although the Labour Code stipulates that the Labour Ministry of Nicaragua must validate contracts with Nicaraguans to provide
services or perform tasks abroad, in practice, a legally valid contract is sufficient. If a Nicaraguan employer hires an employee to
work in Nicaragua or abroad, the provisions of the Nicaraguan Labour Code will apply, together with the tax and social security
obligations. If an employee is hired by a foreign employer to work abroad, the employment relationship will be governed by
the law of the employer's jurisdiction.
13. Is a written contract of employment required?
Main Terms
The Labour Code establishes that only certain labour contracts can be made verbally. Verbal labour contracts can be made only
for the following types of work:
• Fieldwork.
• Housekeeping work.
• Temporary or occasional work that does not exceed ten days' duration.
In all other cases labour agreements must be written. The main terms to be included in a labour agreement are as follows:
• Date and place of the agreement.
• Identity and domicile of the parties.
• Description of the work and the place of performance.
• The duration of work (for the day, and for the week).
• Whether the work is completed in the daytime or the nighttime (or a mixture of the two).
• Whether it is a fixed-term or indefinite period agreement.
• Compensation payable, and the form and place of payment.
• Signatures of the parties.
Implied Terms
There are certain rights implied in a labour relationship even though they are not expressly included in the labour agreement,
for example:
• The right of employees to earn no less than the minimum wage.
• The right to labour benefits, for example, severance, vacations, 13th month payment, and any additional benefits
granted by employers to employees deemed as acquired labour rights under the applicable law.
Collective Agreements
Collective agreements can apply, provided that they are properly issued and approved by the Labour Ministry.
14. Do foreign employees require work permits and/or residency permits?
Foreign employees must have either a temporary work permit or a working residency card to be able to work in Nicaragua.
Timing and procedures can vary on a case-by-case basis; but in general it takes between two to six months for permits to
be issued. The following documents (among others) will need to be supplied to the Immigration Authority and the Labour
Authority, as required in the application:
• Birth and health certificates.
• Criminal record.
• Passport (with no less than six months' validity).
• Labour contract, for review and approval.
The main governmental authorities responsible for issuing permits are the Immigration Authority and the Labour Authority.
The Labour Authority charges USD100 for the certification of the labour contract.
The Immigration Authority charges USD200 for the working residency card and USD25 per month for the temporary work
permit.
Termination and Redundancy
15. Are employees entitled to management representation and/or to be consulted in relation to corporate
transactions (such as changes in control, redundancies and disposals)?
Employees are not entitled to management representation, or to be consulted, in relation to a corporate transaction. However,
the assignment of employees from one company under the same labour contract (that is, without terminating the employees and
re-hiring them) requires the authorisation in writing of the employees to be assigned.
16.How is the termination of an individual's employment regulated?
Termination
Depending on the type of labour contract signed with the employee, they can be terminated.
Definite labour contracts (types of contracts that provide a specific term of duration of the contract) cannot be terminated
unilaterally before the date of termination stipulated in the contract, except for justified cause.
Indefinite labour contracts (types of contracts that do not provide a specific term of duration of the contract) can be terminated
as follows.
Fair Dismissal
These are dismissals where the employer is justified in dismissing the employee, and can include the following, where the
employee:
• Commits a serious offence endangering life and/or the physical integrity of the employer or their co-workers.
• Violates the terms of the employment contract.
• Makes a slanderous expression against the employer, which either discredits the company, or causes economic damage.
Justified dismissals must be approved by the Labour Ministry prior to the dismissal being made.
Statutory minimum notice. Definite labour contracts can be terminated immediately by the employer without notice (Article
45, Labour Code).
Unfair Dismissal
Grounds for unfair dismissal. Unfair dismissals occur where the employer has no justifiable cause to dismiss the employee.
Unjustified dismissal triggers the payment of severance pay (which can be up to five months' salary and can include other
labour benefits).
Remedies. The employee is entitled to request reinstalment to the same job position if the unjustified dismissal was:
• Made in infringement of Labour Code prohibitions.
• A restriction of the employee´s rights.
• A reprisal against the employee for a claimed labour right.
If the employer does not want to reinstall the employee, they must pay the employee twice the compensation due in their contract
for the duration of their contract.
Class of individuals
Pregnant women, directors of unions, and health and safety commission members cannot be dismissed without justified cause.
17. Are redundancies and mass termination regulated?
Redundancies and mass layoffs must be authorised by the Labour Ministry, according to the oral procedure stipulated in
Ministerial Agreement JCHG-019-12-08.
Tax
Taxes on Employment
18. In what circumstances is an employee taxed in your jurisdiction?
The concept of resident for tax purposes has applied in Nicaragua since January 2013, when the Tax Concertation Law came
into effect. Individuals are considered as resident for tax purposes (and therefore subject to taxation in Nicaragua) when they
meet any one of the following criteria:
• They spend more than 180 days in Nicaragua in a tax year (the 180 days does not have to be taken continuously).
• The individual's centre of economic interest is within Nicaragua.
Nicaraguans residing abroad are still subject to taxation in Nicaragua where:
• They are members of a Nicaraguan diplomatic mission or consular post.
• They hold a government post or other official position in Nicaragua.
Any legal entity created under Nicaraguan laws with their tax domicile or permanent establishment in Nicaragua is also subject
to tax in Nicaragua.
All employees in Nicaragua earning over NIO100,000 annually are subject to labour income tax (at the progressive rates
established by law), which is withheld by the employer.
Non-residents working in Nicaragua are subject to labour income tax at a fixed tax rate of 15%, which is withheld by the
employer on each salary payment made.
19.What income tax, social security and other tax or contributions must be paid by the employee and the
employer during the employment relationship?
Employees pay labour income tax at progressive tax rates depending on the amount they earn. This tax rate ranges from 15% to
30%, and the tax is withheld and paid by the employer. Employees also pay 6.25% of their salary as a contribution to the social
security system. The employer pays 19% of the employee salary as a contribution to the social security system, and 2% is paid
as a Technological Institute contribution. Both the Social Security Contribution and the Technological Institute Contribution
affect salaries up to NIO88,005.68.
Tax Resident Employees
For employees who are resident for tax purposes, income tax is charged at the following progressive tax rates, depending on
the income earned (deductions for social security must be made before calculating the applicable tax rate):
• From NIO0.01 to NIO100,000: 0.
• From NIO100,000.01 to NIO200,000: 15%.
• From NIO200,000.01 to NIO350,000: 20% (plus NIO15,000).
• From NIO350,000.01 to NIO500,000: 25% (plus NIO45,000).
• NIO500,000.01 and above: 30% (plus NIO82,500).
The tax is withheld each month by the employer.
Non-residents working in Nicaragua are subject to labour income tax at a fixed tax rate of 15%, which is withheld by the
employer on each salary payment made.
Non-Tax Resident Employees
There is no concept of a non-tax resident employee, since all employees working in Nicaragua (whether resident for tax purposes,
or non-resident) are subject to labour income tax (see above, Tax resident employees). Under the Immigration Law, all foreign
employees working in Nicaragua must have either a temporary work permit or a working residency card and are subject to
labour income tax.
Employers
The Regulations to Social Security Law in Nicaragua were modified by Presidential Decree No. 06-2019, which was approved
by the Directors of the Nicaraguan Institute of Social Security on 28 January 2019. Employers are now subject to a social security
contribution of 22.50% (for companies with 50 or more workers) and 21.50% (with companies with less than 50 workers).
Business Vehicles
20. When is a business vehicle subject to tax in your jurisdiction?
Tax Resident Business
Legal entities incorporated as businesses or mercantile entities (that is, other than non-profit organisations) are subject to taxation
in Nicaragua.
Residents for tax purposes are the following:
• Individuals staying in the country for more than 180 days (the 180 days do not have to be continuous).
• Individuals with their main economic interest in the country.
• Foreign residents.
• Trusts or any other vehicle incorporated in Nicaragua, or foreign entities with a permanent establishment in Nicaragua.
Non-profit organisations incorporated and registered are exempt from all taxes, both national and local, on their income.
Non-Tax Resident Business
There is no recognised concept of a non-tax resident business. Only non-profit organisations, or those operating within free
trade zones, can be subject to tax exemptions.
21. What are the main taxes that potentially apply to a business vehicle subject to tax in your jurisdiction?
Nicaraguan taxation follows the territorial income principle. For national taxes, businesses are subject to:
• A fixed rate of income tax, charged at 30% on income earned in Nicaragua, which is paid by means of monthly tax
returns.
• A monthly payment of 1% of gross income from their economic activities, payable to the municipal authorities.
At the end of each fiscal year, companies must issue an annual income return, which is to be filed and paid to the tax authorities
within the following three months (January to March).
Taxpayers will pay income tax on earnings lower than or equal to NIO12 million at the following rates:
• From NIO0.01 to NIO100,000: 10%.
• From NIO100,00.01 to NIO200,000: 15%.
• From NIO200,000.01 to NIO350,00: 20%.
• From NIO350,000.01 to NIO500,000: 25%.
• Over NIO500,00.01: 30%.
Income tax from capital income and capital gains is paid by means of definitive withholding tax. Income from capital income
is fixed at:
• 10% withholding when paid to residents.
• 15% withholding when paid to non-residents.
Income from capital gains is fixed at 10% withholding (whether it is paid to residents or non-residents).
Dividends, Interest, and IP Royalties
22. How are the following taxed:
• Dividends paid to foreign corporate shareholders?
• Dividends received from foreign companies?
• Interest paid to foreign corporate shareholders?
• Intellectual property (IP) royalties paid to foreign corporate shareholders?
Dividends Paid
Dividends are considered as capital income and are taxed at the following withholding tax rates:
• 10% when paid to residents.
• 15% when paid to non-residents.
The withholding tax applies whether the shareholders are individuals or legal entities.
Dividends Received
Dividends are considered as capital income and are taxed at the withholding tax rate of 10% when they are paid to a resident
legal entity from a foreign company. In this case the paying company should withhold the 10% rate of tax. However, it is
difficult to apply this in practice, because foreign non-resident companies are unable to file tax returns with the Nicaraguan tax
authorities. As a result, the receivers of these dividends should account for the 10% withholding tax that is applicable.
Interest Paid
Interest payments are considered as capital income and are taxed at the following withholding rates:
The withholding tax applies whether those in receipt of interest payments are individuals or legal entities.
IP Royalties Paid
IP royalties are considered as capital income and are taxed at the following withholding rates:
The withholding tax applies whether those in receipt of IP royalty payments are individuals or legal entities.
Groups, Affiliates, and Related Parties
23. Are there any thin capitalisation rules (restrictions on loans from foreign affiliates)?
There are no thin capitalisation rules in Nicaragua. However, financial losses reflected in companies' financial statements are
deductible for income tax purposes.
24. Must the profits of a foreign subsidiary be imputed to a parent company that is tax resident in your jurisdiction
(controlled foreign company rules)?
There are no such rules in Nicaragua.
25. Are there any transfer pricing rules?
Law No. 922 from December 2015, reformed Article 303 of the Tax Concertation Law, and therefore transfer pricing rules
have been in force since 30 June 2017. All related parties are subject to the transfer pricing rules, and all transactions among
related parties will be valued in line with the free competition principle. This establishes that all transactions among related
parties will be valued using the price that would apply for a similar transaction between independent parties.
The tax authorities are authorised by law to re-qualify transactions if they prove that the economic reality of these transactions
differs in any way from the position adopted by taxpayers, or if they consider that the price is substantially lower than the price
that independent parties would have adopted.
Customs Duties
26. How are imports and exports taxed?
Imports are subject to the following taxes:
• Import tax, which varies depending on the imported good.
• Excise tax, which also varies depending on the imported good.
• VAT fixed at a rate of 15%.
Depending on the goods imported and the countries involved, some exceptions or different duty rates may apply.
Exports are taxed with a 0 tax rate which allows VAT accreditation for exporters.
Double Tax Treaties
27. Is there a wide network of double tax treaties?
Nicaragua is not a party to any double tax treaty with any country.
Competition
28. Are restrictive agreements and practices regulated by competition law? Is unilateral (or single-firm) conduct
regulated by competition law?
Competition Authority
The main competition authority in Nicaragua is the National Institute for the Promotion of Competition (Instituto Nacional
de Promoción de la Competencia) (Procompetencia) (https://procompetencia.gob.do/en/), which provides guidance on the
competition law rules. Competition-related matters concerning the regulated sectors are resolved by the corresponding
regulatory entities, and Procompetencia' s scope for providing guidance in these sectors is limited.
Restrictive Agreements and Practices
Law No. 601, the Competition Promotion Law (Law No. 601) prohibits acts, conduct, agreements, covenants, or contracts
between competitor and non-competitor economic agents (whether express or tacit, written, or verbal) which are aimed at:
• Limiting or restricting competition.
• Preventing access to, or eliminating from the market, any economic agent.
Competitor economic agents (PCA). Law No. 601 expressly forbids certain practices between PCA. The following PCA acts
are forbidden:
• Covenants and agreements to fix, increase, concert, or manipulate prices, or other sale or purchase conditions of goods
or services in any way, which are offered or demanded in markets, or exchange of information with the same object or
effect.
• Covenants and agreements to divide, distribute, designate, or proportion or segment an actual or potential market of
goods and services, by means of clients, sellers, suppliers, by kind of sold products, times of sale, and determined or
determinable spaces, or by any other means.
• Covenants and agreements to eliminate other entities from the market, or limit access to the market by other entities,
purchasers, or sellers of determined products.
• Covenants and agreements to fix or limit production amounts, establishing an obligation to produce, process, distribute,
or commercialise only a restricted or limited amount of goods, or restricting the volume or frequency of services.
• Establishing, agreeing, or co-ordinating bid fixing, restraining, or limiting prices in auctions or in any other bidding
form (with the exception of an offer filed jointly by economic agents which is clearly identified as such in the
document filed by bidders).
Agreements between national producing agents and external purchasing agents which set out more favourable conditions for
national producers will not be construed as limiting the free market and will not be contravention of competition law.
Non-competitor economic agents (PNCA). Certain practices between PNCA are forbidden by Law No. 601 where the
following criteria are met:
• The alleged responsible party for the practice has a dominant position in the relevant market.
• The practice is related to goods or services corresponding or related to the relevant market.
• The practice prevents, limits access to, or removes competitors from the market and, in any event, causes harm to the
interests of consumers.
Where these criteria are met, the following practices between PNCA (whether express or tacit, written or verbal) are in breach
of Law No. 601:
• Any unjustified agreement for the exclusive distribution of goods or services between non-competitor economic agents,
wholesale suppliers, or distributors of one product only to sell those goods or services under the condition that retail
purchasers do not buy or distribute competitor products.
• Imposing prices and/or other conditions which distributors or retailers must observe when supplying goods or services
to buyers.
• Selling goods on the condition that the buyer acquires other goods or services or providing services on the condition
that the buyer acquires other goods or services.
• Selling or buying goods on the condition that the goods or services of a third party are not used.
• Refusing to sell to, supply, or purchase from a specific economic agent, where those goods or services would ordinarily
be available to sell, supply, or purchase and there are no alternative suppliers operating in the relevant market.
• Applying unequal conditions for equivalent performance, resulting in some competitors being placed at a disadvantage
compared to others.
• Any agreement among several economic agents to put pressure on clients or suppliers with the purpose of dissuading
them from certain conduct or obligating them to act in a specific manner.
• Using any form of predatory practices.
The provisions of Law No. 601 that prohibit any act or conduct which may harm, limit, or affect free competition also apply
to foreign entities doing business in Nicaragua.
Criminal penalties. Under the Nicaraguan Criminal Code, pecuniary sanctions and a term of imprisonment (between two to
six years), along with disqualification from carrying out a professional activity for the same period, can be imposed on those
that breach competition law by exercising any of the following practices:
• Imposing (directly or indirectly) prices or other conditions of sale or purchase on goods or services or exchanging
information in order to create the same effect.
• Imposing limitations or restrictions on the production, processing, distribution, and commercialisation of goods or
services.
• Impeding or obstructing the entry into the market, or the permanency, of other economic agents, or excluding them
from the market.
Unilateral Conduct
There are no specific provisions which cover unilateral conduct. However, depending on how PCA and/or PNCA activities are
conducted or carried out (for example, one economic agent imposing anti-competitive conditions over others) it is possible to
have one economic agent conducting unilateral anti-competitive practices. Much will depend on the practice's structure and
how it is implemented, and actions will be reviewed on a case-by-case basis.
29. Are mergers and acquisitions subject to merger control?
Transactions Subject to Merger Control and Turnover Tests
Law No. 601 (and its regulations and amendments) provides that the following transactions constitute a concentration:
• When formerly independent economic agents embark on contracts, agreements, or treaties with the purpose of
acquiring, consolidating, integrating, or combining their businesses so that they will no longer be independent entities.
• When one or more economic agents who already control at least one other economic agent, acquire by any means the
direct or indirect control of all, or a portion, of another economic agent, or agents.
• Any other agreement or act which tacitly or legally transfers to an economic agent the assets of another or grants a right
of control of another's business.
In general terms, the above forms of concentrations are permitted provided that their effect does not limit, harm, or restrain
free economic competition in equivalent, similar, or substantially related goods or services. These provisions do not apply to
mergers carried out with insolvent economic agents.
However, if a concentration meets either of the following thresholds, it must be notified to and approved by the Competition
Authority:
• When as a result of the concentration, a market share equal to or greater than 25% in the relevant market is acquired or
increased.
• Where economic agents involved in the concentration have a combined income equal to or greater than 642,857
minimum salaries.
The regulations under Law No. 601 provide that the calculation of income test includes all of the assets and income received
and accrued by the economic agents during their last fiscal term (in a periodic, eventual, or occasional way), whether:
• Acquired in cash, goods, and compensations coming from sales or profits derived from manufactured, produced,
treated, or purchased goods.
• Acquired in Nicaragua or abroad.
• Acquired through the rendering of services, leasing, subleasing, works, compensated activities of any nature, earnings
or profits produced from real estate properties, movable assets, or capital earnings, and any other income of any nature
(before tax deductions).
The Competition Authority takes into consideration the average minimum salary in effect on the day prior to the notification.
The current minimum wage is NIO6,624,454. It is calculated by dividing the sum of all monthly minimum wages by the number
of economic sectors (currently there are ten sectors considered for minimum wage purposes). It is valid from 1 March 2021 to
28 February 2022. Minimum wages are adjusted semi-annually. The next minimum wage adjustment will take effect in March
2022. The total of minimum wages for this period is NIO4,258,576,625.07, about USD121,673,617.85.
Main Substantive Test
There is a preliminary period of 35 business days for the Competition Authority to analyse the notification and determine
whether or not the transaction causes, or may cause, anti-competitive effects. If the transaction is found to not be anti-
competitive, then a resolution authorising the transaction is issued. However, if the Competition Authority considers it necessary
to conduct further research and analysis, it can initiate an investigation phase that can take up to about 180 additional business
days.
Finally, the Competition Authority will issue a final resolution which can:
• Authorise the concentration, either partially or totally.
• Conditionally authorise the concentration on certain requirements being met.
• Order the concentration's reversal, either partially or totally.
• Reject the concentration request.
Parties can challenge the decision using the appeal procedure that is in place.
Foreign-to-Foreign Acquisitions and Foreign Exemptions
Regulations under Law No. 601 establish that concentrations resulting from legal acts executed outside Nicaragua should request
authorisation before taking legal or material effect in Nicaragua. Therefore, approval from the Competition Authority must be
obtained before the transaction takes legal or material effect in Nicaragua where any of the thresholds triggering filing are met.
There are no other specific provisions on this matter or on foreign exemptions.
Specific Industries
There are no provisions that apply to specific industries.
Anti-Bribery and Corruption
30. Are there any anti-bribery or corruption regulations affecting business in your jurisdiction?
Anti-bribery and corruption is regulated as follows:
• Law No. 737 regulates the government's administrative contracting and establishes a set of sanctions for companies
and public workers who offer or accept bribes or engage in corrupt practices. Companies that supply the government
can be suspended from participating in public tenders for three years if they provide gifts or money, directly or through
another person, to officials involved in an administrative contracting procedure (Article 105, Law No. 737).
• Law No. 641 and Article 446 of the Criminal Code punishes the crime of bribery with a penalty of three to six years in
prison and 300 to 500 fine-days.
Intellectual Property
31. What are the main IP rights that are recognised in your jurisdiction?
Patents
Definition and legal requirements. A patent is an exclusive right recognised by the state for an invention that offers a new
technical solution to a specific problem, consisting of or applicable to a product or a process.
The legal requirements for a patent are:
• Novelty.
• Inventive activity.
• Industrial application.
The main types of patents are:
• Patent of invention.
• Utility model.
Nicaraguan law also protects the following:
• Industrial design.
• Programme-carrying signals transmitted by satellite.
• Layout designs for integrated circuits.
• New varieties of plants.
Registration. The Intellectual Property Office (Registro de la Propiedad Intelectual) is responsible for the registration
of patents. The Intellectual Property Office provides information about procedures and the applicable law on its website
(www.mific.gob.ni/Propiedad-Intelectual).
Enforcement and remedies. The patent holder has the exclusive right to prevent others from commercially exploiting the
patented invention. Therefore, the patent holder can take action against any person who engages in any of the following acts
without their consent:
• Where the patent is a product:
• producing and manufacturing the product;
• offering for sale, selling, or using the product; or
• importing it or storing it for any of the aforesaid purposes.
• Where the patent is a process:
• using the process; or
• producing or manufacturing a product obtained directly by means of the process.
(Law on Patents, Utility Models and Industrial Designs (Law No. 354).)
The patent holder can bring an action before the competent judicial authority against any person who engages in any act that
constitutes an infringement of their rights.
In an infringement action the judge can order one or more of the following measures:
• The cessation of the acts that constitute infringement.
• Compensation for harm and injury.
• The withdrawal of the infringing goods from commercial channels and of the means and materials used mainly to
commit the infringement.
• The prohibition of the import or export of the infringing goods and of the means and materials used mainly to commit
the infringement.
• The necessary measures to prevent the infringement's continuation or repetition, including the destruction of the goods,
means, and materials used mainly to commit the infringement.
Where patents are jointly owned, any of the joint owners can bring an action for patent infringement without the consent of
the other joint owners (unless otherwise agreed).
The action will be notified to all persons who have any registry entries in their favour in relation to the title to which the
proceedings relate. Those persons can intervene personally in the action at any time.
Length of protection. A patent of invention is valid for 20 years from the date of filing of the application. A utility model
patent is valid for ten years from the date of filing of the application.
Trade Marks
Definition and legal requirements. Trade marks can consist of, among other things, words or groups of words, advertising
slogans and phrases, letters, numbers, monograms, shapes, portraits, labels, coats of arms, designs, cartoons, borders, lines and
stripes, and combinations and arrangements of colours, sounds or other perceptible signs (for example, smells). They can also
consist of the form, presentation, or packaging of the goods or their containers or wrapping, or the means or place of retail of
the related goods or services.
In general, a trade mark can be any visible sign capable of distinguishing goods or services.
Trade mark rights are obtained with registration.
Protection. A trade mark application must be filed with the Intellectual Property Office (Registro de la Propiedad Intelectual)
and must include:
• A request that includes:
• name, address, and nationality of the applicant and place of incorporation for legal entities;
• name and address of a legal representative (if applicable). If the applicant has no domicile or establishment in the
country they must have a legal representative;
• the mark for which registration is sought;
• a list of products or services for which registration is sought, grouped by classes according to the International
Classification of Goods and Services (WIPO Nice Agreement Concerning the International Classification of
Goods and Services for the Purposes of the Registration of Marks 1957, Tenth Edition), indicating the number of
each class; and
• the applicant's or their legal representative's signature.
• A reproduction of the mark in eight copies where the trade mark has a script, shape, or colour, or is a figurative, mixed,
or three-dimensional mark (with or without colour). For sound marks, the stave and audio of the sound mark.
• When relevant, the documents or authorisations required in Articles 7 and 8 of the Law of Trade Marks and Other
Distinctive Signs (Law No. 380). These can be required if the mark includes a total or partial reproduction of a shield,
flag, or other emblem, acronym, denomination, or abbreviation of the denomination of any state or international
organisation. The applicant should be authorised to use it by the state or international organisation otherwise the
application will be rejected.
• A copy of the ID of the applicant or legal representative (if applicable).
• A document proving legal representation (if applicable).
• Receipt of payment of the prescribed fee.
The Intellectual Property Office provides information about procedures and the applicable law on its website (www.mific.gob.ni/
Propiedad-Intelectual).
Enforcement and remedies. The owner of a registered trade mark has the exclusive right of use of that trade mark, and can
take court action against anyone who infringes that right. The owner of a registered trade mark can prevent any third party
from carrying out the following acts:
• Apply or place the trade mark on similar or identical goods for which the trade mark is registered, or on products
related to services for which it is registered, or on containers, wrappers, packaging, or outfitting of those products.
(Outfitting includes all the operations through which the product is packed and or labelled for its subsequent
distribution and/or commercialisation, for example the packaging and labelling of products for export.)
• Delete or modify the trade mark for commercial purposes after it has been applied or affixed to the products (or it has
been applied on containers, wrappers, packaging, or outfitting of those products).
• Manufacture labels, containers, wrappers, packaging, or other materials that reproduce or contain the trade mark and
sell or store these materials.
• Refill or reuse for commercial purposes containers, wrapping, or packaging bearing the trade mark.
• Use in trade an identical or similar mark for products or services, when this use may cause confusion or a likelihood of
association with the trade mark owner's products or services.
• Use in trade an identical or similar mark to the trade mark for goods or services where this use could cause the trade
mark holder unjust economic or commercial damage because of a dilution of the distinctive force or commercial or
advertising value of brand, or a misappropriation of the brand or owner's prestige.
• Publicly use an identical or similar mark, even for non-commercial purposes, where this use could weaken the
distinctive force or commercial or advertising value of the trade mark or result in unfair exploitation of its prestige.
• The cessation of the acts constituting the infringement.
• The seizure or confiscation of infringing goods, including containers, packaging, labels, printed or advertising
materials, or other materials resulting from the infringement.
• The prohibition of the import or export of the infringing goods, including packaging, labels, printed or advertising
materials, or other materials resulting from the infringement.
• The destruction of all infringing goods.
• The necessary measures to prevent the continuation or repetition of the infringement, including the destruction of the
infringing goods, packaging, labels, printed or advertising materials or other materials resulting from the infringement.
There is no protection for unregistered trade marks (with exception of well-known trade marks, which do not require registration
for protection in Nicaragua).
Length of protection and renewability. The registration of a trade mark will expire ten years from the date of its grant.
Registration can be renewed indefinitely for successive periods of ten years.
Registered Designs
Definition. An industrial design will be protected if it is new. It will be considered new if it has not been disclosed publicly
before the earliest of either:
• The date of the first public disclosure of the design by the designer or their successor in title or by a third party who has
obtained it by any legal means.
• The filing date of the application for registration of the industrial design or, the filing date of the application claiming
priority over that registration.
Industrial design is the particular aspect of a product that results from the characteristics of its shape, line, configuration,
colour, material, or ornamentation, among other things, and which includes all two-dimensional and three-dimensional industrial
designs.
Registration. The Intellectual Property Office is responsible for the registration of industrial designs. However, the Intellectual
Property Office's website does not offer information regarding the procedures or the requirements for registration of industrial
designs.
Enforcement and remedies. The owner of a registered an industrial design has the right to prohibit third parties from exploiting
it. The owner can take court action against anyone who, without their consent, produces, markets, or uses, or imports or stores
for any of those purposes, a product incorporating the registered industrial design, or a product which, by its appearance, gives
the same overall impression as the design.
Where designs are jointly owned, any of the joint owners can bring an action for patent infringement without the consent of
the other joint owners (unless otherwise agreed).
The action will be notified to all persons who have any register entries in their favour in relation to the title to which the
proceedings relate. Those persons can intervene personally in the action at any time.
• The cessation of the acts that constitute infringement.
• The withdrawal from commercial channels of the infringing goods and of the means and materials used mainly to
the infringement.
infringing goods, means and materials used mainly to commit the infringement.
Length of protection and renewability. Registered industrial designs are protected for five years from the filing date of the
application. The registration of an industrial design can be renewed for two additional periods of five years. The renewal fee
should be paid before the date on which it becomes due. However, on payment of a surcharge, there is grace period of six
months following the due date. The registration will remain in full force during the grace period.
Unregistered Designs
Definition and legal requirements. Any person has the right to the protection of an industrial design. An industrial design
is protected if it is new. It is acquired by the first public disclosure of the industrial design, by any means and in any place
in the world, by the designer, their successor in title, or a third party who has obtained the design as a result of any legal act
performed by any of them.
Enforcement and remedies. The owner of an unregistered design can prohibit third parties from copying or reproducing it.
They can take court action against anyone who, without their consent, produces, sells, offers for sale or uses, or imports or
stores for any of those purposes, a product incorporating the copied or reproduced industrial design.
• The cessation of the acts that constitute the infringement.
• The withdrawal from commercial channels of the infringing goods and of the means and materials used mainly to
the infringement.
infringing goods, means and materials used mainly to commit the infringement.
Length of protection. Unregistered designs are protected for three years from the date of the public disclosure.
Copyright
Definition and legal requirements. The copyright in a literary, handicraft, artistic, or scientific work belongs to its creator
by the mere fact of its creation. Copyright has both a moral and economic dimension, giving the creator full control and an
exclusive right to exploit the work.
Protection. There is no mandatory formal registration. The registration and deposit of copyright works is optional and
declarative. Non-registered and non-published works are protected from their creation. The Intellectual Property Office is
responsible for copyright registration.
Enforcement and remedies. The owners of a copyright (whether the original owners or those who have derived rights or
assigned rights) can request the cessation of any unlawful activity and demand compensation for any moral or economic loss
caused as a result of copyright infringement. They can also request the adoption of interim protective measures (which are
regulated by the Law on Copyright and Related Rights).
The cessation of the infringing activity can include:
• Prohibition on carrying out the infringing acts, including, among others, prohibiting the illegal imported goods from
entering commercial channels immediately after these goods are released from customs, or preventing their export.
• Withdrawal from circulation of the illegal copies, or their destruction, or with the consent of the copyright holder, their
donation for charitable purposes.
• Seizure and destruction of the materials and tools used in the production, creation or marketing of the illegal
goods (except in cases where they are donated for charitable purposes with the consent of the copyright holder).
The destruction or donation for charitable purposes of the materials and equipment will take place without any
compensation to the infringer. When considering requests for the destruction of equipment, the judicial authorities
will take into consideration the seriousness of the infringement, and the interests of third parties, holders of real rights,
holders of rights of possession, and holders of a contractual or guaranteed interest (among other things).
• Seizure of any documentary proof relating to the infringement.
Length of protection and renewability. Moral rights do not have a specific time limit, and the creator has moral rights for
their entire life. On the death of the creator, these rights are passed to their heirs.
Economic rights last for the lifetime of the creator plus 70 years after their death (or after a declaration of their death, or a
respective declaration of absence).
Where works are created under a pseudonym, anonymous, or collective works, the economic rights last 70 years from their
publication, unless the name of the creator is identified before the expiration of this period.
In the case of a joint work, the term of the economic rights will be calculated from the death of the last surviving co-creator.
Marketing Agreements
32. Are marketing agreements regulated?
Agency
The general principle is that agency contracts are atypical and, and therefore are not regulated by any specific law. The parties
can agree any terms provided that they do not contravene the law, morality, or public order.
However, there is an important exception to this general principle. In 1979, the Law on Agents, Representatives or Distributors
of Foreign Companies was enacted. This is known as Decree 13, and it established a national legal regime to govern the
relationship between foreign companies or suppliers and distributors in Nicaragua. Decree 13 included certain mandatory
conditions applicable to the termination of contracts, including, among other things:
• Foreign suppliers must pay compensation to their distributors in Nicaragua when they unilaterally terminate the
contract.
• A specific judicial procedure before the Nicaraguan courts to resolve any controversies in connection with these kinds
of relationships.
Decree 13 was repealed as of 1 July 1998, but some further tax-related laws continue to provide for certain restrictions to apply
to agreements entered into under Decree 13. In 2013, Law No. 822 Tax Agreement Law (Law No. 822) entered into force and,
as further amended, is now in effect. Law No. 822 provides that:
• All agreements entered into under Decree 13 should remain in effect and cannot be amended or invalidated (unless they
are amended due to legal cause or by mutual agreement).
• The relationship between the parties can be proved by any means established by law.
• Disputed rights between the parties must be settled in a summary civil procedure before court, and contracts are subject
to Nicaraguan law irrespective of any choice of law in the contract.
Therefore, those agency, distribution, and franchising relationships which began while Decree 13 was in force (that is, prior to
1 July 1998) will be subject to the conditions set out in Law No. 822. Certain provisions in Law No. 822 still remain a grey
area in terms of their application in practice to agreements executed after Decree 13 was repealed (for example, provisions on
dispute resolution and applicable law).
Distribution
See above, Agency.
Franchising
See above, Agency.
E-Commerce
33. Are there any laws regulating e-commerce?
There are no laws regulating e-commerce. However, there is an Electronic Signature Law (which came into force in 2013) but
this law does not yet apply in practice because there are currently no offices for the certification of electronic signatures.
34. Are online platforms regulated in relation to their use for marketing/sales purposes?
There are no regulations.
Advertising
35. How is advertising regulated in your jurisdiction?
Law No. 842, the Law for the Protection of Consumer's Rights and Users (Law No. 842) regulates advertising in Nicaragua.
In the advertising campaigns of products whose continuous or prolonged consumption provides risks to human health, a warning
in the form of a legend (that is, written or recorded text that accompanies the advertisement) must be included. This must state
the dangers of its use, mixture with other products or ingredients, and consumption.
Reports, notifications, records, advertising, or any other promotional activity, which directly or subliminally induce tobacco
consumption must be consistent with the provisions of Law No. 727, the Law for Tobacco Control, published in La Gaceta,
Official Gazette No. 151 of August 10, 2010 and its Regulations, Decree No. 41-2011, published in La Gaceta, Official Gazette
No. 155 of August 18, 2011. These outline the prohibitions and mechanisms for the effective control of tobacco consumption.
The use of children or adolescents, patriotic symbols, and religious symbols is prohibited in alcohol advertising, as are precise
messages that express that its consumption is necessary to reaffirm the consumer's national identity. The warning about the use
of alcoholic beverages should read "excessive consumption of this product is harmful to health"; and the size of this warning
must be proportionate to the size of its container or packaging.
The spreading of abusive or deceptive advertising is prohibited. Deceptive advertising can relate to:
• The nature, use, content, weight, and basic characteristics of the product to be sold or the service to be provided.
• The date of manufacture or useful life of the goods or technology used.
• The quality, quantity, properties, commercial or geographical origin, price, offer, or rate, guarantees, discounts,
awards, recognitions (official or private), national or foreign distinctions, (the latter being medals, prizes, trophies, and
diplomas among others), forms of payment of the goods.
• Any other data on the products and services offered.
Advertising directed at children or adolescents should not lead them to equivocal conclusions about the real characteristics of
the products and services advertised or about the possibilities of them, having regard to ingenuity, credulity, inexperience, the
feeling of loyalty to and values of family members, or create feelings of inferiority for not consuming the product or using
the service.
Likewise, advertisers must not present children or adolescents in unsafe or inadequate situations or places, or broadcast
advertisements with images that are not suitable for children or adolescents on regular television with regular programming
before 8.00 pm. The Nicaraguan Institute of Telecommunications and Postal Services will regulate and supervise compliance
with this provision to promote the culture of social values, including deciding which programmes are unsuitable for children
or adolescents.
All these rules also apply to digital advertising.
The law prohibits suppliers from contacting the consumers, directly or indirectly (by telephone, email, or other means), to offer
promotions or advertising before 8.00 am or after 5.00 pm, and they can only contact them on business days.
36. How are sales promotions regulated in your jurisdiction?
Sales promotions are regulated by Law No. 842, the Law for the Protection of Consumer and Users Rights, which states:
• For the sale to be considered a promotion, it must be exceptional, temporary, and different from the usual offer of
goods and services, otherwise, the term promotion must not be used in any advertisement (Article 27).
• Promotions must clearly indicate their terms and duration, the number of goods or services offered, their
characteristics, the time for claiming the prizes, or other information relevant to the consumer or user's decision to
participate in them (Article 28).
• If the promotion involves raffles, contests, exchanges, or any other regulated activity, it must be carried out in
the presence of a lawyer and notary public, who will attest the results. The attestations must be sent, with their
corresponding documentary backups, to the competent authority (Article 29).
The law also establishes that if the competent authority conducts an inspection and determines that the promotion violates
consumers' rights or includes false information, it may prohibit it.
Data Protection
37. Are there specific data protection laws? If not, are there laws providing equivalent protection?
The Political Constitution of Nicaragua provides certain general rights concerning privacy and data collection. The main
specific law on this matter is Law No. 787, the Personal Data Protection Law (Law No. 787) and its regulations. Law No. 842
also establishes certain provisions relating to customers' data protection. In addition, certain laws enacted under the Political
Constitutional of Nicaragua establish specific rights and forms of recourse (the habeas data recourse) which affected parties
can exercise in connection with these matters.
Product Liability
38. How is product liability and product safety regulated?
Product liability is regulated by Law No. 842, the Law for the Protection of Consumers' Rights and Users, and its regulation
Decree 36-2013. Every person involved in the supply chain, from the producer or manufacturer to the final seller, are jointly
and severally liable for defective products. There are no tests for liability.
Regulatory Authorities
39. What are some of the key regulatory authorities relevant to doing business in your jurisdiction?
Competition
Main activities. Procompetition (Procompetencia) is a public law institution created by Law 601 that operates as an autonomous
administrative court recognised nationally and internationally for its contribution to the development of the country and
consumer welfare, through the protection and promotion of free competition.
Whttps://procompetencia.gob.do/en/
Environment
Main activities. The Ministry of Environment and Natural Resources (MARENA) regulates the use of natural resources
and environmental quality, preventing and controlling environmental pollution by works, projects and activities. MARENA
contributes to the protection of nature, fight against further climate change, conservation, and sustainable use of biodiversity,
forests, soils, and water.
W www.marena.gob.ni
Financial Services
Main activities. The Superintendence of Banks and Other Financial Institutions authorises, supervises, and monitors the
constitution and operation of all banks, branches, and banking agencies, and non-bank financial institutions that operate with
public resources.
W www.superintendencia.gob.ni/
Main activities. The National Microfinance Commission (CONAMI) is the regulatory and supervisory institution that
contributes to the development of the microfinance industry, financial inclusion, transparency, social performance, and the
public trust of different economic agents.
W www.conami.gob.ni/
Other
Main activities. By legal mandate, the Public Registry is a division of the Nicaraguan judicial system, with supervisory powers
and administrative control. The Public Registry offices are interconnected but operate independently at the head of each of
the country's departments. They manage registration processes, automate registration flows, and implement the Personal Folio
System for the registration of new companies. This reduces the time of registration procedures. They also provide a consultation
system available to users to, among other things, give greater legal security to registration processes.
W www.registropublico.gob.ni
Main activities. The General Directorate of Revenue (DGI) is the administrative authority in charge of collecting internal taxes
in an effective, efficient, and transparent manner, and promoting a culture of voluntary compliance.
Main activities. The Town Hall is the local government entity responsible for the sustainable development of cities and
provides services and works to the community, including issuing licence plates for new and existing businesses, environmental
endorsements for companies, and collection of local taxes. The local government is divided into several departments, each of
which operates its own town hall office.
Main activities. The General Directorate of Customs Services (DGA) administrates customs services. It controls and facilitates
foreign trade through the development and constant improvement of customs processes. It also administrates the taxes on the
international traffic of goods and the legal relationships derived from them.
Main activities. The Nicaraguan Institute of Social Security (INSS) protects workers and their families against risks related
to life and work, providing financial benefits for disability, old age, and death. It insures illness, maternity, common accident,
and professional accident health services, and provides other social services to improve the quality of life of the protected
population. This is financed by the solidarity contribution of employers, workers, and the government.
W www.inss.gob.ni/
Main activities. The General Directorate of Sanitary Regulation of the Ministry of Health deals with matters relating
to pharmaceutical products, including cosmetic products, hygiene products, natural products, chemical substances of
pharmaceutical interest and their precursors. In addition, it:
• Regulates food supplies, including those provided by donations and brigades.
• Authorises medical devices, standards, protocols, and manuals.
• Regulates ionizing radiation sources.
• Authorises customs clearance of medicines.
W www.minsa.gob.ni/
Depending on the investor's proposed activities, the intervention of other regulatory authorities may be necessary, for example:
• The Ministry of Energy and Mines (Ministerio de Energía y Minas – Nicaragua).
• The National Commission of Free Zones (Comisión Nacional de Zonas Francas).
W https://cnzf.gob.ni
• The Export Procedures Center (CETREX), which is a public entity that provides services to the export sector.
• The Ministry of Industry and Commerce Development (MIFIC).
W www.mific.gob.ni
• The Directorate of Migration and Foreign People.
W www.saludymigracion.org
• The Ministry of Labour (Mitrab).
Other Considerations
40. Is there anything else that is important relating to doing business in your jurisdiction?
All important considerations have been covered in the Q&A.
Contributor Profiles
Claraliz Oviedo Maglione, Senior Associate
Alvarado y Asociados
T +505 2278 7708
F +505 2278 7491
E [email protected]
W https://alvaradoyasociadoslegal.com/
Professional qualifications. Lawyer, 2013
Areas of practice. Fiscal law; intellectual property and corporate law.
Experience
• Advising national and international clients in contracting, corporate matters, and investments.
• Participating actively in due diligence processes for the acquisition of real estate, companies, project
financing, constitution of guarantees, and corporate restructuring.
• Advising clients on insurance and reinsurance matters.
• Responsible for the Department of Sanitary Registries of the firm involved in different processes before
the Ministry of Health of Nicaragua.
Jazmin Garcia Toruño, Associate
T +505 2278 7708
F +505 2278 7491
E [email protected]
Areas of practice. Environmental law; administrative law; corporate law; mercantile law and immigration law.
Experience
• Assisting many foreign clients in the incorporation of national corporations and branches of foreign
corporates of non-profit organisations in Nicaragua and obtaining all the necessary permits to operate in
Nicaragua according to the law.
• Providing technical legal opinions regarding environmental laws and procedures.
• Providing legal support in bidding procedures, administrative contracting of public works, and
transportation, and immigration laws and procedures.
Zayda Elizabeth Cubas Chavarría, Junior Partner
T +505 2278 7708
F +505 2278 7491
E [email protected]
Areas of practice. Corporate and mercantile law; due diligence; mergers and acquisitions; intellectual and
industrial property law; administrative law; sanitary registration; notary and registry law.
Experience
• Extensive experience in IP law, working as a legal advisor in copyright law and patents for various
prestigious law firms and national corporations.
• Serving in government positions in the Judicial Branch as attorney for the Public Defence Office and legal
assistant for the First Criminal Local Court of Managua.
Yury Fernando Cerrato Espinoza, Senior Associate
T +505 2278 7708
F +505 2278 7491
E [email protected]
Areas of practice. Corporate and mercantile law; due diligence; merger and acquisitions; labour and syndicate law.
Experience
• Assisting many national and foreign clients with important transactions in the fields of
telecommunications, construction, mining, and air transportation.
• Advising on the best legal strategies for the execution of the different transactions implemented in
Nicaragua.
END OF DOCUMENT
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Doing Business in Nicaragua: Overview, Practical Law Country Q&A 5-604-7372

Doing Business in Nicaragua: Overview

Country Q&A | Law stated as at 01-Nov-2021 | Nicaragua

A Q&A guide to doing business in Nicaragua.

Termination and Redundancy

Dividends, Interest, and IP Royalties

Double Tax Treaties

Jazmin Garcia Toruño, Associate

Yury Fernando Cerrato Espinoza, Senior Associate

Economy and Dominant Industries

Population and Language

The main terms of Law No. 1035 are as follows:

• the foreign entity's deed of constitution or articles of incorporation and by-laws;

• the foreign entity's national certificate of registration; and

• to the company's controlling bodies and their legal representatives; and

• Bring any legal actions.

Key Business and Economic Events

There have been no recent key business and economic events.

There have been no recent key political events.

3. What is the general legal system in your jurisdiction?

4. Are there any restrictions on foreign investment, ownership or control?

There are no authorisations required by the central or local government.

Restrictions on Foreign Shareholders

• A foreign national residing in Nicaragua.

Restrictions on Foreign Acquisition of Shares and Real Estate

The following developments have placed some restrictions on foreign investment:

There are no bank deposit reporting requirements.

An entity's beneficial ownership must be recorded, see Question 2.

7. What grants or incentives are available to investors?

• Exploration and exploitation of hydrocarbons and geothermic resources.

Main Business Vehicles

Most common business vehicles in Nicaragua are:

Trusts can also be used in Nicaragua.

Registration and Formation

• Mercantile Registry (www.registropublico.gob.ni).

• Municipal Authority of Managua.

Generally, the reporting requirements are as follows:

• Tax Authority: the following must be provided online:

• monthly tax returns for value added tax (VAT);

• income tax payments;

• minimum definitive payment; and

• withholding tax payments.

• Municipal Authorities: the following must be provided:

• real estate municipal tax (paid annually in arrears); and

Shares can be issued for cash or in-kind consideration.

Rights Attaching to Shares

Directors' and Officers' Liability

• Failure to execute the corporation's administrative mandate.

• Breach of the corporation's bye-laws.

• Breach of the law.

Parent Company Liability

• The consumers have a claim related to goods.

Laws, Contracts, and Permits

12. What are the main laws regulating employment relationships?

Foreign Employees and Mandatory Rules of Law

Employees Working Abroad

13. Is a written contract of employment required?

• Date and place of the agreement.

• Identity and domicile of the parties.