Jurisdiction overviewTax in Nicaragua
Last reviewed: · by TaxProsRated editorial
Key points
Nicaragua's Direccion General de Ingresos (DGI) administers personal income tax at progressive 0/15/20/25/30 percent across five bands on annual net income, corporate income tax (IR de Empresas) at 30 percent, and IVA at 15 percent. A monthly Pago Minimo Definitivo (PMD) of 3 percent of gross revenue applies as a minimum corporate tax floor regardless of net profit. The treaty network is almost nonexistent — CAFTA-DR provides trade access but is not a double taxation agreement. Free Trade Zones enjoy 0 percent CIT for 10 years under Law 382.
Who is the tax authority?
Nicaragua's national tax authority is the Direccion General de Ingresos (DGI), operating under the Ministerio de Hacienda y Credito Publico. DGI administers income tax (IR), IVA, ISC, and most national-level levies. Its website is dgi.gob.ni.
Customs is a separate body — the Direccion General de Servicios Aduaneros (DGA) — which collects IVA and ISC on imports at the border.
A second tax obligation sits outside DGI entirely. Municipal governments (Alcaldias) collect the monthly 2% municipal tax on gross revenues for businesses above C$500,000 in annual sales. This obligation runs in parallel with DGI filings and has separate deadlines.
The substantive tax law framework rests on Ley 822 de 2012 (Ley de Concertacion Tributaria) and the Codigo Tributario (Ley 562 de 2005), updated through Ley 987 de 2019 (fiscal reform). The credentialed Nicaraguan accounting profession is the Contador Publico Autorizado (CPA), regulated by the Colegio de Contadores Publicos de Nicaragua (CCPN).
What is the tax year and when are returns due?
The Nicaraguan tax year is the calendar year (1 January to 31 December). Three separate filing rhythms run concurrently for most businesses.
The annual IR return is due 31 March for the prior calendar year. Employee income tax (Impuesto sobre las Rentas del Trabajo) is fully withheld monthly by employers. The Pago Minimo Definitivo (PMD) — the monthly minimum tax advance — is due by the 20th of each month. IVA returns are due by the 15th of the following month.
Who is a Nicaraguan tax resident?
Under Article 7 of Ley 822, an individual is a Nicaraguan tax resident if either condition is met:
- 183-day test: physically present in Nicaragua for more than 183 days during the calendar year, whether continuous or with interruptions
- Economic interests test: main centre of business or economic interests is in Nicaragua
Nicaragua's system is territorial in scope — both residents and non-residents are taxed only on Nicaraguan-source income (rentas de fuente nicaraguense). Foreign-source income is generally outside the DGI's reach. This is a key difference from worldwide-income jurisdictions like the US or UK.
Foreign nationals on long-term work assignments in Nicaragua typically meet the 183-day threshold from year one, but only their Nicaraguan-source income is in scope.
What are the personal income tax rates?
Nicaragua uses five progressive brackets for employment income (Impuesto sobre las Rentas del Trabajo). Brackets are applied to annual net taxable income after the standard deduction (20% of gross, capped at C$100,000) and INSS personal contributions (6.25%).
| Annual net taxable income (C$) | Rate |
|---|---|
| 0 to 100,000 | 0% |
| 100,001 to 200,000 | 15% |
| 200,001 to 350,000 | 20% |
| 350,001 to 500,000 | 25% |
| Over 500,000 | 30% |
Investment income (Rentas de Capital) and capital gains face a 15% flat withholding tax as a final tax under Nicaragua's territorial principle. Self-employment income falls under the Regimen General (IR at 30%) or, for small traders, the Regimen de Cuota Fija (fixed-amount monthly tax).
Employer-side INSS contributions are among the highest in Central America — currently set at approximately 21.5% of gross salary. The employee-side contribution is 6.25% (deductible in computing the personal standard deduction).
How does corporate income tax work?
The corporate income tax rate (IR de Empresas) is 30% on net Nicaraguan-source taxable profit under Ley 822.
Applies to net Nicaraguan-source taxable profit for most companies operating under the general regime (Regimen General).
Pago Minimo Definitivo — 3% of monthly gross revenue, paid by the 20th of each month. Acts as a minimum tax floor even when the business is loss-making.
The PMD works as a reconciling advance. At year-end, annual IR liability is compared against cumulative PMD payments. If annual IR exceeds PMD totals, the difference is payable with the March IR return. If PMD exceeds annual IR, the excess carries forward as a credit — it is not refunded.
Withholding tax on dividends paid to non-residents is 15%. Interest, royalties, and technical services to non-residents also attract 15-17% withholding under domestic law. Nicaragua has not yet transposed the OECD Pillar Two global minimum tax framework.
Tax loss carryforwards are limited. For the industrial sector, losses may carry forward for 3 years under specific conditions. A general carryback mechanism does not exist.
Free Trade Zones
0% CIT for the first 10 years — 15% thereafter
Nicaragua's Free Trade Zone (Zona Franca) regime is among the most favourable in Central America. Licensed FTZ entities engaged in export manufacturing pay no corporate income tax for the first 10 years of operation, then 15% from year 11 onward. FTZs also receive IVA exemption on imports of raw materials and machinery, and zero-rated ISC on fuel used in production. Compliance with FTZ conditions is a hard requirement — if a company loses its FTZ register status, the ordinary 30% CIT applies retroactively for non-compliant periods.
IVA and indirect taxes
Nicaragua's VAT equivalent is the Impuesto al Valor Agregado (IVA). The standard rate is 15% under Ley 822.
| Category | Rate | Examples |
|---|---|---|
| Standard | 15% | Most goods and services |
| Zero-rated | 0% | Exports, agricultural inputs |
| Exempt | Exempt | Basic food basket, medicines, education, health, financial services |
IVA registration is mandatory for businesses subject to IVA regardless of turnover. Monthly IVA returns are due by the 15th of the following month. Small traders below DGI thresholds may qualify for the Regimen de Cuota Fija, which substitutes a fixed monthly payment for both IVA and IR obligations.
The Impuesto Selectivo al Consumo (ISC) is an ad valorem excise tax applied to alcohol, tobacco, fuel, and specified luxury goods, collected by DGI at the manufacturing or import stage.
The Municipal Tax (Impuesto Municipal sobre Ingresos) is a separate levy collected by each Alcaldia — not DGI:
Businesses with annual sales exceeding C$500,000 owe 2% of monthly gross revenue to the local Alcaldia. The minimum monthly amount is C$500. This obligation runs independently of all DGI filings and has its own deadlines and enforcement by the municipal government — it is not reconciled against IR or IVA at the national level.
Transfer pricing
Nicaragua transposed transfer pricing rules in 2019 under the Ley 987 fiscal reform. Related-party transactions across borders must comply with the OECD arm's-length standard. Contemporaneous documentation is required, and DGI can challenge and re-price non-arm's-length transactions. For multinational groups operating in Nicaragua, maintaining a transfer pricing file before year-end is now a standard compliance requirement.
What is the treaty network?
Nicaragua's bilateral tax treaty network is nearly nonexistent. No comprehensive double taxation agreement (DTA) is in force with any major trading partner as of early 2026. A treaty with Mexico has been signed but remains of limited scope. Nicaragua has not signed the OECD Multilateral Instrument (MLI).
For cross-border businesses operating with Nicaragua, the practical consequence is significant. Non-resident recipients of dividends, interest, royalties, or technical-service fees face the full domestic withholding rates (15-17%) with no treaty reduction available. CAFTA-DR (US-Central America-Dominican Republic Free Trade Agreement) provides preferential trade tariffs and market-access rules but is not a tax treaty and does not reduce withholding obligations.
Currency framework
The Nicaraguan Cordoba (NIO) operates under a managed crawling-peg (deslizamiento) administered by the Banco Nacional de Nicaragua (BNN), which adjusts the official rate by approximately 5% annually against the US Dollar. In practice, Nicaragua has a de facto dual-currency economy — the US Dollar is widely accepted in commercial transactions, particularly in real estate, larger contracts, and international trade. DGI tax obligations are denominated in Cordobas; when transactions are in USD, the BNN official rate is used for conversion.
Where does Nicaragua sit in the Central American cohort?
Nicaragua sits within the Central American income-tax cohort alongside Guatemala, Honduras, El Salvador, Costa Rica, and Panama. The six countries share CACM membership and broadly similar tax structures, but differ significantly by development level, tax sophistication, and treaty network depth.
Common pitfalls
Foreign companies and individuals frequently encounter these recurring compliance gaps when operating in Nicaragua:
The 3% Pago Minimo Definitivo applies to monthly gross revenue — not to net profit. A loss-making business still owes PMD every month. This is the single most common surprise for new entrants to the Nicaraguan market.
IVA returns and payments are due by the 15th of each month. Missing the deadline triggers escalating penalty interest under the Codigo Tributario. DGI has tightened enforcement on IVA through the Ventanilla Electronica Tributaria system.
Companies in the Free Trade Zone regime enjoy 0% CIT for the first 10 years, but this depends on continuous compliance with FTZ operating conditions. Losing FTZ register status exposes the company to ordinary 30% CIT — a severe retroactive liability risk.
Since 2019, related-party transactions across borders require contemporaneous TP documentation under the OECD arm's-length standard. DGI has the authority to challenge and re-price transactions that do not meet the standard. Groups operating in Nicaragua without TP files face significant audit exposure.
The 2% municipal income tax on gross revenue is collected by the local Alcaldia, not by DGI. It has different deadlines, different enforcement, and no reconciliation with national filings. Foreign businesses often miss this obligation when focusing solely on DGI compliance.
Nicaragua's near-absence of bilateral DTAs means dividends, interest, royalties, and technical-service fees paid to non-resident recipients face full domestic withholding (15-17%) with no reduction available. CAFTA-DR is a trade agreement — it does not affect withholding tax rates.
Nicaragua's territorial system taxes only Nicaraguan-source income. Foreign-source income is generally not subject to Nicaraguan IR. This is often misunderstood by individuals coming from worldwide-income jurisdictions — the distinction matters for structuring cross-border arrangements.
Employer-side INSS contributions run at approximately 21.5% of gross salary — well above the Central American average. For payroll-intensive businesses, this is a significant labour cost that affects total cost of employment modelling.
When should you talk to a Nicaraguan tax professional?
Some situations in Nicaragua are straightforward. Others become complex quickly:
Nicaragua's combination of a monthly PMD minimum tax, near-zero DTA network, strict FTZ compliance requirements, and the 2019 transfer pricing rules makes professional engagement important for most businesses beyond sole-trader scale. A licensed Contador Publico Autorizado (CPA) registered with the Colegio de Contadores Publicos de Nicaragua is the appropriate professional for DGI-level work.
This page is general information. It is not personal guidance for your specific situation. Tax rules change. Always check current figures on the DGI website (dgi.gob.ni) or with a licensed Nicaraguan practitioner before filing.
Frequently asked
Who is the Nicaraguan tax authority?
Direccion General de Ingresos (DGI), under the Ministerio de Hacienda y Credito Publico, administers income tax, IVA, and ISC at the national level. Direccion General de Servicios Aduaneros (DGA) handles customs. Municipal governments (Alcaldias) separately collect the 2% municipal gross-revenue tax. The credentialed Nicaraguan accounting profession is the Contador Publico Autorizado (CPA) regulated by the Colegio de Contadores Publicos de Nicaragua.
When is the Nicaraguan annual IR return due?
The annual IR return is due 31 March of the year following the calendar tax year. The monthly Pago Minimo Definitivo (PMD) advance at 3% of gross revenue is due by the 20th of each month. IVA returns are due by the 15th of the following month. Employee income tax is withheld monthly by employers under the Rentas del Trabajo framework.
Who is a Nicaraguan tax resident?
Under Article 7 of Ley 822, an individual is tax resident if physically present more than 183 days in Nicaragua in the calendar year, or if their main centre of business or economic interests is in Nicaragua. Nicaragua uses territorial taxation — both residents and non-residents are taxed only on Nicaraguan-source income. Foreign-source income is outside the DGI scope.
What are the Nicaraguan personal income tax rates?
Five brackets on annual net taxable income: 0% on the first C$100,000; 15% on C$100,001 to C$200,000; 20% on C$200,001 to C$350,000; 25% on C$350,001 to C$500,000; and 30% above C$500,000. Investment income and capital gains face a 15% flat withholding as a final tax. Employee-side INSS is 6.25%; employer-side INSS is approximately 21.5%.
How does Nicaragua's corporate tax work?
Corporate IR is 30% on net Nicaraguan-source taxable profit. The Pago Minimo Definitivo (PMD) of 3% of monthly gross revenue is paid monthly as a minimum tax advance — it applies even when the company is loss-making. At year-end PMD is reconciled against annual IR liability; the excess credits forward but is not refunded. Free Trade Zone entities under Law 382 pay 0% CIT for the first 10 years, then 15% thereafter.
What is the Nicaraguan IVA rate?
Standard IVA is 15% under Ley 822. Zero-rated supplies include exports and agricultural inputs. Exempt supplies include basic food basket, medicines, education, and health. IVA returns are due monthly by the 15th of the following month. Selective Consumption Tax (ISC) applies to alcohol, tobacco, and fuel. Municipal governments separately levy a 2% gross-revenue tax on businesses above C$500,000 annual sales.
How many tax treaties does Nicaragua have?
Nicaragua's bilateral DTA network is nearly nonexistent. No comprehensive double taxation agreement is in force with the US, EU, or major trading partners as of early 2026. A limited-scope treaty with Mexico has been signed. Nicaragua has not signed the OECD MLI. CAFTA-DR provides trade-market access with the US, Central America, and the Dominican Republic but is not a tax treaty and does not reduce withholding rates.
What is Nicaragua's Free Trade Zone regime?
Under Law 382 (Ley de Admision Temporal para el Perfeccionamiento Activo), licensed Free Trade Zone entities engaged in export manufacturing pay 0% CIT for the first 10 years of operation and 15% from year 11 onward. FTZ status also provides IVA exemption on imports of raw materials and machinery. Losing FTZ register compliance status triggers ordinary 30% CIT.
Major tax firms in Nicaragua
Verified directory of the largest accounting + tax practices operating in Nicaragua. Listings are entity-level reference cards — claim flow is open to firm representatives.
- Big 4
Deloitte Nicaragua
- Big 4
EY Nicaragua
- Big 4
KPMG Nicaragua
- Big 4
PwC Nicaragua
- National
BDO Nicaragua
- National
Grant Thornton Hernandez & Asociados
- National
RSM Nicaragua
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The figures, dates, and rules on this page are sourced from the documents listed below. Where two sources disagree, both are listed.
- Direccion General de Ingresos (Nicaragua) · accessed
- La Gaceta (Nicaragua) · accessed
- La Gaceta (Nicaragua) · accessed
- Ministerio de Hacienda y Credito Publico (Nicaragua) · accessed
- PwC Worldwide Tax Summaries · accessed
- La Gaceta (Nicaragua) · accessed
- La Gaceta (Nicaragua) · accessed
Important disclaimer
Informational only — not tax advice. This page summarises publicly available information about tax in Nicaragua as of July 2026. Tax laws change, individual circumstances vary, and the application of any rule depends on your specific facts.
TaxProsRated does not provide tax, legal, accounting, or financial advice. Before acting on anything you read here, consult a qualified tax professional licensed in your jurisdiction (in the US: CPA, Enrolled Agent, or attorney; in the UK: CIOT- or ATT-qualified adviser; in Australia: TPB-registered tax agent; elsewhere: a locally-licensed equivalent). TaxProsRated, its operators, and its contributors disclaim all liability for action taken in reliance on this page.