Capital Gains Taxation in Nicaragua
In Nicaragua, the taxation of capital gains is governed by the Tax Code, specifically Article 70. Capital gains are defined as the profit obtained from the sale, exchange, or transfer of assets, including:
- Real estate properties
- Stocks and bonds
- Business assets
- Intellectual property
The Tax Code does not differentiate between short-term and long-term capital gains.
Calculating Taxable Capital Gains
Taxable capital gains are calculated as the difference between the selling price of the asset and its acquisition cost, minus any expenses incurred in the sale. The formula is:
Capital Gain = Selling Price - Acquisition Cost - Expenses
Expenses that can be deducted include brokerage fees, legal fees, and improvements made to the asset.
Tax Rates
Capital gains are taxed at a flat rate of 15%. However, certain exemptions and deductions may apply, such as:
- Gains from the sale of a principal residence are exempt up to a certain amount.
- Gains from the sale of agricultural land are exempt if the land is used for farming.
- Gains from the sale of shares in a Nicaraguan company are exempt if the company has been held for at least two years.
Legal Framework
The taxation of capital gains in Nicaragua is outlined in the following articles of the Tax Code:
- Article 70: Definition of capital gains
- Article 71: Calculation of taxable capital gains
- Article 72: Tax rates applicable to capital gains
- Article 73: Exemptions and deductions
These provisions aim to ensure that individuals and businesses contribute their fair share of tax on profits realized from investments and asset disposals. By applying a flat tax rate to capital gains, Nicaragua seeks to maintain a neutral tax treatment across different sources of income and promote investment.
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