The transfer or transmission of Real Estate in Nicaragua generates taxes or fiscal charges, tariffs and mandatory municipal compliance. Without the satisfaction of each of these charges, it is not possible to complete the process of legalizing the transfer of ownership of a property, which concludes with the registration in the Real Estate Public Registry of the Department or the Departmental Capital where the property is located.
These charges consist of three separate and different payments with their concept and legal basis in the followings topics:
I: Property Tax (“IBI”): Created by Decree No. 3-95, Approved on January 31, 1995 and published in the Official Gazette No. 21 of January 31, 1995; which in the Article 2 provides that this tax is levied on real property, whether it is urban or rural, located in the geographical area of each municipality of the Republic and owned as of December 31 of each fiscal year and in Article 4 defines that the rate of the “IBI” shall be one percent (1%) or based on taxable income determined under the Municipal Cadastral Assessment issued and notified by the relevant municipality.
It is a municipal charge or linked to the property and not the owner or the act of transmission, but its payment generates a document called Municipal Solvency, which is issued by the mayor of the territorial jurisdiction of the municipality in which the property is located. The procuration and assistance with the property deed or the ownership title is an obligation, so we relate as a mandatory charge for the transmission of the property and it is the responsibility of the seller to pay this tax.
The payment of the “IBI” can be canceled in equal partial payments of 50%, the first during the months of January, February and March and the other fifty percent (50%), no later than June 30 of that year, encouraging their prompt cancellation, at a discount provided for in Article 22, 10% if the taxpayer makes one full payment for the months of January, February and March.
The Municipal Solvency created by Law 452 (Municipal Solvency Law), published in the Official Gazette No. 90 of Nicaragua from May 10, 2003, which as already stated, is a binding document for the registration of the transmission of Property, being the reason by which we relate the “IBI” as a mandatory charge for the transmission of the property.
II: IR Withholding tax on capital income and capital gains and losses:
Governed by Articles 87 and 88 of Law No. 822, Tax Concertation Law, published in the Gazette No. 241 of December 17, 2012 and Decree 01-2013 Rules of the Tax Concertation Law (LCT), published in the Gazette No. 12 of January 22, 2013.
Capital gains and losses are the changes in the value of the assets of the taxpayer, as a result of the sale of goods, or assignment or transfer of rights. In addition, the capital gains are from gambling, betting, gifts, inheritances and legacies, and other similar income.
The Generator Fact and the Taxable Event are the income earned or received in cash or kind, from the exploitation of assets or transfer of rights, as it involves the transmission of real estate. Being defined as from the lease, sublease, and assignment of rights or powers of use or enjoyment of property, including fixed assets, facilities and equipment. Considering real estate, among others, the following:
b) Buildings and facilities;
c) Permanent plantations;
d) Motor vehicles, vessels and aircraft Vehicles;
e) Machinery and Equipment; Y
f) Installations and other goods deemed as real estate by accession.
Capital income and capital gains and losses do not have a tax period, by being taxed with unique withholding at the time they are perceived, based on Article 87 “LCT2, as in example when selling a property.
The rate of “IR” payable over the incomes from capital gains and capital losses on the transfer of property subject to registration with a public office (real estate), the following rates apply for withholding “IR”. The payment of such income shall be divided in the following sliding scale:
|Minimum Range||Maximum Range||Percentage to Pay|
|US$ 0.01||US$ 50,000.00||1%|
|US$ 50,000.01||US$ 100,000.00||2%|
|US$ 100,001.00||US$ 200,000.00||3%|
The reference to price this rate is the tax valuation made by the dependence of the Cadastral Office from the Directorate General of Revenue (DGI) and the value reflected in the Deed of sale of the property, which reflects the highest value. By being capital gains, is the obligation of the seller to pay the taxes.
III: Registry registration Tariff public records of Deeds and Mercantile:
Ruled by Decree No. 14-2009, published in The Gazette No. 42 of March 3, 2009, establishing for the registration of Real Estate Sale of the sum of Ten Cordobas (C $ 10.00) per each thousand Cordobas (C$ 1,000. 00) or fraction thereof, without the amount of revenues may be less than one hundred cordobas (C $ 100.00) nor more than thirty thousand Córdobas (C $ 30,000.00), the reference to assess the registration fee is tax valuation by dependence Cadastral Office of the Directorate General Revenue (DGI). And is the buyer's payment obligation.
If the buyer wants to speed up the process of registration with the Real Estate Registry, It is able to pay an additional percentage of the principal amount tariff, whose ranges are as follows:
|Minimum Range||Maximum Range||Percentage to Pay|
|C$ 100.00||C$ 1,000.00||50%|
|C$ 1,001.00||C$ 5,000.00||40%|
|C$ 5,001.00||C$ 10,000.00||30%|
|C$ 10,001.00||C$ 20,000.00||20%|
|C$ 20,001.00||C$ 30,000.00||10%|
For each of these taxes and fees, the collecting institution issues an official receipt.
All these payments are made in stages: First: The Municipal Solvency needs to be obtained; Second: IR Payment from the sale of property and; Third: Registration Tariff, which is a mandatory imposition, with some exceptions such as when the property belongs to the Government or any exemption made by law.
CENTRAL LAW in Nicaragua we have made a number of real estate transactions of all sizes, either with individuals or with commercial purposes. Our Lawyers and Attorneys in Nicaragua advise our clients on all areas from the negotiation process to finalizing the purchase, including the prior inspection of the property, the purchase and sale, agreements, services of guaranteed deposits, title transfer, mortgages, guarantee deeds, taxes, and existing lawsuits involving the property.
Soraya Montoya Herrera
CENTRAL LAW Nicaragua