Nicaragua Cross-Border Tax Guide 2026

Overview — Cross-Border Taxation

Cross-border taxation in Nicaragua is governed by the Tax Code, the Income Tax Law, and the Double Tax Treaty with Spain. Nicaragua follows a territorial tax system, meaning only income sourced in Nicaragua is subject to Nicaraguan tax. Payments to non-residents are generally subject to withholding tax (WHT) at source, with rates potentially reduced under the Spain DTT. The DGI has strengthened its international tax compliance capabilities.

Withholding Tax Rates

Payments to non-residents are subject to withholding tax at the following standard rates:

• Dividends: 15% (on dividends paid to residents and non-residents)
• Interest: 15% (on interest paid to non-residents, subject to DTT reduction)
• Royalties: 15% (on licensing fees, patents, trademarks, copyrights)
• Services: 20% WHT on technical and professional services paid to non-residents
• Tax haven transactions: 30% WHT on payments to entities in tax haven jurisdictions

The Nicaraguan payer must withhold and remit the tax within the prescribed timeframe. Rates may be reduced under the Spain DTT for qualifying residents of Spain.

Double Tax Treaty — Spain

Nicaragua has one Double Tax Treaty in force, with Spain. Key provisions:

• Dividends: Reduced WHT rates for qualifying shareholders
• Interest: Reduced WHT rate
• Royalties: Reduced WHT rate
• Permanent establishment: Standard PE definition based on OECD model
• Elimination of double taxation: Foreign tax credit method

For all other countries, domestic WHT rates apply in full as there is no applicable DTT.

Transfer Pricing

Nicaragua has transfer pricing rules aligned with international standards. Requirements include:

• Arm's length principle: All related-party transactions must be at arm's length
• Documentation: Taxpayers must prepare transfer pricing documentation
• Related parties: Includes direct and indirect control, management influence, and family relationships
• TP return: Annual transfer pricing declaration must be filed
• Penalties: Adjustments can result in additional tax plus penalties and interest

Tax Haven Transactions — 30% WHT

Payments made to entities resident in jurisdictions classified as tax havens by Nicaragua are subject to a 30% withholding tax. This applies to all types of payments including dividends, interest, royalties, and services. Nicaragua maintains a list of tax haven jurisdictions. The 30% rate is applied to the gross payment amount and is a final tax. The DGI actively monitors transactions with tax haven jurisdictions.

Permanent Establishment (PE)

A foreign company with a Permanent Establishment (PE) in Nicaragua is subject to Nicaraguan CIT at 30% on profits attributable to the PE. A PE is created if the foreign company has a fixed place of business in Nicaragua (office, branch, factory, construction site), a dependent agent with authority to conclude contracts, or a service presence exceeding a certain period. Foreign companies with a PE must register with DGI and file CIT returns.

FAQs

How can I claim treaty benefits in Nicaragua?

To claim reduced WHT rates under the Spain DTT, the non-resident recipient must provide a Certificate of Tax Residency (issued by Spanish tax authorities) and complete a treaty relief application with the DGI.

Are management fees subject to WHT?

Yes, technical and professional service fees paid to non-residents are subject to 20% WHT. This rate may be reduced under the Spain DTT if applicable.

What is the penalty for non-compliance with transfer pricing rules?

Failure to maintain proper TP documentation can result in penalties. TP adjustments may result in additional tax on the adjustment amount, plus late payment interest.

Does Nicaragua have exchange of information agreements?

Nicaragua participates in international tax information exchange through the Spain DTT and may exchange information under tax information exchange agreements (TIEAs) with other jurisdictions.

Disclaimer

This guide provides general information about Nicaraguan cross-border taxation for the 2026 tax year. Tax laws and treaties may change. Always consult with a qualified Nicaraguan tax advisor or the Dirección General de Ingresos for advice specific to your situation. InvestmentKit does not provide tax advice.