Income Tax (IR) in Nicaragua

In Nicaragua, all companies that are within the general regime have the obligation to submit their annual income tax return (IR). The Arto 50 of the Tax Agreement Law (LCT) establishes that the fiscal period is from January 1 to December 31 of each year. The exception to submit the tax return is only for companies that have special fiscal periods other than the fiscal year.

The first thing you should have is reliable accounting records. It is important to mention that the information presented in the declaration before the General Directorate of Revenue (DGI) is obtained from the accounting records of the companies, their assets, liabilities, equity, income and expenses, and hence, the importance of carrying an updated, verifiable accounting and free of significant errors.

Tax base and its determination, form of preparation

The annual tax base of economic activities is the net income. The net income will be the result of deducting from the gross non-exempt income, or taxable income, the amount of the deductions authorized by law (Art. 35 LCT).

Income from economic activities must be properly classified and separated from capital income and capital gains and losses, and unless the latter are greater than 40% of the former, they will be integrated as taxable income from economic activities, liquidating with the aliquot corresponding to 30% or Minimum Definitive Payment, whichever is greater.

In general, the requirements for deductibility of costs and expenses indicated in articles 39 and 42 of the LCT, require; a) That they belong to the period, b) That they are generators of taxable income, c) That they are duly documented and supported and d) That having made the withholding the payment to the Tax Administration has been informed, the expense will be deductible in the fiscal period in that the payment of the withholdings or contributions is fulfilled. With respect to the requirement indicated in subparagraph c), numeral 2 of article 31 of the RLCT states that the supporting or supporting vouchers must include the name of the taxpayer and his RUC or identification number.

Estimated time for the preparation of fiscal closure reports

It is necessary to prepare the Annual Income Tax Return with sufficient time in order to anticipate and address possible clarifications that the Tax Administration could make.

If the companies keep their accounting updated after the accounting closing of December, they must proceed to analyze the financial and fiscal information for their annual declaration and thus make inquiries and clarify doubts. Companies really have three months from January to March, not to update their accounting, but to support and sustain their tax return.

Avoid fines

A company that does not declare or pay its taxes on time commits a tax infraction for the failure to file a declaration or for its late payment. Remember that not only is the fine for the omission of US $ 71.00 seventy-one units of fine. (According to articles 6, 8, 127 and 220 of the tax code). There is also a monthly surcharge of 2.5% on the unearned balance, but this has other consequences such as not obtaining tax solvency, which would delay various procedures of interest to a company.

Author: Nilson Mercado Centeno

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