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Intellectual Property

Trademarks, Patents, Copyrights, Trade Secrets, Internet Law.

Brands

Trademark processing in Nicaragua

Distinctiveness is the ability of a sign to individualize the goods and services offered on the market in such a way that the consumer public can differentiate them.

Before beginning the trademark registration process, an evaluation of the proposed trademark must be conducted, both of the trademark itself and of the trademark in relation to the products or services it will protect.

For a sign to be eligible to become a trademark, it must be distinctive. Distinctiveness is the ability of a sign to serve to identify a product or service and distinguish it from other similar products or services. At this stage, the trademark attorney determines whether the sign has intrinsic distinctiveness. That is, whether the sign is capable of acting as a trademark in relation to other signs. Thus, a sign such as a one-digit number, an isolated color, or a simple geometric figure is considered to lack distinctiveness and cannot constitute a trademark. Similarly, for example, words used to designate the product or service, nor words that describe or qualify the product or service, cannot constitute trademarks.

Once the trademark attorney has determined that the sign is eligible to be a trademark, the next step should be to conduct a trademark history search. Although the history search is optional, it is highly recommended. Through the search, you can learn about prior trademark records (trademark registrations and pending applications) that may interfere with the new application. Through the search report, the trademark attorney can determine whether the sign has extrinsic standing (the ability to act as a trademark against other trademarks in the market) and issue an opinion on whether the trademark application is available or whether it may face obstacles due to prior registrations or applications. The attorney will clarify whether these obstacles are easily overcome or very difficult or impossible to overcome, in which case he or she will recommend selecting another trademark.

Once a sign is found that is suitable for trademark registration, and a background search has determined that its registration is feasible, the trademark process itself begins with the filing of the application, along with the payment of the application fees.

When applying for a trademark, a very important aspect is the list of goods and/or services covered by the trademark. The list of goods and/or services depends on the purpose of the trademark. The trademark attorney will consult with the client about the goods and/or services for which they plan to use the trademark. The goods and/or services should include those for which the trademark will be used in the short and medium term. The trademark attorney will then prepare a technical specification of the goods and/or services in accordance with the international classification of goods and services under the Nice Agreement.

Once the application is filed, the Intellectual Property Registry will conduct a formal examination, assessing whether the application complies with the requirements of the Trademark Law, including a review of the list of goods and/or services to verify that it meets the classification requirements of the Nice Agreement.

The next step in the trademark registration process is the publication of an abstract of the application in the Official Gazette (La Gaceta). Once the notice of the trademark application has been published, any interested party may file an opposition to the trademark registration within two months of the publication date. Conducting a background search is extremely important at this stage of the process, as the trademark attorney will have identified potentially conflicting prior trademarks and will have recommended the selection of another trademark if, in their opinion, an opposition is likely to arise.

If no opposition is filed, or if one has been filed and the obstacle has been overcome, the Intellectual Property Registry will proceed to conduct a substantive examination. During the substantive examination, the Registry will examine whether the sign has intrinsic and extrinsic legal standing.

When examining the intrinsic capacity of a trademark, the trademark examiner will assess, among other aspects, whether it is not a common form for goods or services, whether it is not a generic sign, meaning one used to designate the product or service, or a descriptive sign that describes or qualifies the product or service.

In examining the intrinsic capacity of a trademark, the examiner will compare the trademark with previous registrations and applications and use their judgment to decide whether the applied-for trademark is confusingly similar to any of the previous ones found. If the Intellectual Property Registry deems the sign unregistrable, it will issue a resolution objecting to the application. In that case, the applicant will have two months to respond and state the reasons why, in their opinion, the trademark application should be accepted. This is the second reason why it is important to conduct a background search before filing the application.

Once the substantive examination has been passed, following payment of the final fee, the Industrial Property Registry will issue the registration certificate, which must be published in the Official Gazette, La Gaceta.

 

Well-known brands

The exclusive right to a trademark in Nicaragua is acquired upon registration.

The treatment of well-known trademarks in the Nicaraguan Trademark Law

The exclusive right to a trademark in Nicaragua is acquired upon registration. The owner of a registered trademark has the exclusive right to prevent third parties from using an identical or similar trademark for identical, similar, or different goods or services, provided that such use creates a likelihood of confusion. A notable exception is well-known trademarks.

The Nicaraguan Trademark Law (Law No. 380 of 2001, amended by Law No. 580 of 2006) establishes that a well-known trademark is one known to the relevant sector of the public or business circles in Nicaragua, or in international trade, regardless of the form or means by which it became known.

The Nicaraguan Trademark Law allows owners of well-known trademarks to protect their rights regardless of their registration status and outside the specialty principle, according to which a trademark is protected only for identical or similar goods or services.

In accordance with the Joint Recommendation on Provisions Concerning the Protection of Well-Known Marks, adopted in 1999 by the Paris Union Assembly and the General Assembly of the World Intellectual Property Organization (WIPO), Article 80 establishes a series of factors for determining whether a trademark is well-known. These factors are: • The degree of awareness of the trademark within the relevant sector within Nicaragua; • The duration, breadth, and geographical extent of use of the trademark, within Nicaragua or abroad; • The duration, breadth, and geographical extent of promotion of the trademark in Nicaragua or abroad, including advertising and presentation of products or services at fairs, exhibitions, or other similar events; • The existence and seniority of registrations or applications in Nicaragua or abroad; • The measures taken to defend the trademark and, in particular, the resolutions of national or foreign authorities declaring the trademark to be well-known; and • The value of any investment intended to promote the brand, or to promote the establishment, activity, products, or services identified by the brand.

Article 82 establishes that, to determine whether a trademark is well-known, it is sufficient that the trademark is known in one of the relevant sectors. This article establishes that the relevant sectors for determining whether a trademark is well-known include:

• Actual or potential consumers of the type of products or services to which the trademark applies;

• Persons involved in the marketing channels of the type of products or services to which the trademark applies; and

• Business circles operating in lines of business related to the type of establishment, activity, products, or services to which the trademark applies.

Article 81 adds that the factors mentioned in Article 80, considered together or separately, may be sufficient to determine that a trademark is well-known. A trademark may be declared well-known even if it does not meet the factors set forth in Article 80, provided that other relevant facts are taken into account. Article 81 establishes the factors that cannot be required to declare a sign’s notoriety:

• That the trademark is registered or applied for in Nicaragua or abroad;
• That the trademark has been used or is being used in commerce in Nicaragua or abroad;
• That the trademark is well-known abroad, except when it is not known in Nicaragua for other reasons; or
• That the trademark is known to the general public in Nicaragua.

Subsection d) of Article 8 of the Trademark Law establishes that a sign cannot be registered as a trademark if it constitutes a total or partial reproduction, imitation, translation, transliteration, or transcription of a well-known trademark belonging to a third party, regardless of the goods or services identified by the sign, if the use of said sign may cause a risk of confusion or association with a well-known trademark or a risk of dilution of its distinctive strength or commercial or advertising value, or if it would entail unfair exploitation of the sign’s reputation.

In addition to being entitled to oppose a registration application based on this provision, the owner of a well-known trademark may take appropriate action to prevent third parties from using the trademark (Article 83).

El artículo 84 define el uso no autorizado de la marca notoriamente conocida como el uso de la marca en su totalidad o en una parte esencial, así como la reproducción, imitación, traducción o transliteración de la marca, en relación con establecimientos, actividades productos, servicios idénticos o similares, si tal uso es susceptible de crear confusión. El uso no autorizado también incluye cualquier uso en relación con diferentes productos, servicios, actividades o establecimientos, incluso para usos no comerciales, si dicho uso es capaz de crear un riesgo de confusión o asociación con el propietario de la marca notoriamente conocida o los establecimientos, productos, servicios o actividades identificados por la marca notoriamente conocida; o causa un daño económico o comercial injusto al titular de la marca notoriamente conocida debido a la dilución de la fuerza distintiva o del valor comercial o publicitario de la marca notoriamente conocida; o se aprovecha injustamente del prestigio de la marca notoriamente conocida o de su propietario.

El uso de una marca notoriamente conocida como nombre de dominio, dirección de correo electrónico o nombre o designación en medios electrónicos también constituye un uso no autorizado.

La acción contra el uso no autorizado de una marca notoriamente conocida debe iniciarse en un plazo de cinco años contado a partir de la fecha en que el titular de la marca notoria tenga noticia de tal uso, a menos que medie mala fe.

Reasons for cancellation of a trademark registration

Cancellation may be partial if only some of the goods or services identified by the trademark have not been used in commerce.

Reasons for cancellation of a trademark registration in Nicaragua due to lack of use

The Nicaraguan Trademark Law establishes that a trademark registration is vulnerable to cancellation for non-use if the trademark has not been used in commerce within three years of the date of registration in Nicaragua. Cancellation may be partial if only some of the goods or services identified by the trademark have not been used in commerce.

A trademark is considered to be in use if the goods or services identified by the trademark have been placed in commerce or are available under the trademark, in the quantity and form normally appropriate to the size of the market, the nature of the goods or services involved, and the modalities of their commercialization. A trademark is also considered to be in use if the goods identified by the trademark are exported from Nicaragua, or if the services under the trademark are provided abroad from Nicaragua. Furthermore, the use of a trademark by a licensee or other authorized person benefits the trademark owner.

An action for cancellation for non-use must be filed in a district court; However, when the applicant faces opposition or rejection from the Trademark Office, they may request cancellation of the registration for non-use as a defense. In both cases, the Trademark Office must refer the case to a district court.

When use of the trademark begins after three years from the date of registration, such use will only prevent cancellation of the registration if it had begun at least three months before the date on which the judicial cancellation process was initiated.

The burden of proof rests with the trademark owner, who must demonstrate that the trademark has been effectively used.

The Trademark Law Regulations add that for the purposes of canceling a registration due to non-use, a trademark is considered to be in use if the goods or services it identifies have been placed on the market or are available under the trademark, in the quantity and form normally corresponding to the size of the market, the nature of the goods or services in question, and the modalities of their commercialization in any of the member countries of the World Trade Organization (WTO). This provision of the Regulations constitutes a useful tool for foreign trademark owners wishing to maintain a registration in Nicaragua.

Validity of a trademark?

Cancellation may be partial if only some of the goods or services identified by the trademark have not been used in commerce.

Validity of a trademark?

Trademark search in Nicaragua

Before proceeding to file a trademark application, it is advisable to conduct a background search.

Can background checks be conducted before registering a trademark in Nicaragua?

In Nicaragua, retrospective trademark background searches can be conducted with the Intellectual Property Registry. Conducting trademark background searches is a very useful tool for assessing the viability of registering a trademark.

Before filing a trademark application, conducting a background search is recommended, as the report shows trademark registrations or applications that are similar to the trademark you wish to register in Nicaragua. Based on the results of the search report, the trademark attorney issues an opinion on the trademark’s availability. This way, those interested in registering a trademark can avoid unnecessary expenses, and even losses, if they are preparing to launch a product or service under a trademark that is unavailable or whose processing poses high risks.

Background searches are performed individually for each of the 45 classes of the International Classification of Goods and Services under the Nice Agreement. Background searches are also possible for registered trade names.

Protection of unregistered trademarks in Nicaragua

With the exception of well-known trademarks, trademark rights in Nicaragua are acquired upon registration.

Protection of unregistered trademarks in Nicaragua

With the exception of well-known trademarks, trademark rights in Nicaragua are acquired upon registration. Trademark registration grants the exclusive and exclusive right to use the trademark in commerce, as well as to bring legal actions to prevent third parties from using confusingly similar trademarks. However, the Nicaraguan Trademark Law (Law No. 380 of 2001, amended by Law No. 580 of 2006) grants certain limited rights to users of unregistered trademarks.

The most important right conferred by the Trademark Law to users of unregistered trademarks is the right to oppose the registration of a trademark application that may create a likelihood of confusion with a trademark that has been used in good faith in Nicaragua for the same goods or services (Article 8, paragraph i). Thus, users of unregistered trademarks can only object based on the same products or services, unlike registered trademark holders, who can also object based on different products or services if there is a risk of confusion or association with the registered trademark.

The Trademark Law Regulations establish that in order to exercise the right of opposition, the user of an unregistered trademark must apply for the trademark prior to filing the opposition and must demonstrate that the unregistered trademark has been used for at least six months in Nicaragua (Article 27, paragraph 4, of Regulation 83-2001 of 2001 and subsection i) of Article 8 of Law No. 380).

Although users of unregistered trademarks cannot pursue infringement proceedings, which is the most important tool available to trademark owners to defend their rights, they do have the law at their disposal.

Intellectual property and imports

The intensification of trade activity between different countries and trading blocs has made the exhaustion of intellectual property rights increasingly important.

The exhaustion of intellectual property rights and parallel imports in Nicaragua

The exhaustion of intellectual property rights is a legal principle according to which, after the first sale by the owner of a product protected by an intellectual property right, or a third party with their consent, the owner is prohibited from exercising control over the distribution or resale of said product.

The intensification of commercial activity between different countries and trading blocs has made the exhaustion of intellectual property rights of great importance, as it constitutes a means by which companies compartmentalize their products according to markets, with variations, for example, in the product itself, its packaging, number of units included, weight, and price.

Exhaustion of rights can be national, regional, or international. National exhaustion, which is the most restrictive, stipulates that the rights of the owner are not exhausted until the product protected by an intellectual property right is sold in the domestic market of the country, either by the owner or with his or her consent. Regional exhaustion is similar to national exhaustion, but operates within a region or trading bloc. That is, exhaustion of rights occurs only when the product has been sold by the owner or with his or her consent in any of the countries that make up the region. Finally, international exhaustion is the broadest, as intellectual property rights are exhausted when the product has been sold anywhere in the world by the owner or with his or her consent.

Both regional and international exhaustion can lead to parallel imports. Parallel imports consist of the importation of legitimate (non-counterfeit) products from abroad without the authorization of the owner. Parallel imports give rise to the so-called “gray market,” which consists of the marketing of products through distribution channels that, although legal, are not expressly authorized by the intellectual property right holder. Products marketed on the gray market are often referred to as “gray products.” These are products originally sold by a trader or its authorized distributor, which are destined for a market not anticipated by the trader. For example, trader A sells its products to distributor B, according to its distribution agreement, which defines territory X for the sale of its products. However, B, unaware that the products are destined for another market (or knowingly seeking to increase its sales), sells the products to C, who exports them to market Y, where A already has one or more authorized distributors. This gives rise to parallel imports to those carried out by the authorized distributor in Y. For parallel imports to occur, there must be a price difference between one country and another such that it is profitable for the parallel importer to pay the costs of freight and insurance, customs duties, and other marketing costs.

In intellectual property law, there is generally no uniform treatment of the exhaustion of industrial rights, such as trademarks, patents, and copyrights. Nicaragua is no exception. Thus, trademark and patent laws follow the principle of international exhaustion, while copyright and related rights apply national exhaustion.

Article 29 of Law No. 380 on Trademarks and Other Distinctive Signs of Nicaragua establishes the following: “Exhaustion of the Exclusive Right. The registration of a trademark does not confer upon its owner the right to prohibit a third party from using the trademark in relation to legitimately marked products that have been introduced into commerce in any country, by the same owner or by another person with his consent or economically linked to him, provided that the products and the containers or packaging that are in immediate contact with them have not suffered any modification, alteration, or deterioration.” For its part, Article 47 of Law No. 354 on Patents, Utility Models, and Industrial Designs provides the following: “Exhaustion of the Patent. A patent does not grant the right to prevent a third party from engaging in commercial activities with respect to a product protected by the patent after that product has been introduced into commerce in any country by the patent holder or by another person with the consent of the holder or economically related to him.”

On the other hand, Article 23.8 of Law No. 312, on Copyright and Related Rights, as amended by Law No. 577, lists the right of importation among the author’s economic rights. Even if the rightholder is not expressly granted the right of importation, section 6 of the same article grants authors the right of distribution to the public, which Article 2.6 defines as “making available to the public the original or copies of the work or phonogram, through sale, rental, importation, lending, or any other form of transfer of ownership or possession.”

Holders of related rights also enjoy the right of importation. Thus, Article 87.2 establishes that performers enjoy the right of distribution, which, as we have seen, includes the right of importation. Phonogram producers are expressly granted the right of importation in Article 92.4, in addition to the right of distribution.

Patents

Patent filing requirements in Nicaragua

Pursuant to Section 20 of the Patent Act, to obtain a filing date, the applicant’s name, address, and nationality, as well as a description of the invention in any language, are required at a minimum.

Patent filing requirements in Nicaragua

Article 19 of the Nicaraguan Patent Law (Law No. 354 of 2000, amended by Laws Nos. 579 of 2006 and 634 of 2007) and Article 6 of the Patent Law Regulations (Decree No. 88-2001, amended by Decree No. 16-2006) establish the requirements for filing patent applications in Nicaragua:

• Title of the invention;
• Name, address, and nationality or country of incorporation of the applicant;
• Two copies of the descriptive specification in Spanish (which must include the background of the invention, a detailed description, drawings, if any, one or more claims, and a technical summary);
• If the application claims priority from a foreign patent application, the priority number, date, and name of the office where the priority application was filed (in accordance with Article 90, priority may be claimed together with the application or within four months of the expiration of the applicable priority period);
• If applicable, the name and address of a recognized depository institution with which the biological material has been deposited, as well as the date of deposit and the number assigned by that institution (Article 22).

A certified copy of the priority document issued by the office where the priority application was filed must be submitted with the application or within four months of the expiration of the applicable priority period (Article 90). In practice, for PCT applications entering the national phase in Nicaragua, the Patent Office does not require a priority document.

Pursuant to Article 20 of the Patent Law, to obtain a filing date, the applicant’s name, address, and nationality, as well as a description of the invention in any language, are required at a minimum.

If not all the documents required by Article 19 are submitted with the application, the Patent Office will notify the applicant to correct the omission within two months from the date of notification; otherwise, the Office will consider the application as not filed (Article 30).

Applicants not domiciled in Nicaragua must be represented by a Nicaraguan attorney. Representation is not required for certain acts, such as the submission of translations and drawings and the payment of fees (Article 90). The Nicaraguan attorney must hold a power of attorney legalized by an apostille or by a Nicaraguan consul; However, the application may be submitted without the power of attorney, which must be submitted within two months of the application being submitted in Nicaragua.

Structure of patent claims in Nicaragua

Article 25 of the Nicaraguan Patent Law (Law No. 354 of 2000, amended by Laws Nos. 579 of 2006 and 634 of 2007) establishes that claims must be clear, precise and supported by the descriptive specification.

Structure of patent claims in Nicaragua

Article 25 of the Nicaraguan Patent Law (Law No. 354 of 2000, amended by Laws Nos. 579 of 2006 and 634 of 2007) establishes that claims must be clear, precise, and supported by the specification, and must define the essential characteristics of the subject matter of the patent.

The Regulations of the Patent Law (Decree No. 88-2001, amended by Decree No. 16-2006) establish the structure and content of patent claims:

• Claims must be drafted based on the technical characteristics of the invention, without containing examples or relative or imprecise terms, unless they have not been precisely defined in the specification.

• Unless the nature of the invention makes a different wording appropriate, the claims must be drafted in two parts. The first part (a) consists of a preamble indicating the technical features of the invention that are part of the prior art; and the second part (b) sets forth the technical features that the invention adds to the prior art and, together with those mentioned in paragraph (a), are intended to be protected.

• The claims must be numbered consecutively. The Patent Office does not accept claims that are not numbered consecutively, which may occur after amendments to the claim specification. If one or more claims are deleted or new ones are added, the specification must be renumbered consecutively, and the dependencies must be adjusted.

• If drawings have been filed, the technical features mentioned in the claims may be followed by reference numbers for the corresponding features shown in the drawings. These reference numbers must be included in parentheses. Reference numbers shall not be included unless they are necessary for a better understanding of the claim.

A claim is considered independent when it defines the subject matter without reference to another claim. A dependent claim is one that encompasses or refers to another claim. When a dependent claim refers to two or more other claims, it is considered a multiple dependent claim.

The preamble to a dependent claim must indicate the number of the underlying claim and must specify the additional feature, variation, embodiment, or alternative embodiment of the invention referred to in the respective underlying claim.

A dependent claim includes all the features and limitations of the underlying claim and must be stated after the claims on which it is based.

A multiple dependent claim may only refer alternatively to the underlying claims and may not be used as the basis for another multiple dependent claim.

Methods of treatment and medical use claims under the Patent Law

An invention is defined in Article 3 as a technical solution to a specific problem.

Methods of treatment and medical use claims under the Patent Law

Unlike United States patent law and practice, which allows for the patentability of treatment methods, Nicaragua’s Patent Law expressly excludes from patent protection therapeutic, surgical, or diagnostic methods applicable to humans or animals.

The Nicaraguan Patent Law (Law No. 354 of 2000, amended by Laws Nos. 579 of 2006 and 634 of 2007) provides that inventions that are new, involve an inventive step, and are susceptible to industrial application are patentable. Article 13 establishes that an invention is considered susceptible to industrial application when its subject matter can be produced or used in any type of industry or productive activity. For this purpose, industry is understood in a broad sense and includes, among others, crafts, agriculture, livestock, manufacturing, construction, mining, fishing, and services.

Notwithstanding Articles 8 and 13, Article 7(b) excludes from patentability therapeutic, surgical, or diagnostic methods applicable to humans or animals. The intention of this provision is to prevent patent protection from interfering with non-commercial applications in medical and veterinary activities.

An invention is defined in Article 3 as a technical solution to a specific problem, consisting of a product or a process. The same article defines a product as any substance, composition, material, including biological matter, apparatus, machine, or other object, or part thereof, and a process as any method, operation, set of operations, or application or use of a product.

Article 3 of the Patent Law Regulations (Decree No. 88-2001, as amended by Decree No. 16-2006) further establishes that a product invention may relate to, among others, any substance, composition, or material, including biological material, and to any apparatus, machine, equipment, mechanism, device, or other tangible object or result, as well as any part thereof; and a process invention may relate to, among others, any method, operation, or set of operations, use, or application of a product or process, or parts and steps thereof, leading to the production, manufacture, or transformation of a product or the obtaining of a result.

Based on the above provisions, the Nicaraguan Patent Office accepts use claims, which are useful for reformulating claims relating to therapeutic methods and for claiming first and subsequent medical uses, provided that such use satisfies the requirements of novelty and inventive step.

The Nicaraguan Patent Office accepts Swiss-style use claims, such as “use of a compound (or substance) X for the manufacture of a medicament for the treatment of disease Y.”

The Patent Office does not accept claims relating to dosage regimens of pharmaceutical products, including formulation, route of administration, dosage interval, duration of treatment, and variations necessary to take into account the patient’s age and health status. Patent examiners reject dosage regimen claims on the basis that a dosage regimen is not a medical use, but rather a therapeutic method excluded from patentability by Section 7(b) of the Patent Act. Claims such as “the use of compound (or substance) X for the manufacture of a medicament for the treatment of disease Y, wherein said medicament is administered in a dosage regimen Q” are routinely rejected.

Consequently, the wording of claims for medical uses, which are only accepted in the Swiss style, should not include any expression of dosage regimens, which will be rejected upon substantive examination. Some examples of dosing regimens include “every 8 hours,” “at bedtime,” “before meals,” and generally any terms that indicate specific intervals at which medications should be administered.

Limits to patentability in Nicaragua

The Law sets limits on the subject matter that can be patented.

Limits to patentability in Nicaragua

Invention patents can be obtained in Nicaragua for products or processes. Nicaraguan Law No. 354 on Patents for Inventions, Utility Models, and Industrial Designs defines a product as any substance, composition, or matter, including biological materials, apparatus, machines, or other objects, or part thereof. A process is defined as any method, operation, or set of operations, or application or use of a product.

Notwithstanding the foregoing, the Law establishes limits on the subject matter that may be patented.

Article 6 of the Nicaraguan Patent Law lists the subject matter that does not constitute an invention as follows:

• Simple discoveries. For the purposes of the Patent Law, a “simple discovery” is the discovery of something as it exists in nature, without involving innovation.
• Matter or energy as it occurs in nature.
• Biological processes as they occur in nature, and which do not involve human intervention to produce plants or animals, except for microbiological processes.
• Scientific theories and mathematical methods. Plants obtained from essentially biological processes may be protected under the provisions of Law No. 318 for the Protection of Plant Varieties.
• Purely aesthetic creations, literary and artistic works, which may be protected by the Copyright Law.
• Economic, advertising, or commercial plans, principles, rules, or methods, and those related to purely mental or intellectual activities or games; computer programs as such. Computer programs may be protected under the provisions of the Copyright Law. Business plans may be protected by entering into confidentiality and/or non-competition agreements. The Patent Law, as well as Law No. 601 on the Promotion of Competition, contain provisions for the protection of trade and industrial secrets.

Article 7 of the Patent Law lists the subject matter that constitutes an invention but is excluded from patentability for reasons of public interest: • Animal breeds. • Therapeutic, surgical, or diagnostic methods applicable to humans or animals. • Inventions whose commercial exploitation must be prevented to protect public order or morality. • Inventions whose commercial exploitation must be prevented to protect human, animal, or plant health or life, or to preserve the environment. For these purposes, the exclusion of patents is not considered applicable because it is prohibited, limited, or conditioned by a legal or administrative provision.

Corporate and commercial law

Income tax

Article 50 of the Tax Agreement Law (LCT) establishes that the fiscal period runs from January 1 to December 31 of each year.

Income tax

In Nicaragua, all companies under the general regime are required to file their annual Income Tax (IR) return. Article 50 of the Tax Agreement Law (LCT) establishes that the tax period runs from January 1 to December 31 of each year. The exception to filing a tax return is only for companies with special tax periods other than the fiscal year.

The first thing to consider is reliable accounting records. It is important to mention that the information submitted to the General Directorate of Revenue (DGI) in the tax return is obtained from the companies’ accounting records, including their assets, liabilities, equity, income, and expenses. This explains the importance of keeping accounting records that are up-to-date, verifiable, and free of significant errors.

Income tax

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

Income from economic activities must be properly classified and separated from capital income and capital gains and losses. Unless the latter exceed 40% of the former, they will be included as taxable income from economic activities, settled at the corresponding rate of 30% or the Final Minimum Payment, whichever is higher.

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 generate taxable income, c) That they are duly documented and supported and d) That having made the withholding the payment has been made to the Tax Administration, the expense will be deductible in the fiscal period in which the payment of withholdings or contributions is fulfilled. Regarding the requirement indicated in literal c), numeral 2 of article 31 of the RLCT indicates that the supporting or supporting vouchers must include the name of the taxpayer and his RUC or ID number.

Estimated time for preparing fiscal closing reports

It is important to prepare the annual income tax return with sufficient time to anticipate and address any clarifications that the Tax Administration may have.

If companies keep their accounting records updated after the December financial year-end, they should proceed to analyze the financial and tax information for their annual return to address any queries and clarify any doubts. Companies actually have three months, from January to March, not to update their accounting records, but rather to support and justify their tax returns.

Avoid fines

A company that fails to file or pay its taxes on time commits a tax violation due to failure to file a return or late payment. Remember that the fine for failure to file a tax return, which amounts to seventy-one US$71.00 (according to articles 6, 8, 127, and 220 of the Tax Code), is not the only penalty. There is also a late payment surcharge of 2.5% per month on the unpaid balance, but this has other consequences, such as the inability to obtain tax clearance, which would delay various procedures of interest to a company.

Incorporating in Nicaragua

The most common and usual form of incorporation in Nicaragua is a corporation, in which ownership is divided into shares.

The most common and usual form of incorporation in Nicaragua is a Limited Company, in which ownership is divided into shares. Nicaragua’s Commercial Law also provides for Limited Liability Companies (Compañía Limitada), but due to their inflexible structure, they are not widely used in practice.

A Limited Company can be set up in just a few days. To be ready to do business, it must be registered with the municipality where the company will operate and with the Nicaraguan Tax Authority (DGI).

Some important aspects to consider when incorporating in Nicaragua are:

The preamble to a dependent claim must indicate the number of the underlying claim and must specify the additional feature, variation, embodiment, or alternative embodiment of the invention referred to in the respective underlying claim.

A dependent claim includes all the features and limitations of the underlying claim and must be stated after the claims on which it is based.

A multiple dependent claim may only refer alternatively to the underlying claims and may not be used as the basis for another multiple dependent claim.

In Nicaragua, a corporation can be established with a minimum of two shareholders; however, we recommend adding at least a third shareholder within six months of incorporation.

Natural and legal persons (Nicaraguan or foreign) can be shareholders of a corporation.

Only shareholders may serve on the Board of Directors, which is generally composed of the President, Vice President, Treasurer, Secretary, and other Board members. If a legal entity holds shares in a Nicaraguan corporation, that entity is free to appoint a representative to serve on the Board of Directors.

The articles of incorporation must outline the activities the new company will carry out. We carefully draft a general scope of activities that will allow the company to conduct daily business, such as importing or exporting products and opening bank accounts. This is a very important aspect when establishing a new company in Nicaragua, as missing activities that may be considered trivial by a foreign investor can cause problems down the road, which may even require amending the articles of incorporation at great cost and delays, resulting in lost business opportunities. To the general scope of activities required for proper operation in Nicaragua, we add all specific activities of interest to the client.

All companies in Nicaragua must designate a legal representative, who must be a Nicaraguan citizen or legal resident.

Nicaraguan banks are very conservative and cautious when opening bank accounts belonging to newly incorporated companies, particularly those in which foreign individuals or foreign entities are shareholders. At Bendaña & Bendaña, we assist our clients in complying with banking requirements for opening new accounts.

Once incorporated, even if not yet operating, a Nicaraguan company must file monthly tax returns. We assist our clients in filing the necessary tax forms. Once the company is operating, it must appoint an accountant, who will be responsible for preparing tax returns and paying taxes.

Incorporation of commercial companies in Nicaragua

Establishing a business in Nicaragua is a relatively quick and easy procedure.

Establishing a business corporation in Nicaragua is a relatively easy and quick procedure. Once the parties have signed the articles of incorporation and bylaws, it takes 10 to 15 business days for the company to be registered and ready to operate. The preferred type of corporation in Nicaragua is a “Sociedad Anónima,” which is a joint-stock company.

A joint-stock company can be established with at least two shareholders, who can be Nicaraguan or foreign. Shareholders can be individuals or other corporations, whether Nicaraguan or foreign. To establish a new company, shareholders do not need to be present in Nicaragua; they can grant powers of attorney to be represented.

A Board of Directors composed exclusively of shareholders must be appointed. When there are only two shareholders, a president and a secretary-treasurer are appointed. When there are more than two shareholders, additional positions are appointed. A Nicaraguan lawyer and notary public must be responsible for preparing the company's articles of incorporation and bylaws. To prepare the articles of incorporation and bylaws, certain information is required, such as the identification of each shareholder, the company's main activity, the capital stock, and the number of shares each shareholder will hold.

After signing the articles of incorporation, for the new company to be authorized to operate, the articles of incorporation and bylaws must be registered with the Public Commercial Registry. Once the company has been registered with the Commercial Registry, additional registrations must be made with the General Directorate of Revenue (DGI) and the mayor’s office of the municipality where the company will operate. Other registrations may be required, such as as an importer and with the Nicaraguan Social Security Institute (INSS) when hiring staff.

An important thing to keep in mind is that once the company has been registered, even if it has not yet begun operations, monthly declarations must be filed with the DGI. For this reason, the services of an accountant are required from the moment a company is incorporated.

Bendaña & Bendaña offers business formation and accounting services.

Real estate law

Real Estate

Acquisition of real estate in Nicaragua

As a first step, you should investigate the property’s registration in the Property Registry.

After selecting a property, whether for private or commercial use, it is important for the buyer to take certain steps to ensure they will be able to take possession of the property and not face any legal issues in the future.

The seller or their real estate agent will usually provide the buyer with a document called a “freedom of liens,” which is a certificate issued by the Property Registry showing that a property is free of liens. While this is a useful starting point, proper background research on the property should be conducted.

As a first step, you should investigate the property's registration in the Property Registry. This investigation should include inspecting the registry entries to ensure that the property is free of liens and has no other annotations. You should also obtain the property's registration history, which allows you to ensure there are no issues with the property and shows the origin of the title, which can be a problem in Nicaragua, as we discuss below.

In addition to verifying the property records, the investigation should include verification that the Real Estate Tax (IBI) has been paid and that the property plan has been approved by the Cadastre. If the Property Registry investigation reveals that the property has been involved in litigation, the outcome of the litigation in the courts should also be verified. For certain properties, such as those located in coastal areas or near borders, it may also be necessary to obtain a certificate from the Attorney General’s Office.

As mentioned above, the origin of the title is important, as Nicaragua went through several phases of agrarian reform in the 1980s, and in 1990 many urban real estate properties, which were in government hands, were transferred to the person or persons who occupied them at the time (Laws 85 and 86 of 1990). If the title to the property comes from the agrarian reform, or from Laws 85 or 86, some additional research should be done to determine if the title is free of problems, as otherwise, the buyer could face legal proceedings in the future.

Another aspect to consider is obtaining a land use certificate, which is particularly important for vacant lots intended for development. The land use certificate allows the investor to determine whether the property can be used for its intended purpose.

Finally, when signing the purchase and sale contract, it is important to ensure that the vacant lot has been vacated, as otherwise, a court process would be required to evict the people occupying the property who do not wish to leave.

Signing a contract of promise of sale

When negotiating the purchase of a property or real estate, it is advisable to sign a promise of sale agreement.

Signing of a contract of sale for the acquisition of real estate in Nicaragua

When negotiating the purchase of real estate, it is advisable to sign a promise of sale agreement (commonly known in Nicaragua as a promise of sale contract).

A promise of sale is a pre-contract agreement, with a future date for signing. The promise of sale agreement establishes the terms of the negotiation and establishes fines or penalties that apply if either party breaches the contract.

Signing a promise of sale contract is beneficial for both the seller and the buyer. Upon signing the promise of sale contract, the seller will receive an advance payment of the sale price, generally 10 to 20% of the total price (as freely agreed upon by the parties). Furthermore, by signing the contract, the seller is assured that the purchase will go through and can safely stop advertising the property for sale.

The buyer also benefits from signing a promise of sale agreement because it establishes the price of the property, preventing the seller from increasing it. They can also conduct a background check on the property without any risk of the seller changing their mind about the sale. And because the terms and conditions of the sale are set forth in the promise of sale agreement, the buyer has the time needed to make arrangements, such as transferring funds for payment of the property.

Because signing a promise of sale agreement implies an advance payment, it is recommended to conduct a preliminary investigation to determine if the property has any apparent problems that could jeopardize the purchase.

For greater security, the promise of sale contract must be signed before a Notary Public and must be in the form of a public deed, as this will facilitate the seller or buyer’s ability to take legal action before a Court of Justice, if necessary.

Furthermore, the buyer may consider registering the promise of sale contract in the Public Property Registry. Once the contract is registered, the Registry will refuse to register any other purchase or promise contract and any encumbrances, such as mortgages, liens, etc. For registration purposes, a promise of sale contract must be signed in a public deed.

Acquire beachfront properties

According to Law No. 690, for the Development of Coastal Zones, coastal properties belong to the State of Nicaragua; however, there are some beachfront properties that were acquired in the past by individuals or legal entities.

Can you buy beachfront properties in Nicaragua?

According to Law No. 690, for the Development of Coastal Zones, coastal properties belong to the State of Nicaragua; however, there are some beachfront properties that were acquired in the past by individuals or legal entities, whose title is duly registered, and are recognized by Law No. 690. These properties are available for purchase with full ownership rights.

The situation is different for most coastal properties owned by the State, for which only a concession can be obtained.

Beachfront properties are included in public and restricted coastal zones. The public coastal zone, not available for private use, is the zone between low and high tide, plus 50 meters from the average high tide toward the mainland. The restricted coastal zone comprises the area from the end of the public coastal zone plus 200 meters toward the mainland. These properties can be leased, consisting of a concession granted by municipal governments on the Pacific coast or by the Regional Autonomous Councils on the Caribbean coast. The lease term is 20 years, renewable upon request, and up to 59 years for projects whose magnitude warrants a longer term.

Nicaraguan citizens, foreign residents of Nicaragua, or Nicaraguan corporations may obtain concessions. Concessions may be for private use or commercial development.

Tenants must pay an annual fee to the Municipal Governments or Regional Autonomous Councils and are required to use the property within 90 days of the lease date, otherwise the contract may be revoked. A lease may also be revoked if the property is left abandoned for one year, if the lease transfers the right to a third party without authorization, if the property is subleased, if the annual fee is not paid, if the property is not used in accordance with the terms of the concession, if applicable environmental laws are not complied with, if unauthorized construction is carried out on the property, if the general public is prevented from using the public beach adjacent to the property, if illegal acts are permitted or carried out within the property, if inspection of the property ordered by competent authorities is prevented, and if the terms of the concession agreement are not complied with.

When a concession right is acquired from a third party, an investigation must be conducted to ensure that the lessee has complied with the terms of the contract, that all annual fees have been paid on time, and that the lessee has obtained authorization from the Municipal Government or the Regional Autonomous Council to transfer the concession to a third party.

Law No. 690 also applies to coastal properties on the lakes of Managua (Xolotlán) and Nicaragua (Cocibolca), artificial lakes created or acquired by the State, crater lakes (lagoons), as well as lacustrine and maritime islands with a permanent population.

Can I buy an island in Nicaragua?

Most of the uninhabited islands in Nicaragua’s lakes or oceans can be freely acquired by individuals or legal entities, national or foreign.

Most of the uninhabited islands in Nicaragua’s lakes or oceans can be freely acquired by individuals or legal entities, national or foreign.

The small islands that make up the Grenada Archipelago in Lake Nicaragua (the Grenada islets) are available for purchase and constitute highly desirable properties for private and commercial use.

There are also private islands in the Nicaraguan Caribbean Sea, as well as alungas in the Pacific Ocean.

The situation is different for islands with a permanent population, as the provisions of Law No. 690, for the Development of Coastal Zones, apply. Law No. 690 defines public and restricted coastal areas. Photo credit: @RJBGdA

Public coastal areas are not available for private use and are those between low and high tide, plus fifty meters from the average high tide inland. Restricted coastal areas are those located from the end of the public coastal zone plus 200 meters inland. In most cases, properties located in restricted coastal zones are not available for purchase, but concessions can be obtained from Municipal Governments on the Pacific coast and Regional Autonomous Councils on the Caribbean coast. (For more information, please see Can beachfront properties be purchased in Nicaragua?)

When purchasing an island, as with any other property, a proper investigation must be conducted, which must include verifying that the property is registered in the Public Property Registry, that it is free of encumbrances such as mortgages and liens, that municipal taxes have been paid, etc. (For more information, please see Real Estate Acquisition in Nicaragua)

Photo credit above: An undeveloped private island in the Isletas de Granada, Nicaragua by Aaron Escobar, Wikipedia Commons.

Real estate tax

The property tax payment can be paid in two equal installments of 50%. The first installment of 50% in January, March, or April, and the remaining 50% no later than June 30th of each year.

What is the property tax?

Decree No. 3-95, Real Estate Tax (IBI).

This is the payment of the Real Estate Tax (IBI) on all real estate properties located within the territorial jurisdiction of the municipality where the property is located. Real estate includes: land and fixed buildings, stable or permanent plantations (coffee, sugarcane, for example), fixed buildings and installations, and fixed machinery.

Costs

Property Tax Declaration Form C$5.00. The property tax rate is 1% of the taxable base (80% of the municipal cadastral appraisal).

Property tax (IBI) can be paid in two equal installments of 50%. The first installment, 50%, is due in January, March, or April, and the remaining 50% is due no later than June 30th of each year.

Taxpayers who pay their property tax (IBI) in a single payment during the first quarter of the year are eligible for a 10% discount on the tax payable.

If the property tax payment is not made between January and June, a 10% penalty will be applied to the amount payable starting July 1st.

If you are retired, you must present your retirement card and a photocopy of it, along with a letter from the INSS stating the date you are eligible for retirement benefits, to be eligible for the home exemption. If you own more than two properties, the exemption applies to the property you live in, and you must pay the tax on the other properties. In Managua, this procedure cannot be completed in the districts; it must be done at the central mayor’s office (ALMA central).

If the taxpayer owns several properties in the same municipality, they must file them in a single return. If the properties are located in different municipalities, they must declare the corresponding portion in each municipality. Likewise, if the property is located in two or more municipalities, the taxpayer must pay the corresponding portion of the tax in each of them.

Income tax

Article 50 of the Tax Agreement Law (LCT) establishes that the fiscal period runs from January 1 to December 31 of each year.

Income tax

In Nicaragua, all companies under the general regime are required to file their annual Income Tax (IR) return. Article 50 of the Tax Agreement Law (LCT) establishes that the tax period runs from January 1 to December 31 of each year. The exception to filing a tax return is only for companies with special tax periods other than the fiscal year.

The first thing to consider is reliable accounting records. It is important to mention that the information submitted to the General Directorate of Revenue (DGI) in the tax return is obtained from the companies’ accounting records, including their assets, liabilities, equity, income, and expenses. This explains the importance of keeping accounting records that are up-to-date, verifiable, and free of significant errors.

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

Income from economic activities must be properly classified and separated from capital income and capital gains and losses. Unless the latter exceed 40% of the former, they will be included as taxable income from economic activities, settled at the corresponding rate of 30% or the Final Minimum Payment, whichever is higher.

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 generate taxable income, c) That they are duly documented and supported and d) That having made the withholding the payment has been made to the Tax Administration, the expense will be deductible in the fiscal period in which the payment of withholdings or contributions is fulfilled. Regarding the requirement indicated in literal c), numeral 2 of article 31 of the RLCT indicates that the supporting or supporting vouchers must include the name of the taxpayer and his RUC or ID number.

It is important to prepare the annual income tax return with sufficient time to anticipate and address any clarifications that the Tax Administration may have.

If companies keep their accounting records updated after the December financial year-end, they should proceed to analyze the financial and tax information for their annual return to address any queries and clarify any doubts. Companies actually have three months, from January to March, not to update their accounting records, but rather to support and justify their tax returns.

A company that fails to file or pay its taxes on time commits a tax violation due to failure to file a return or late payment. Remember that the fine for failure to file a tax return, which amounts to seventy-one US$71.00 (according to articles 6, 8, 127, and 220 of the Tax Code), is not the only penalty. There is also a late payment surcharge of 2.5% per month on the unpaid balance, but this has other consequences, such as the inability to obtain tax clearance, which would delay various procedures of interest to a company.

Immigración

Nicaragua es muy acogedora para los extranjeros.

Viajando o Residir en Nicaragua

Nicaragua es muy acogedora para los extranjeros. La mayoría de los viajeros no requieren visa para ingresar al país; sin embargo, permanecer más tiempo de la estadía generalmente permitida, de aproximadamente 90 días, requiere una extensión de la estadía de hasta 90 días adicionales.

Existen requisitos adicionales para los extranjeros que decidan residir en Nicaragua.

Bendaña & Bendaña puede ayudarlo con su proceso de inmigración, ya sea extendiendo su estadía o convirtiéndose en residente o ciudadano.

También podemos ayudarlo con los documentos de apostilla necesarios para su proceso de inmigración, como certificados de nacimiento, registros de salud y antecedentes penales. Todos los documentos deben presentarse ante la Oficina de Inmigración en original, con una traducción oficial al español.

Los procesos de inmigración con los que podemos ayudarte, son los siguientes:

• Solicitando prórroga de estancia.
• Residencia nicaragüense.
• Requisitos de salida para niños.
• Visa de salida para extranjeros.
• Informe de identificación de residencia perdida.
• Estancia irregular en Nicaragua (excediendo la estadía permitida para extranjeros sin permiso).

Regulatory Affairs

Our regulatory team stays abreast of regulations that frequently change due to legal, economic, and even political reasons, and will provide you with accurate information about the required documents and samples.

Trademark processing in Nicaragua

Our expert team of legal professionals, pharmacists, and veterinarians will help you navigate the complex process of obtaining marketing authorization in Nicaragua.

Our regulatory team stays abreast of regulations that frequently change due to legal, economic, and even political reasons and will provide you with accurate information regarding the required documents and samples.

Once the required documentation has been received, we thoroughly review and evaluate the file to ensure its completeness and avoid regulatory authority actions, which can cause delays and negatively impact sales.

Our services include obtaining marketing authorization for pharmaceutical, veterinary, and chemical products, drafting and reviewing distribution agreements, pricing regulations, compulsory and voluntary licenses, and general regulatory matters.

Bendaña & Bendaña’s clients include several multinational and local pharmaceutical companies.

Services

• Health registrations for pharmaceutical, veterinary, food, and chemical products.
• General regulatory matters.
• Product registration.
• Voluntary and compulsory licenses.
• Price regulation.
• Distribution contracts.

Real Estate Law

Purchases and sales, contracts, mortgages, property registry investigations.

Real Estate Law

Bendaña & Bendaña provides quality real estate legal services in Nicaragua. We understand the unique challenges foreign investors face when purchasing real estate in Nicaragua.

When you work with our firm, you’ll have a team of experienced professionals at your side. Our goal is not only to help you navigate the process as quickly and efficiently as possible, but also to ensure that any property you ultimately decide to purchase is free of title clouds. Peace of mind is invaluable, and we will ensure your property is the dream come true you’ve hoped for.

Nicaragua offers a wide range of real estate opportunities, including city properties in Managua and the colonial cities of Granada and León, beachfront properties on the idyllic beaches of Nicaragua’s west coast, and mountain properties in central Nicaragua. Security, economic growth, and a growing tourism industry have fueled a property boom in Nicaragua; however, property prices remain a fraction of the cost of similar properties in neighboring countries like Costa Rica.

At Bendaña & Bendaña, we advise our clients through all stages of real estate purchases. We will perform all necessary due diligence to ensure clear title, as well as prepare intent-to-purchase agreements (promesa de venta) and deeds of sale (escritura de compraventa), and draft mortgages. We will also request and review appraisals, surveys, and inspections, when necessary. We also handle the closing and provide you with a summary of the deed in English for your reference.

Because there have been many property issues in Nicaragua’s past, due diligence to uncover potential liabilities is a crucial step in purchasing real estate, especially to avoid future litigation. Only a professional team knowledgeable in real estate law and related matters can provide buyers with legal advice to ensure their investment is secure.

FAQs

When negotiating the purchase of a property or real estate, it is advisable to sign a promise of sale agreement.

Signing a contract of sale and purchase promise for the acquisition of real estate in Nicaragua

When negotiating the purchase of real estate, it is advisable to sign a promise of sale agreement (commonly known in Nicaragua as a promise of sale contract).

A promise of sale is a pre-contract agreement, with a future date for signing. The promise of sale agreement establishes the terms of the negotiation and establishes fines or penalties that apply if either party breaches the contract.

Signing a promise of sale contract is beneficial for both the seller and the buyer. Upon signing the promise of sale contract, the seller will receive an advance payment of the sale price, generally 10 to 20% of the total price (as freely agreed upon by the parties). Furthermore, by signing the contract, the seller is assured that the purchase will go through and can safely stop advertising the property for sale.

The buyer also benefits from signing a promise of sale agreement because it establishes the price of the property, preventing the seller from increasing it. They can also conduct a background check on the property without any risk of the seller changing their mind about the sale. And because the terms and conditions of the sale are set forth in the promise of sale agreement, the buyer has the time needed to make arrangements, such as transferring funds for payment of the property.

Because signing a promise of sale agreement implies an advance payment, it is recommended to conduct a preliminary investigation to determine if the property has any apparent problems that could jeopardize the purchase.

For greater security, the promise of sale contract must be signed before a Notary Public and must be in the form of a public deed, as this will facilitate the seller or buyer’s ability to take legal action before a Court of Justice, if necessary.

Furthermore, the buyer may consider registering the promise of sale contract in the Public Property Registry. Once the contract is registered, the Registry will refuse to register any other purchase or promise contract and any encumbrances, such as mortgages, liens, etc. For registration purposes, a promise of sale contract must be signed in a public deed.

As a first step, you should investigate the property's registration in the Property Registry.

Acquisition of real estate in Nicaragua

After selecting a property, whether for private or commercial use, it is important for the buyer to take certain steps to ensure they will be able to take possession of the property and not face any legal issues in the future.

The seller or their real estate agent will usually provide the buyer with a document called a “freedom of liens,” which is a certificate issued by the Property Registry showing that a property is free of liens. While this is a useful starting point, proper background research on the property should be conducted.

As a first step, you should investigate the property's registration in the Property Registry. This investigation should include inspecting the registry entries to ensure that the property is free of liens and has no other annotations. You should also obtain the property's registration history, which allows you to ensure there are no issues with the property and shows the origin of the title, which can be a problem in Nicaragua, as we discuss below.

In addition to verifying the property records, the investigation should include verification that the Real Estate Tax (IBI) has been paid and that the property plan has been approved by the Cadastre. If the Property Registry investigation reveals that the property has been involved in litigation, the outcome of the litigation in the courts should also be verified. For certain properties, such as those located in coastal areas or near borders, it may also be necessary to obtain a certificate from the Attorney General’s Office.

As mentioned above, the origin of the title is important, as Nicaragua went through several phases of agrarian reform in the 1980s, and in 1990 many urban real estate properties, which were in government hands, were transferred to the person or persons who occupied them at the time (Laws 85 and 86 of 1990). If the title to the property comes from the agrarian reform, or from Laws 85 or 86, some additional research should be done to determine if the title is free of problems, as otherwise, the buyer could face legal proceedings in the future.

Another aspect to consider is obtaining a land use certificate, which is particularly important for vacant lots intended for development. The land use certificate allows the investor to determine whether the property can be used for its intended purpose.

Finally, when signing the purchase and sale contract, it is important to ensure that the vacant lot has been vacated, as otherwise, a court process would be required to evict the people occupying the property who do not wish to leave.

According to Law No. 690, for the Development of Coastal Zones, coastal properties belong to the State of Nicaragua; however, there are some beachfront properties that were acquired in the past by individuals or legal entities.

Can you buy beachfront properties in Nicaragua?

According to Law No. 690, for the Development of Coastal Zones, coastal properties belong to the State of Nicaragua; however, there are some beachfront properties that were acquired in the past by individuals or legal entities, whose title is duly registered, and are recognized by Law No. 690. These properties are available for purchase with full ownership rights.

The situation is different for most coastal properties owned by the State, for which only a concession can be obtained.

Beachfront properties are included in public and restricted coastal zones. The public coastal zone, not available for private use, is the zone between low and high tide, plus 50 meters from the average high tide toward the mainland. The restricted coastal zone comprises the area from the end of the public coastal zone plus 200 meters toward the mainland. These properties can be leased, consisting of a concession granted by municipal governments on the Pacific coast or by the Regional Autonomous Councils on the Caribbean coast. The lease term is 20 years, renewable upon request, and up to 59 years for projects whose magnitude warrants a longer term.

Nicaraguan citizens, foreign residents of Nicaragua, or Nicaraguan corporations may obtain concessions. Concessions may be for private use or commercial development.

Tenants must pay an annual fee to the Municipal Governments or Regional Autonomous Councils and are required to use the property within 90 days of the lease date, otherwise the contract may be revoked. A lease may also be revoked if the property is left abandoned for one year, if the lease transfers the right to a third party without authorization, if the property is subleased, if the annual fee is not paid, if the property is not used in accordance with the terms of the concession, if applicable environmental laws are not complied with, if unauthorized construction is carried out on the property, if the general public is prevented from using the public beach adjacent to the property, if illegal acts are permitted or carried out within the property, if inspection of the property ordered by competent authorities is prevented, and if the terms of the concession agreement are not complied with.

When a concession right is acquired from a third party, an investigation must be conducted to ensure that the lessee has complied with the terms of the contract, that all annual fees have been paid on time, and that the lessee has obtained authorization from the Municipal Government or the Regional Autonomous Council to transfer the concession to a third party.

Law No. 690 also applies to coastal properties on the lakes of Managua (Xolotlán) and Nicaragua (Cocibolca), artificial lakes created or acquired by the State, crater lakes (lagoons), as well as lacustrine and maritime islands with a permanent population.

Most of the uninhabited islands in Nicaragua's lakes or oceans can be freely acquired by individuals or legal entities, national or foreign.

Can I buy an island in Nicaragua?

Most of the uninhabited islands in Nicaragua’s lakes or oceans can be freely acquired by individuals or legal entities, national or foreign.

The small islands that make up the Grenada Archipelago in Lake Nicaragua (the Grenada islets) are available for purchase and constitute highly desirable properties for private and commercial use.

There are also private islands in the Nicaraguan Caribbean Sea, as well as alungas in the Pacific Ocean.

The situation is different for islands with a permanent population, as the provisions of Law No. 690, for the Development of Coastal Zones, apply. Law No. 690 defines public and restricted coastal areas. Photo credit: @RJBGdA

Public coastal areas are not available for private use and are those between low and high tide, plus fifty meters from the average high tide inland. Restricted coastal areas are those located from the end of the public coastal zone plus 200 meters inland. In most cases, properties located in restricted coastal zones are not available for purchase, but concessions can be obtained from Municipal Governments on the Pacific coast and Regional Autonomous Councils on the Caribbean coast. (For more information, please see Can beachfront properties be purchased in Nicaragua?)

When purchasing an island, as with any other property, a proper investigation must be conducted, which must include verifying that the property is registered in the Public Property Registry, that it is free of encumbrances such as mortgages and liens, that municipal taxes have been paid, etc. (For more information, please see Real Estate Acquisition in Nicaragua)

Photo credit above: An undeveloped private island in the Isletas de Granada, Nicaragua by Aaron Escobar, Wikipedia Commons.

The property tax payment can be paid in two equal installments of 50%. The first installment of 50% in January, March, or April, and the remaining 50% no later than June 30th of each year.

What is the property tax?

Decree No. 3-95, Real Estate Tax (IBI).

This is the payment of the Real Estate Tax (IBI) on all real estate properties located within the territorial jurisdiction of the municipality where the property is located. Real estate includes: land and fixed buildings, stable or permanent plantations (coffee, sugarcane, for example), fixed buildings and installations, and fixed machinery.

Costs

Property Tax Declaration Form C$5.00. The property tax rate is 1% of the taxable base (80% of the municipal cadastral appraisal).

When must the Property Tax be paid?

The Property Tax can be paid in two equal installments of 50%. The first installment of 50% is due in January, March, or April, and the remaining 50% is due no later than June 30th of each year.

Taxpayers who pay the Property Tax in a single payment during the first quarter of the year are eligible for a 10% discount on the tax payable.

If the Property Tax is not paid during the period from January to June, a 10% penalty will be incurred on the amount payable as of July 1st.

Exemption for Retirees

If you are retired, you must present your retirement card and a photocopy of it, along with a letter from the INSS stating the date you are eligible for retirement benefits, to be eligible for the exemption for residential properties. If the retiree owns more than two properties, the exemption applies to the property where you live, and you must pay the tax on the other properties. In Managua, this procedure cannot be completed in the districts; it must be done at the central mayor’s office (ALMA central).

Where should I pay the Property Tax (IBI)?

If the taxpayer owns several properties in the same municipality, they must file them in a single return. If the properties are located in different municipalities, they must declare the corresponding portion in each municipality. Likewise, if the property is located in two or more municipalities, the taxpayer must pay the corresponding portion of the tax in each of them.

Corporate and Commercial Law

We advise small and large companies at all stages of their life.

Corporate and Commercial Law

Bendaña & Bendaña advises small and large businesses throughout all stages of their life cycles: from formation to operation; to expansion through merger or acquisition; and even dissolution, when necessary.
Our practice areas include:

● Business formation: Incorporation of a Nicaraguan company (Corporation).
● Partnership agreements, joint venture agreements, and strategic alliance agreements.
● Real estate matters, including leases and closings.
● Drafting of commercial contracts, including distribution, subcontracting, licensing, disclosure, and confidentiality agreements.
● Contractual disputes (including collections and enforcement of obligations).
● Including legalization of documents abroad.
● Property Tax (IBI), VAT (Tax Agreement Law).

After incorporation, we can also help you comply with the legal requirements established by Nicaraguan law.

Tax Compliance: The corporation must file monthly and annual tax returns.

Services

Commercial

• Commercial contracts.
• Preparation and review of contracts, including sales contracts, joint ventures, franchising, technology transfer, and distribution.
• Breach of contract.
• Consulting on all types of commercial transactions, both domestic and international.

Companies

• Incorporation of companies in accordance with Nicaraguan law.
• Establishment of branches of foreign companies.
• Mergers and acquisitions.

Tax Law

• Foreign investment advice.
• Tax advice.

FAQs

Article 50 of the Tax Agreement Law (LCT) establishes that the fiscal period runs from January 1 to December 31 of each year.

Income tax

In Nicaragua, all companies under the general regime are required to file their annual Income Tax (IR) return. Article 50 of the Tax Agreement Law (LCT) establishes that the tax period runs from January 1 to December 31 of each year. The exception to filing a tax return is only for companies with special tax periods other than the fiscal year.

The first thing to consider is reliable accounting records. It is important to mention that the information submitted to the General Directorate of Revenue (DGI) in the tax return is obtained from the companies’ accounting records, including their assets, liabilities, equity, income, and expenses. This explains the importance of keeping accounting records that are up-to-date, verifiable, and free of significant errors.

Taxable Base and Its Determination, Method of Preparation

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

Income from economic activities must be properly classified and separated from capital income and capital gains and losses. Unless the latter exceed 40% of the former, they will be included as taxable income from economic activities, settled at the corresponding rate of 30% or the Final Minimum Payment, whichever is higher.

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 generate taxable income, c) That they are duly documented and supported and d) That having made the withholding the payment has been made to the Tax Administration, the expense will be deductible in the fiscal period in which the payment of withholdings or contributions is fulfilled. Regarding the requirement indicated in literal c), numeral 2 of article 31 of the RLCT indicates that the supporting or supporting vouchers must include the name of the taxpayer and his RUC or ID number.

Estimated Time for Preparing Fiscal Year-End Reports

It is necessary to prepare the annual income tax return with sufficient time to anticipate and address any clarifications that the Tax Administration may have.

If companies keep their accounting records updated after the December financial year-end, they should proceed to analyze the financial and tax information for their annual return and thus make inquiries and clarify any doubts. Companies actually have three months, from January to March, not to update their accounting records, but rather to support and justify their tax return.

Avoid Fines

A company that fails to file or pay its taxes on time commits a tax violation due to the failure to file a return or the late payment of said tax. Remember that the fine for failure to file a return is not limited to US$71.00 (seventy-one units). (According to articles 6, 8, 127, and 220 of the Tax Code). There is also a late payment surcharge of 2.5% per month on the outstanding balance, but this has other consequences, such as not obtaining tax solvency, which would delay various procedures of interest to a company.

The most common and usual form of incorporation in Nicaragua is a corporation, in which ownership is divided into shares.

Incorporating in Nicaragua

The most common and usual form of incorporation in Nicaragua is a Limited Company, in which ownership is divided into shares. Nicaragua’s Commercial Law also provides for Limited Liability Companies (Compañía Limitada), but due to their inflexible structure, they are not widely used in practice.

A Limited Company can be set up in just a few days. To be ready to do business, it must be registered with the municipality where the company will operate and with the Nicaraguan Tax Authority (DGI).

Some important aspects to consider when incorporating in Nicaragua are:

In Nicaragua, a corporation can be established with a minimum of two shareholders; however, we recommend adding at least a third shareholder within six months of incorporation.

Natural and legal persons (Nicaraguan or foreign) can be shareholders of a corporation.

Only shareholders may serve on the Board of Directors, which is generally composed of the President, Vice President, Treasurer, Secretary, and other Board members. If a legal entity holds shares in a Nicaraguan corporation, that entity is free to appoint a representative to serve on the Board of Directors.

The articles of incorporation must outline the activities the new company will carry out. We carefully draft a general scope of activities that will allow the company to conduct daily business, such as importing or exporting products and opening bank accounts. This is a very important aspect when establishing a new company in Nicaragua, as missing activities that may be considered trivial by a foreign investor can cause problems down the road, which may even require amending the articles of incorporation at great cost and delays, resulting in lost business opportunities. To the general scope of activities required for proper operation in Nicaragua, we add all specific activities of interest to the client.

All companies in Nicaragua must designate a legal representative, who must be a Nicaraguan citizen or legal resident.

Nicaraguan banks are very conservative and cautious when opening bank accounts belonging to newly incorporated companies, particularly those in which foreign individuals or foreign entities are shareholders. At Bendaña & Bendaña, we assist our clients in complying with banking requirements for opening new accounts.

Once incorporated, even if not yet operating, a Nicaraguan company must file monthly tax returns. We assist our clients in filing the necessary tax forms. Once the company is operating, it must appoint an accountant, who will be responsible for preparing tax returns and paying taxes.

Establishing a business in Nicaragua is a relatively quick and easy procedure.

Incorporation of commercial companies in Nicaragua

Establishing a business corporation in Nicaragua is a relatively easy and quick procedure. Once the parties have signed the articles of incorporation and bylaws, it takes 10 to 15 business days for the company to be registered and ready to operate. The preferred type of corporation in Nicaragua is a “Sociedad Anónima,” which is a joint-stock company.

A joint-stock company can be established with at least two shareholders, who can be Nicaraguan or foreign. Shareholders can be individuals or other corporations, whether Nicaraguan or foreign. To establish a new company, shareholders do not need to be present in Nicaragua; they can grant powers of attorney to be represented.

A Board of Directors composed exclusively of shareholders must be appointed. When there are only two shareholders, a president and a secretary-treasurer are appointed. When there are more than two shareholders, additional positions are appointed. A Nicaraguan lawyer and notary public must be responsible for preparing the company's articles of incorporation and bylaws. To prepare the articles of incorporation and bylaws, certain information is required, such as the identification of each shareholder, the company's main activity, the capital stock, and the number of shares each shareholder will hold.

After signing the articles of incorporation, for the new company to be authorized to operate, the articles of incorporation and bylaws must be registered with the Public Commercial Registry. Once the company has been registered with the Commercial Registry, additional registrations must be made with the General Directorate of Revenue (DGI) and the mayor’s office of the municipality where the company will operate. Other registrations may be required, such as as an importer and with the Nicaraguan Social Security Institute (INSS) when hiring staff.

An important thing to keep in mind is that once the company has been registered, even if it has not yet begun operations, monthly declarations must be filed with the DGI. For this reason, the services of an accountant are required from the moment a company is incorporated.

Bendaña & Bendaña offers business formation and accounting services.

Immigration

Nicaragua is very welcoming to foreigners.

Traveling or Residing in Nicaragua

Nicaragua is very welcoming to foreigners. Most travelers do not require a visa to enter the country; however, staying longer than the generally permitted stay of approximately 90 days requires an extension of stay of up to 90 additional days.

There are additional requirements for foreigners who choose to reside in Nicaragua.

Bendaña & Bendaña can help you with your immigration process, whether extending your stay or becoming a resident or citizen.

We can also help you with the apostille documents required for your immigration process, such as birth certificates, health records, and criminal records. All documents must be submitted to the Immigration Office in the original, with an official Spanish translation.

The immigration processes we can help you with are the following:

• Requesting an extension of stay.
• Nicaraguan residency.
• Exit requirements for children.
• Exit visa for foreigners.
• Lost residency identification report.
• Irregular stay in Nicaragua (exceeding the permitted stay for foreigners without permission).

Accounting Services

Bendaña & Bendaña, through its professionals, can advise you and handle your company’s accounting and tax matters.

Accounting Services

For businesses, maintaining good accounting records is one of the most important matters. However, this can be an arduous process. In Nicaragua, income tax returns must be filed annually. In addition, monthly returns must be filed for taxes collected and withholdings made.

Other aspects of the Tax Law that businesses must consider include withholdings and deductible expenses. Many businesses lose a lot of money because they are unaware of the deductions they can benefit from. On the other hand, not keeping proper accounting records can negatively affect the business in the event of an audit.

Bendaña & Bendaña, through its professionals, can advise you and take care of your company’s accounting, as well as tax matters. By hiring our services, you will have access to quality and reliable advice tailored to your needs, saving your company time and money with the best tax advice.

We offer the service of organizing your business’s accounting department and providing external advice on tax and financial matters. Our professionals have 15 years of experience in this field, from legal to administrative. Our legal and accounting department is constantly training to provide the best service to our clients.

Services

• Monthly tax returns to the DGI (Nicaraguan tax authority).
• Annual tax returns
• General accounting
• Auditing services
• Outsourcing services

FAQs

Article 50 of the Tax Agreement Law (LCT) establishes that the fiscal period runs from January 1 to December 31 of each year.

Income tax

In Nicaragua, all companies under the general regime are required to file their annual Income Tax (IR) return. Article 50 of the Tax Agreement Law (LCT) establishes that the tax period runs from January 1 to December 31 of each year. The exception to filing a tax return is only for companies with special tax periods other than the fiscal year.

The first thing to consider is reliable accounting records. It is important to mention that the information submitted to the General Directorate of Revenue (DGI) in the tax return is obtained from the companies’ accounting records, including their assets, liabilities, equity, income, and expenses. This explains the importance of keeping accounting records that are up-to-date, verifiable, and free of significant errors.

Taxable Base and Its Determination, Method of Preparation

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

Income from economic activities must be properly classified and separated from capital income and capital gains and losses. Unless the latter exceed 40% of the former, they will be included as taxable income from economic activities, settled at the corresponding rate of 30% or the Final Minimum Payment, whichever is higher.

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 generate taxable income, c) That they are duly documented and supported and d) That having made the withholding the payment has been made to the Tax Administration, the expense will be deductible in the fiscal period in which the payment of withholdings or contributions is fulfilled. Regarding the requirement indicated in literal c), numeral 2 of article 31 of the RLCT indicates that the supporting or supporting vouchers must include the name of the taxpayer and his RUC or ID number.

Estimated Time for Preparing Fiscal Year-End Reports

It is necessary to prepare the annual income tax return with sufficient time to anticipate and address any clarifications that the Tax Administration may have.

If companies keep their accounting records updated after the December financial year-end, they should proceed to analyze the financial and tax information for their annual return and thus make inquiries and clarify any doubts. Companies actually have three months, from January to March, not to update their accounting records, but rather to support and justify their tax return.

Avoid Fines

A company that fails to file or pay its taxes on time commits a tax violation due to the failure to file a return or the late payment of said tax. Remember that the fine for failure to file a return is not limited to US$71.00 (seventy-one units). (According to articles 6, 8, 127, and 220 of the Tax Code). There is also a late payment surcharge of 2.5% per month on the outstanding balance, but this has other consequences, such as not obtaining tax solvency, which would delay various procedures of interest to a company.

Business Strengthening and Development

Provide consulting and advisory services to small, medium-sized, and large companies on organizational, financial, project, economic, and labor issues.

Business Strengthening and Development

Facilitate Strategic Planning processes to define the relevant business strategy for a 3- to 5-year planning horizon, as well as support in the implementation of said strategy.

Business Diagnostics to assess a company’s current situation, identify problems, and propose solutions. These diagnostics can cover organizational and financial aspects, or cover the entire company.

Development of organizational and functional manuals, as well as those for all company areas. This can also include all human resources system documentation, work environment analysis, and any other documents related to the functioning and operation of a company.

Development of Business Management Information Systems. Facilitates the management of all a company’s information and its analysis by generating reports for the decision-making process.

Cost Analysis, ABC Costing, and Business Financial Analysis, to promote business efficiency through cost analysis and revenue generation tools.

Development of business plans or feasibility studies, as well as preparation of market studies and business valuations, to strengthen the decision-making process for business investments. The market and financial viability of investing in a business is determined, as well as business valuations for decision-making regarding the sale or purchase of a company.

Studies on Economic Research in the Business Sector and Labor Economics.

FAQs

El Arto. 50 de la Ley de Concertación Tributaria (LCT) establece que el periodo fiscal está comprendido del 1 de enero al 31 de diciembre de cada año.

Income tax

In Nicaragua, all companies under the general regime are required to file their annual Income Tax (IR) return. Article 50 of the Tax Agreement Law (LCT) establishes that the tax period runs from January 1 to December 31 of each year. The exception to filing a tax return is only for companies with special tax periods other than the fiscal year.

The first thing to consider is reliable accounting records. It is important to mention that the information submitted to the General Directorate of Revenue (DGI) in the tax return is obtained from the companies’ accounting records, including their assets, liabilities, equity, income, and expenses. This explains the importance of keeping accounting records that are up-to-date, verifiable, and free of significant errors.

Taxable Base and Its Determination, Method of Preparation

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

Income from economic activities must be properly classified and separated from capital income and capital gains and losses. Unless the latter exceed 40% of the former, they will be included as taxable income from economic activities, settled at the corresponding rate of 30% or the Final Minimum Payment, whichever is higher.

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 generate taxable income, c) That they are duly documented and supported and d) That having made the withholding the payment has been made to the Tax Administration, the expense will be deductible in the fiscal period in which the payment of withholdings or contributions is fulfilled. Regarding the requirement indicated in literal c), numeral 2 of article 31 of the RLCT indicates that the supporting or supporting vouchers must include the name of the taxpayer and his RUC or ID number.

Estimated Time for Preparing Fiscal Year-End Reports

It is necessary to prepare the annual income tax return with sufficient time to anticipate and address any clarifications that the Tax Administration may have.

If companies keep their accounting records updated after the December financial year-end, they should proceed to analyze the financial and tax information for their annual return and thus make inquiries and clarify any doubts. Companies actually have three months, from January to March, not to update their accounting records, but rather to support and justify their tax return.

Avoid Fines

A company that fails to file or pay its taxes on time commits a tax violation due to the failure to file a return or the late payment of said tax. Remember that the fine for failure to file a return is not limited to US$71.00 (seventy-one units). (According to articles 6, 8, 127, and 220 of the Tax Code). There is also a late payment surcharge of 2.5% per month on the outstanding balance, but this has other consequences, such as not obtaining tax solvency, which would delay various procedures of interest to a company.

Founded in 1950 by Julián Bendaña Silva, Bendaña & Bendaña has been a leading firm for over 70 years and one of the most recognized names in patent, trademark, and healthcare registrations.

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  • Pricesmart 1c. Norte, 20mts. Oeste, Ave. Genízaro, Managua 12066, Bolonia. Managua, Nicaragua.
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