By approving the changes to the Special Law for Exploration and Exploitation of Hydrocarbons, the country's oil sector contractors are exonerated from all taxes.
The amendments stipulate that transfers of agreed contracts shall not pay taxes during the exploration period, and the direct or indirect assignment or transfer of all or part of the rights derived under any modality for the activity of exploration and exploitation of hydrocarbons shall be exempt from any capital gains tax.
Until 2023 renewable energy projects in Nicaragua may opt for the exemption of import duty on machinery and equipment, VAT, income tax and municipal taxes.
The National Assembly approved a reform proposed by the Ortega administration to extend the term of tax benefits for energy generation projects with renewable sources.The law established that the maximum period to opt for exemptions was January 2018, but now they will remain in place until January 2023.
In Nicaragua, the Ortega administration is proposing to extend tax benefits for energy generation projects using renewable sources for another five years.
Continuing with the strategy of promoting energy generated from renewable sources, the government is proposing extending tax incentives for these types of projects, as it did in June 2015.At that time, the benefits were extended until January 2018.
According to the ICEFI, "tax incentive policies seem to be a lost opportunity because of permanent tax expenses and the lack of tangible social benefits."
From a statement issued by the ICEFI:
Within the framework of the international meeting on Tax Justice and Transnational Fraud, held in Costa Rica, a study was presented on October 20 entitled 'The effectiveness of tax incentives for investment in Central America' in which an analysis was undertaken of the Central American experience in investment attraction through tax incentives.
From 2014 to 2015 the size of central governments remained constant at an average 18.5% of gross domestic product (GDP).
From the introduction of the report: "Macrofiscal Profiles: 6th Edition" by the Central American Institute for Fiscal Studies (Icefi):
2015 proved to be a period of low tax advance for the Central American region. On average, the size of central governments remained constant compared to 2014, at 18.5% of gross domestic product (GDP). However, not all nations maintained this trend in the same way. While the governments of Nicaragua, Costa Rica and El Salvador, some of the largest fiscally in the region, continued to increase their participation in the economy, reporting increases of 1.5, 0.7 and 0.7% of GDP, respectively, the Government of Guatemala - one of the smallest in the world became even smaller, being reduced by 1.2% of GDP. For its part, the Government of Honduras reported a small decrease of 0.2% of GDP, fully converged with its policy of fiscal austerity, while that of Panama had a transient contraction of 1.4%, reflecting a reorganization established by the new administration and that, according to the plans for 2016, will be reversed in full.
The Executive has submitted a reform bill to extend tax benefits for investments in renewable energy projects until January 2018.
Among the tax incentives that exist for investment in renewable energy is exemption from the "... Import Custom Duties (DAI), Value Added Tax (VAT) and Income Tax (IR). "
The initiative aims to reform Article 8 of Law 532, which cites that "investors interested in promoting the development of new projects in power generation from renewable sources or make additions to generating capacity from renewable sources, may receive the benefits established by law number 532, for a period of time which ends on 1 January 2018 ".
The problem with income tax exemptions is that they favor high-return projects that would probably have been made anyway.
From an IDB document entitled "The effectiveness of tax incentives: The case of export processing zones in Costa Rica, El Salvador and the Dominican Republic".
Introduction and Summary
Policies encouraging investment make use of a variety of instruments.
A hotel in Estelí is part of the projects that will benefit from the tourism incentives approved by the Nicaraguan Institute of Tourism so far this year.
From a statement issued by the Nicaraguan Institute of Tourism (INTUR):
TOURIST BOARD APPROVES OVER 10 MILLION DOLLAR INVESTMENT FOR TOURISM
INCENTIVES
Over 10 million dollars has been approved by the Board of Tourism Incentives in the third ordinary session held by the Nicaraguan Institute of Tourism (INTUR).
The draft law on Tax Coalition will extend exemptions until March 2015 and maintain tax free income for international cooperation given to nonprofit organizations.
Some of the goods included in the list of exemptions are books, magazines, school supplies, medicines, vaccines, agricultural goods, rice (except packaged rice or packages equal to or less than fifty pounds and higher quality presentation than 80/20), sugar cane (except for special sugars), vegetable cooking oil, corn, and coffee grounds, among others.
Exemption from VAT and income tax for SMEs operating under the fixed quota regime will be retained in the Tax Act Coalition whose reform is being proposed by the Executive.
There are about 200,000 small and medium enterprises (SMEs) operating under the so-called fixed quota regime, contributing 40% to gross domestic product (GDP).
Bayardo Arce, advisor to the President for Economic Affairs, told Elnuevodiario.com.ni that "...
With the consent of the private sector, the government has announced that it will remove from the Tax Coalition Law the article which establishes an end to exemptions on December 31st this year.
The executive Power will this week present the law reform to the National Assembly, and it is expected that it will be approved before the end of the current legislative period.
Up until May incentives have been authorized for 22 tourism investment projects, including the construction of the airport in Costa Esmeralda, for $12 million.
Tourism growth and incentives granted to investment projects in the tourism sector are boosting investment in the country, which, according to estimates by the Nicaraguan Institute of Tourism, will amount to $400 million in the year.