Learn about the tax benefits that Nicaragua offers to investors under the free zone regime

By: Sergio Corrales.

Nicaragua has become a strategic destination for foreign investment due to favorable policies for business development, among which, Free Zones stand out as a highly fiscally benefited sector, thus attracting foreign investment.

It should be noted that the Free Zone Operator company is one whose sole purpose is to develop and manage industrial parks in free zones, while the Free Zone User company is one whose business, industrial or service establishment is authorized by the National Commission of Free Zones to operate within a Free Zone industrial park. Only companies dedicated to the production and export of goods or services will be eligible to operate in a Free Zone, all in accordance with their respective operating permit.

In accordance with the above, some of the main tax benefits that Nicaraguan legislation offers to Free Zone Operating and User Companies are detailed below:

Exemption from Import and Export Taxes: Free zone companies are exempt from paying import and export taxes on raw materials, machinery, equipment, services, goods and merchandise intended for the operations of companies in the zones.

Exemption from Income Tax (IR): Free Zone operating companies are exempt one hundred percent (100%) from paying Income Tax for a period of fifteen (15) years from the start of operations, extendable for a period of the same duration. On the other hand, Free Zone user companies are exempt by one hundred percent (100%) for a period of ten (10) years, and by sixty percent (60%) from the eleventh year and thereafter.

Total exemption from Real Estate Tax: Companies established in Free Trade Zones are exempt from paying the Real Estate Tax.

Total exemption from Indirect Taxes: Companies established in Free Trade Zones are exempt from paying Indirect Taxes, among which are: Value Added Tax (VAT), Selective Consumption Tax (ISC).

Total exemption from Municipal Taxes: Companies established in Free Trade Zones are exempt from paying Municipal Taxes, among which are: Municipal License, Municipal Income Tax (IMI).

In short, Free Trade Zones in Nicaragua offer a series of tax benefits and competitive advantages that make this country an attractive destination for foreign investment. If you are looking to expand your business operations in Central America, you can consider the Free Trade Zone regime as your investment project.