Income Tax In Nicaragua: Non-Resident's Retention
The Fiscal Equity Law, Law Num. 453, published on May 6, 2003, in the Daily Official Gazette Num. 82, establishes that natural persons, artificial persons or economic units, resident or not in the country, who perceive rent originated in Nicaragua are subject to a definite retention. Based in aforementioned Law, the Bylaw of the Fiscal Equity Law stipulates that natural or artificial persons domiciled in the country who make any business or occasional contracting with people non domiciled in the country, or that being domiciled intend to leave it, will be forced to withhold and to satisfy, in the term consigned in the in-force tributary laws, the percentage that corresponds to the amount of the contracting or payments made. In case of noncompliance, the cost will be non deductible of their Rent Tax and they will be liable in solido (joint and several liability) for the tax payment. Moreover, an economic sanction will be imposed (surcharge of 5% of the balance due for every month or month’s fraction of default). The withholdings vary according to the cause that originates the payment to the non-resident. Thus, for example, natural or artificial persons non-resident or non-domiciled in the country who offer services different to a labour relation or in which there is dependency to other people, by which they perceive an income that is reputed of Nicaraguan origin, are subjects to a withholding in the source of income. In the case of natural persons the withholding is 20 % while if they are artificial persons the retention is 10,5%. These percentages are calculated over the total amount perceived. There are also different withholding rates from non resident income originated from the following concepts: ACTIVITIES SUBJECT TO WITHHOLDING RETENTION RATE Real estate Leasing and analogous with construction 21 % Real estate Leasing and analogous without construction 24 % Royalties, copyrights, patents, designs, trademarks and other similar assets 21 % Cinema films, television and radio and television programs renting 9 % In case of interests perceived in the country 22.5 % Marine transport 3 % Terrestrial transport 3 % Air transport 1.5 % International communications 1.5 % Life insurance premiums 0.9 % Fire insurance premiums 2.4 % Marine insurance premiums 3 % Other risks insurance premiums 0.6 % In order to simplify the tax return of the withholders, the “Dirección General de Ingresos, DGI” (General Direction of Income) has created a declaration form (IR) of definite withholdings in the source of income.