On this occasion, we present the first part of a series of articles in which we’ll make a brief statement of the main laws that provide tax incentives in Nicaragua in different economic sectors.
- No. 462. Law for Conservation, Promotion and Sustainable Development of Forestry.
Law No. 462 was published in the Official Gazette No. 168 on September 4, 2003 and stated that the following incentives would be granted during the first 10 years of operation of the Act:
- Plantations registered on the regulatory entity will be exempted of paying fifty percent (50%) of the Municipal Tax on Incomes (IMI, for its acronym in Spanish) and fifty percent (50%) on profits from the exploitation of such plantation.
- Areas where forestry plantations are established and where forest management is performed through a Forest Management Plan are exempted from Property Tax (IBI, for its acronym in Spanish).
- Companies of any line of business that invest in forestry plantations may deduct, as an expense, 50% of the amount invested for Income Tax purposes.
- Exemption from payment of duties and taxes on imports to companies of secondary and tertiary processing that import machinery, equipment and accessories to improve their technological level in the processing of wood, excluding sawmills.
- In addition, all companies may deduct up to 100% payment of Income Tax when it is intended to promote reforestation or establishment of forest plantations, for which the taxpayer must file a forestry initiative at INAFOR, which must be previously approved.
- The benefits granted in the Law for Conservation, Promotion and Sustainable Development of Forestry were extended to the year 2023 by the Tax Concertation Law (822).
- Incentives Act for Tourism Industry in Nicaragua
The Law of Incentives for the Tourism Industry of Nicaragua provides a number of tax incentives for investment in this sector ranging from investment in the areas of accommodation, food and beverage, travel agencies to tourist transportation, airlines, among others. These Incentives are:
- Exemption of 80 to 100 percent of the income tax (IR) for a period of ten years.
- Exemption of property tax (IBI, for its acronym in Spanish) for a period of ten years.
- Exemption of Value Added Tax (VAT) applicable to design services, engineering and construction services.
- Exemption of Import Tax and Value Added Tax (VAT) on the local purchase of goods, furniture, equipment, ships and vehicles of 12 passengers or more or cargo vehicles, this must be declared necessary for the establishment and operations of the tourism activity by the Tourism Board; and on the purchase of equipment that contribute to save water and energy and those necessary for the safety of the project.
- Exemption of Import Tax and Value Added Tax (VAT) on the purchase of non-luxury materials and fixtures of the building.
- In case of reinvestment: if at the end of the incentive regime for ten years, the investor decides to reinvest at least 35 percent of the value of the originally approved investment, he/ she can receive all the benefits for ten additional years.
This Act provides differentiated benefits depending on the tourism sector, we invite you to contact us if you would like to learn more about the benefits granted by this Act. Please contact cnavarro@alvaradoyasociados.com.ni for more information.