The Value Added Tax (IVA, for its acronym in Spanish), is applied to the following activities performed in Nicaraguan territory:
• goods transfer
• imports of goods
• exports of goods and services
• provision of services or use of goods.
The IVA tariff is 15% of the value of a product or of an activity carried out; except the export of goods of the national production and the services provided abroad, which tax rate is of 0%.
The law establishes a list of goods and services that are exempt from the Value Added Tax. For example: goods related to academic studies, medicine and human health, agricultural goods, medical sector services, financial markets, sporting events, religious goods, etc. The goods and services that are exempt are defined in a tax list emitted by the minister of finance and public credit.
The responsibility for charging, collecting and paying it to the tax authority at each stage of the process rests with the business making the sale. A business registered for the tax will charge VAT (output tax) on its sales, and incur VAT (input tax) on its purchases (including any VAT paid at importation). The difference between the output tax and the deductible input tax in each accounting period will be the amount of VAT payable by the business to the tax authority.
The right of accreditation is personal and will not be transferable, except in the case of merger of companies, successions, transformation of companies and change of business name.
Where the input tax exceeds the output tax, a refund can be claimed. Taxpayers may recover the sales tax by means of credit or since cash reimbursements, as applicable.
Businesses that make exempt supplies are unable to claim all of the input tax that they incur, so the VAT paid to suppliers will be a ‘real’ cost.
There is no a registration limit for the tax. A ‘person’ who either makes or intends to make taxable sales of goods or services in the course or furtherance of a business must register for VAT.
For these purposes, a ‘person’ includes any legal entity.
Therefore, once a person is registered for VAT, all of their business activities will be covered by the registration – even if the nature of some of those activities are very different.
A penalty may be imposed by the tax authority if a business fails to register at the correct time. Without prejudice to the penalties that could apply, those who do not fulfil their obligations to register are obliged, however, to pay the tax, and not entitled to a refund or credit for the tax paid on the existence of goods which remain in inventory at the date of registration as taxpayers.
There is no a registration limit for the tax.
No. There are no specific regulations for these type of situations.
No, except if the non-established business qualifies as a permanent establishment.
VAT returns have to be submitted in a monthly basis. All VAT returns have to be submitted within 15 days of the end of the previous month.
A default surcharge penalty may be imposed by the tax authority if VAT returns are not submitted on time, or the related tax is not paid by the due date.
Any person who belatedly submits his/her declaration and/or payment of taxes and for any reason is in default, must pay the corresponding credit with a surcharge of 5% (five percent) for each month or fraction of the month of the delay, on the unpaid balance.
In any case, the accumulated surcharges referred to above may exceed the equivalent to fifty percent (50%) of the unpaid balance.
No.
Yes. A range of penalties can be imposed where businesses do not comply with the VAT rules.
Fines and interest can be applied for errors or omissions made on tax returns, or where the tax is paid late. Penalties and interests can also be applied where the business do not maintain adequate records. Criminal proceeding may be brought in the case of more serious matters.
No, VAT cannot be reclaimed by the cross-border businesses if these are not registered as having operations in Nicaragua.
A VAT invoice must show:
• an invoice number which is unique and sequential
• the seller’s name and address
• the seller’s VAT registration number
• the invoice date
• the customer’s name
• a description sufficient to identify the goods or services supplied to the customer
• the rate of any cash discount
• the total amount of VAT charged.
For each different type of item listed on the invoice, the following must be shown:
• the unit price or rate, excluding VAT
• the quantity of goods or the extent of the services
• the total amount payable, excluding VAT. Where a VAT invoice includes zero-rated or exempt goods or services, it must show clearly that there is no VAT payable on those goods or services.
VAT invoices can be issued, received and stored in electronic format with the authorization of the Tax Authority.
For further information on indirect tax in Nicaragua please contact:
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Martin Manuel Ruiz |
Silvio Ronald Flores |
Indirect tax snapshot