Jean Franco Fernández Clark

Corporate & Tax Lawyer

Fernandez Clark Management UK LTD ​​

Stock Companies in the Republic of Nicaragua

General aspects, taxation, and procedure to incorporate.
By Jean Franco Fernandez Clark

I- Generalities.​​

Stock companies in Nicaragua are regulated by the Commercial Code (Código de Comercio de la República de Nicaragua) published in the offical Gazette of Nicaragua on October 30th, 1916. §201-286.
Stock companies in Nicaragua may have a fantasy name, and has a maximum durability of 99 years (renewable),
The commercial code requires a minimum of two shareholders, but it is recommended a minimum of three because a “two shareholders company” can be dissolved if any of the two shareholders requests so.
In Nicaragua there is no minimum capital requirement and the shareholders are not personally liable of the corporation’s debts.
Shares can be nominative shares, bear shares, preference shares
Any amendment to the Social Pact and Status should be approved by the Sharesholders, and appear before a judge.

II- Taxation

The taxation in Nicaragua depends on the tax regime of each company 
In this article we are going to address the General Tax Regimen.
Income Tax
Nicaragua has a Worldwide Tax System.
Stock companies in Nicaragua are subject to Income Tax, a progressive tax, which taxes Net Income (Gross Income – Expenses/Deductions= Net Income)
 In the monthly tax declaration, the company must pay a 1% on all gross sells in advance. The Tax Authority (DGI, Dirección General de Ingresos), will keep this 1% in case the company reports losses (no profit) at the end of the fiscal year; the company can accredit this 1% paid in advance if they report profit.



General VAT (Impuesto al Valor Agregado IVA) in Nicaragua is 15%.

Capital income, and Capital Gain and loss

Capital income from immovable property has an effective tax rate of 7%
Capital income from movable property, be it corporeal, has an effective tax rate of 5%; incorporeal assets have an effective tax rate of 10%.
Capital Gain and Loss from property that requires registry in any public registry, has a progressive effective tax rate of 1% to 4%:

Onerous and Free Capital Gain and Loss have a rate of 10% on the legal tax base.

III- Procedure to Incorporate.

First it is recommended to perform a registry research to find out if the name you want to give to your new corporation is available. If so, you must appear before a notary public to write the corporation’s social pact and by laws
Then you must proceed to register the public deed in the Mercantile registry. In the mercantile registry you must pay one per cent (0.01%) of the share’s capital and you shall wait 4 legal days. If you want a faster procedure, you can pay one per cent of the share’s capital, plus half of that amount and you will have to wait 1 legal days.
Once the company is registered, you must register your new company as a merchant, in this moment you attach the share holder’s book, the ledger, diary book, and the minutes book to be duly sealed by the public registry. This procedure can be performed without the need of a notary public.
The shareholder must appear before a notary public to grant General Power of Attorney for Acts of Administration, if so wishes, but it is required in case that the legal represant of the company is a foreign.
Finally we request the tax payer’s registry (RUC, Registro Único de Constribuyente), along the city hall’s registry. The company has exactly 30 days after being registered to obtain the RUC, otherwise will obtain a penalty fee.

Certain businesses require additional registration to operate, such as construction and development companies, import/export companies, tourism companies, etc.