Taxes on Textiles and Footwear Companies in Nicaragua

The amendment to the Law on Tax Coalition sent by the Executive to the Assembly repeals the exemption from VAT on domestic production of clothing and footwear.

Thursday, November 27, 2014

If the reform is approved, SMEs in these sectors will be the most affected "... as it states that they must pay Value Added Tax (VAT) and also orders that they withhold income tax, through an unclear mechanism within the fixed quota system. "

This would mean a loss of competitiveness in the international market, since "... it would increase manufacturing costs by 15%," said Alejandro Delgado, president of the National Leather, Footwear and Allied companies in Nicaragua.

Delgado added that "... By paying VAT the value of the shoes, backpacks and everything made in national workshops will be more expensive. And this I assume the final consumer will pay for in the form of higher prices for the this domestic product. " reports that "... By making local manufacturing more expensive those favor is given to imported products such as school and women's shoes, and that threatens the livelihoods of local workshops and export targets. This year along between 80 and 100 new shops opened in the country. "

More on this topic

Tax Incentives for Agriculture

January 2020

In order for Guatemalan producers to compete under the same conditions as neighboring countries, the government is preparing a bill that seeks to exempt agricultural inputs from VAT.

The initiative, known as the "Fiscal Equity Law", is being prepared by the Ministry of Agriculture, Livestock and Food (Maga), because, according to the institution's top official, other Central American countries do not charge value-added tax (VAT) on agricultural inputs.

Guatemala: Textile Companies Urge Investment and Employment Law

March 2015

The guild is once again insisting on the urgency of the government passing the law which grants tax incentives to the maquila industry so that they can remain competitive in the global market.

Once the Investment and Employment Decree 4644 is approved, there would come into effect "...

Investment and Employment Law Urged in Guatemala

May 2014

The Guatemalan Exporters Association is asking Congress to urgently approve vital regulations to ensure better conditions for investment and the creation of more jobs.

From a statement issued by the Guatemalan Exporters Association (Agexport):

Entrepreneurs of the Guatemalan Association of Exporters, AGEXPORT have made an urgent call to Congress, for the adoption of Decree 46-44, on Investment and Employment Law in the shortest time possible due to the pervading uncertainty on the part of dozens of companies about whether or not to remain in the country and the job security for at least 80 thousand jobs, which respond to Guatemala's number one export product, clothing and textiles, as well as other manufactured products.

Guatemala: Notional VAT Calculation Annulled

March 2014

Citing unconstitutionality power has been taken away from the tax authorities to determine the basis for calculating tax owed in respect of Value Added Tax.

A paragraph in Article 7 of the Law on Value Added Tax (VAT) which was declared unconstitutional provided: "In the case that a taxpayer, within three months, reports in their declaration of turnover sales rates that are lower than at cost or production of goods, the tax authorities may determine the basis for calculating the tax owed, taking into consideration the sale price of the same product in other transactions of the same taxpayer within the same time ... unless the taxpayer can justify and demonstrate the reasons why this situation occurred and present banking and financial information proving their real income. "

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