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Nicaragua, formally the Republic of Nicaragua (Spanish: República de Nicaragua, is the biggest nation in the Central American isthmus, bordered to the northwest by Honduras, to the east by the Caribbean, to the south by Costa Rica, and to the southwest by the Pacific Ocean. Managua is the capital and biggest city of Nicaragua, as well as the third-largest metropolis in Central America, behind Tegucigalpa and Guatemala City. Six million individuals of mestizo, indigenous, European, and African ancestry make up the multi-ethnic population. Spanish is the primary language. The Mosquito Coast's indigenous tribes speak their own languages as well as English.
The territory, which had been inhabited by many indigenous civilizations from ancient times, was captured by the Spanish Empire in the 16th century. In 1821, Nicaragua declared independence from Spain. The Mosquito Coast had a distinct historical trajectory, having been colonized by the English in the 17th century and then come under British authority. It became a Nicaraguan independent territory in 1860, and its northernmost section was given to Honduras in 1960. Nicaragua has had periods of political upheaval, authoritarianism, occupation, and budgetary catastrophe since its independence, notably the Nicaraguan Revolution of the 1960s and 1970s and the Contra War of the 1980s.
The blending of cultural traditions has resulted in significant variations in folklore, food, music, and literature, notably literature, thanks to the literary achievements of Nicaraguan poets and authors such as Rubén Daro. Nicaragua, popularly known as the "Land of Lakes and Volcanoes," is home to the Bosawás Biosphere Reserve, the Americas' second-largest rainforest. Nicaragua is becoming an increasingly attractive tourist destination due to its ecological richness, mild tropical climate, and active volcanoes. Nicaragua is a founding member of the United Nations, the Non-Aligned Movement, the Organization of American States, ALBA, and the Latin American and Caribbean States Community.
Employees who have worked for at least six months to a year are eligible to 15 days of paid vacation. The employee is entitled to 30 days of paid leave after one year of service.
Nicaragua recognizes nine public holidays.
Sick leave is paid starting on the third day of illness and is covered by social security for up to six months. Sick pay is equal to 60 percent of regular pay.
The three-day waiting period is waived if the employee is hospitalized.
Maternity leave lasts 12 weeks and is compensated at 100% of regular pay, with the employer covering 60% and social security covering 40%. Maternity leave can start four weeks before the due date.
Maternity leave is extended to 14 weeks for multiple newborns.
Fathers are entitled to 5 days of paid leave each year.
In Nicaragua, there is no such thing as a parental leave law.
Employers must submit a termination request to the labor inspection department. The employee is entitled to any remaining vacation money and their annual bonus at the time of termination. Termination notice is also required.
Employees must provide 15 days notice.
There is a 30-day probationary period during which time either party may terminate the employment agreement for any reason.
When an employee is terminated for cause, the employer is required to pay severance. Severance pay is calculated at one month's salary for the first three years of employment and at twenty additional days of pay for each subsequent year. Severance pay is limited to five months.
The standard workweek is 48 hours and eight hours per day for work performed between 6 a.m. and 8 p.m. Nighttime work, defined as work performed between the hours of 8 p.m. and 6 a.m., cannot exceed 42 hours per week or seven hours per day. Working a combination of day and night shifts is limited to 45 hours per week and seven and a half hours per day. Nighttime work is defined as a mixed workday that includes more than three and a half hours of nighttime work. The Ministry of Labor prohibits work that is classified as dangerous or unhealthy from exceeding six hours per day.
After six days of continuous service, employees are entitled to one day of rest. Generally, this occurs on Sunday, but there are exceptions. Additionally, employees are entitled to a half-hour break during the workday, which is considered effective work time.
Overtime work is permitted for a maximum of nine hours per week and three hours per day and is compensated at 100% of the standard rate. Employees who work on a rest day or on a public holiday are also compensated at 100% above the standard rate.
Female employees who are six months or more pregnant are not permitted to work at night.
Nicaragua has no national minimum wage. Instead, the country's compensation rules provide a minimum salary that applies to all nine economic sectors. Workers in the agricultural industry, for example, must earn at least 4,414.91 Nicaraguan córdobas per month as of March 1st, 2021, while people in the financial sector must earn at least 9,880.17 Nicaraguan córdobas per month.
Nicaragua features a hybrid public-private health-care system. The government pays for the majority of regular visits. While there is no private insurance as in the United States, the main hospitals provide a program that functions similarly to insurance.
Pensions, supplemental health insurance, life and disability insurance, discounts at corporate shops, transportation allowances, and food allowances are all common employee perks.
Nicaragua has a territorial income tax system, which means that only income produced in, or that has an impact on, Nicaragua is usually taxed. CIT is levied on a corporation's earnings, which include business/trading revenue as well as passive income. Capital gains and income are subject to WHT indefinitely. General business costs are deductible when calculating taxable income.
CIT is exclusively paid on domestic-sourced income at a fixed rate equal to the greater of:
(1) 30% of net taxable income (i.e. gross taxable income less allowed deductions), or
(2) a definitive minimum tax of 1% to 3% on gross income obtained during the fiscal year.
The income tax will be the larger of the amount obtained by comparing the 30% applied to net taxable income and the definite minimum tax described above.
Nicaragua taxes its citizens, as well as other residents and non-residents, on income earned in Nicaragua. Non-residents' or non-domiciled individuals' taxable income earned in Nicaragua is calculated as a percentage of gross income, depending on the type of the income.
Workers who earn up to NIO 100,000 are tax-free.
Workers who earn a taxable income between NIO 100,000 to NIO 200,000 are imposed a personal income tax rate of 15 percent.
Workers who earn a taxable income between NIO 200,000 to NIO 350,000 are imposed a personal income tax rate of 20 percent.
Workers who earn a taxable income between NIO 350,000 to NIO 500,000 are imposed a personal income tax rate of 25 percent.
Workers who earn over NIO 500,000 are imposed a 30 percent personal income tax rate.
Non-residents, whether domiciled or not, who earn income from Nicaragua are subject to a 20% definitive WHT.
When conducted inside Nicaragua, the following transactions are subject to VAT: supply of goods, suppliers of services, imports of goods, and exports of goods and services.
VAT is levied at a rate of 15% on the sale of products, the rendering of services, the grant of use of assets, and the import of commodities. Exports of goods and services are taxed at zero percent.
Certain commodities are free from VAT, including as medication, real estate transfers, the sale of secondhand goods, basic food products, credit instruments, tuition, and textbooks and educational materials.
Employers of foreign nationals in Nicaragua have various alternatives under the country's immigration system. The requirements, processing times, employment eligibility, and benefits for accompanying family members differ depending on the type of permit.
Visa-exempt nationalities (also known as Category A nationals) may enter Nicaragua without a visa and remain for up to 90 days, which can be extended at the discretion of immigration officials for an additional 90 days. Nationals with a Category B visa may get a visa at a Nicaraguan consular post or upon arrival at a Nicaraguan port of entry. Category C visa holders must seek a Consulted Visa from a Nicaraguan consular station with prior authorisation from the Nicaraguan Immigration Department. These visas typically have a lengthy processing time.
Foreign nationals who plan to work or engage in remunerated activities in Nicaragua for less than a year can apply for a Work Permit. The validity of the Work Permit usually corresponds to the length of time the foreign national will be performing work activities in Nicaragua. Foreign nationals who will work or participate in remunerated activities in Nicaragua for more than one year, whether employed by a Nicaraguan corporation or independent workers who intend to execute a paid activity in Nicaragua, must get Temporary Residence. Temporary residence permits can be issued for up to a year and are renewable for the duration of the original issuance. After three years in Nicaragua, the foreign national may petition for permanent residence status for up to five years.
Employment agreements may be either written or verbal. The Ministry of Labor receives two copies of signed written employment contracts for permission and certification. At a later period, one copy is delivered to the employer.
Employment contracts may be for a set period of time or for an unlimited period of time. Verbal employment contracts of up to 10 days are permissible for fieldwork, domestic service, and temporary or seasonal duties. Within three days of service, employers must furnish workers with a certificate specifying the start date, kind of work to be done, and remuneration. This is both essential and sufficient to establish the employment relationship.
Nicaraguan CÓrdoba
Setting up a Nicaragua subsidiary requires much preparation before you begin the procedure. First, you must choose the best site inside Nicaragua that is conducive to international investment. Different areas or towns may have their own Nicaragua subsidiary legislation, which will influence how you establish your Nicaragua subsidiary. If you are unsure about the optimal location for your subsidiary, we suggest consulting with a lawyer, consultant, or accountant.
Following that, you should concentrate on selecting the appropriate entity. When establishing your Nicaragua subsidiary, you may choose from a number of subsidiary forms, such as a company or a branch. It's critical to choose one that aligns with your company objectives, since your entity specifies what activities you may do in the nation. Many businesses opt to organize as a corporation because it allows them to operate practically like a local business.
The following stages are involved in establishing your Nicaragua subsidiary as an LLC:
1. Creating incorporation acts
2. Purchasing accounting and business books from a local bookshop
3. Submitting incorporation acts to the VUI
4. Creating an account as a trader
5. Keeping accounting records
6. Obtaining and submitting a single registration paperwork at the VUI
7. Obtaining, if necessary, a foreign investor certificate
Nicaragua's subsidiary laws prescribe all you need to know to keep your company in compliance. For the Nicaragua subsidiary formation procedure, you'll need one director, two shareholders, and an auditor. All companies in the nation are regulated by the Ministry of Development, Industry, and Trade, and all transactions must be completed in person. Before you can start working, you'll also need a tax identification number.
All businesses, whether corporations or branches, need a commercial bank account, which takes four to six weeks to set up. Remember that you'll also need at least 10,000 Nicaraguan córdobas, which is around $300. To begin the procedure, your business will need to choose a legal representative with Nicaraguan residence to write an act of incorporation.
