On 28 February 2019, Nicaragua issued tax amend law No.987 in the Official Gazette including notices of the amendment of applicable withholding tax rates.
Major changes are summarized in below:
Establishing the changes in the alternative minimum tax for corporations from 1% of gross annual income tax for all corporations to 3% rates of annual gross income for large taxpayers, 2% for the fishing sector in the Caribbean, 2% of annual gross income for main contributors and 1% of the annual gross income of other taxpayers;
Establishing an anti-avoidance rule for the increased AMT rates to provide that if a company separate its operation to apply a lower AMT rate, the tax authority may consider that the operations are not separated for the purpose of AMT;
Introducing a list of the withholding rates per type of income, the applicable rates were introduced by Law 987 that changes the applicable rates for payments to non-residents including 10% to interest of foreign financial institutions, 15% resident and non-resident income and capital gains, and trusts, 30% to tax havens;
Establishing of a 15% withholding tax on severance payments and other labor-related indemnities received by employees, including both residents and non-residents;
Introducing self-assessment in 5 days after the month in which no withholding was made for income and capital gains by withholding agents. The advance tax for every month must be declared by the 5th calendar day of the next month and paid by the 15th day; and
Establishing a determination of taxable base for withholding on permanent property capital income that is derived from deducting 20% for assumed costs and expenses without no other deduction and the taxable base determination for withholding on movable property capital income is also derived from deducting 30% for assumed costs and expenses without no other deduction and moreover the tax basis for withholding on intangible property capital income is 100% of the gross income.
Law No. 987 entered into force on the date of publication. However, the rate of withholding changes generally apply from 1 March 2019.