Today Thursday, October 8th, the National Assembly of Nicaragua approved unanimously, a new law on Industrial Free Zones, updating the normative content to modern trends and demands of users and adding new species areas free, leading to the repeal of Decree No. 46-91. Here are the main aspects of this Law:
- – Categories of Free Zones: Same as Decree No. 46-91, the traditional Free Zones operators and users are preserved. This new law categorizes the free zones in our country based on the nature of their activities, founding in the article number three the new categories, which goes as follows: processing zones, production of industrial and agro-industrial goods, logistics zones, service zones, outsourcing zones, as well as others engaged in the production and export of goods and/or services under a tax and customs regime of exception. The activity of the free zones will be directed exclusively to the export of goods and services.
- – Extension of Operating Permit: One of the main problems with the old Decree No. 46-91 is that it did not recognize the extension of the Operating Permit, forcing users to have to set up a new company to absorb the existing goods and reapply to the National Commission of Free Zones (CNZF). Now, companies under this regime may renew their Operating Permit upon request to be approved by the CNZF.
- – Benefits: The new law retains elements of the previous decree, however considers new aspects, which must be analyzed by separating the free zone between operators and users.
- * Operators: enjoy the 100% exemption from Income Tax (IR) for a period of 15 years, renewable for one more period and for payment of municipal taxes; Total exemption from import tax on machinery, equipment, tools, spare parts and other equipment necessary for the functioning and operation of the free zone; exemption from taxes of incorporation; exemption from payment of the Value Added Tax (VAT) and the exemption from property transfer taxes.
- * Users: 100% exemption from Income Tax (IR) for the first ten years of operation and 60% of the eleventh year onwards (extendable for a further period); Total exemption from import tax on machinery, equipment, tools, spare parts and other equipment necessary for the functioning and operation of the free zone and also to the export of processed products; exemption from taxes of incorporation; exemption from payment of Value Added Tax (VAT) and the exemption from transfer taxes on goods and even capital gains.
Pending the issuance of a regulation that conforms to this Law, applications continue to be processed in accordance with current requirements.
No doubt that this is a step forward in the promotion of foreign investment in Nicaragua to have a new adequate legal framework to contemporary demand.
Avil Ramírez Mayorga
CENTRAL LAW Nicaragua