On previous occasions, we have talked extensively about the “three types of income tax” that we have in Nicaragua, which are Labor Income Tax, Income Tax from Economic Activities and Capital Income and Gains, but there is also a differentiated way of Taxing the Income of Economic Activities, for persons classified by the Law as “Small Taxpayers”, and this differentiated way of taxing is known as “Fixed Flat-Rate”.
The flat-rate tax, in accordance with article 245 of the Tax Conciliation Law, is an enclosed/unified Income tax of economic activities and VAT, which taxes the income received by small taxpayers who carry out economic activities.
For purposes of this tax, small taxpayers are considered to be natural taxpayers enrolled in the General Directorate of Revenues (Nicaragua IRS) who receive GROSS monthly income equal to or less than one hundred thousand cordobas (C $ 100,000.00).
In addition, the small taxpayer must have inventory of goods with a cost no more than five hundred thousand cordobas (C $ 500,000.00).
Taxpayers who do not comply with at least one of the above requirements, cannot be on this regime and must pay taxes according to the general regime.
My income is less than or equal to C $ 100,000.00, what fee should I pay?
The flat-rate tax fee to be paid will depend on the monthly income received, according to the following table:
|
Monthly Income in Cordobas |
Fixed Fee Rate |
|||
|
|
From C$ |
To C$ |
Cordobas C$ |
|
|
1 |
0.01 |
10,000.00 |
Exempted |
|
|
2 |
10,000.01 |
20,000.00 |
200.00 – 500.00 |
|
|
3 |
20,000.01 |
40,000.00 |
550.00 – 1,190.00 |
|
|
4 |
40,000.01 |
60,000.00 |
1,200.00 – 2,100.00 |
|
|
5 |
60,000.01 |
80,000.00 |
2,400.00 – 3,600.00 |
|
|
6 |
80,000.01 |
100,000.00 |
4,000.00 – 5,500.00 |
|
The exact rate is determined by the Tax Administration and must be paid within 15 days following the month that elapsed, using the same payment methods that the Tax Administration has established for the general regime.
So if my Income is lower than C $ 10,000.00 per month, should I pay anything?
Correct, the Law indicates that natural persons who receive income lower than or equal to ten thousand córdobas (C $ 10,000.00) a month, are exempt from paying the above rate, but not from compliance with the other obligations to provide information to the Tax .
So, does any person whose income is less than C $ 100,000.00 and inventory less than C $ 500,000.00 can be enrolled as a Fixed Rate?
No, the law indicates that there are some persons or activities that are excluded from this regime, which are:
- Legal entities;
- Importers;
- Exporters;
- Permanent establishments of non-resident persons;
- Trustees;
- De facto partnerships;
- Natural persons practicing liberal professions;
- Natural persons registered as suppliers of the State, and who sell or provide services in excess of fifty thousand córdobas (C $ 50,000.00) per transaction.
- Manufacturers or producers of alcoholic beverages, beers and ethyl alcohol.
I am already registered as a fixed Flat-Rate, what are my obligations?
The small taxpayers, must fulfill the following obligations:
- Register at the Tax Administration (RUC) and in the Simplified Fixed Flat-Rate regime;
- Issue simplified sales invoice, at the buyer’s request;
- Keep simplified records of your income and expenses;
- To back up or document their inventories, with formal invoices of taxpayers enrolled in the Tax Administration that pay income from economic activities;
- Exhibit the original of the certificate of registration in the regime in a conspicuous place where it carries out its activity, or have it available for presentation to the competent authority;
- To keep in a separate and chronological way in each case to present them to the requirements of the Tax Administration, the following documents:
- Original invoices for purchases of goods or services rendered;
- The means of payment for rents, and taxes paid to the municipality; Y
- The receipts (tax receipts and / or other types of documents) of the payments made to the Tax Administration.
- Notify the respective Income Administration, with thirty (30) days in advance, of the definitive closure of the business, suspending monthly payments, when applicable, from the month following the closing date. The foregoing without prejudice to the subsequent verification that may be carried out by the Tax Administration;
I am a fixed fee taxpayer, what other taxes should I pay or withhold?
Besides the obligation to pay the fixed fee rate applied, taxpayers of this regime will not be required to file declarations with the Tax Administration or to pay the Income Tax from economic activities, except income tax withholdings made by taxpayers of the general regime. Fixed fee taxpayer also won´t be obliged to make advance payments for the Definitive minimum payment nor perform Income Tax withholdings, nor to transfer VAT.
Withholdings made to taxpayers with a fixed fee will be credited to their monthly payments.