Doing Business Here
Working in Nicaragua
You do not have to be a resident to work here or to own a business. But Nicaragua is a poor country so consider this if you are planning to come here to make big bucks. It is certainly possible since there is plenty of potential here but potentiality does not always translate to opportunity or reality.
There are economic reasons for maids and caretakers only making around $100-$150 a month. Many of our local neighbors are university graduates and many still earn less than $200 a month if they can find employment. As mentioned in another section, one of the highest salaries in Granada made by locals is teaching Spanish which earns $5-$7 an hour but few instructors have more than 10 hours of teaching a week.
You can see that if you are looking for work, the competition is stiff unless you have a unique skill that is needed. Many of the existing businesses do hire expats as their managers since the work ethic of foreigners is sometimes desired. Another reason the competition for jobs can be formidable is that many people move here due to the low cost of living and they are happy to receive low pay just to keep themselves busy yet have a few more coins.
If your occupation is of the type it can be accomplished from home then Nicaragua may be exactly what you are looking for. You can live here cheaply and still make the same money as you would in Europe or North America. For example, if you are a writer, professional blogger, web designer, etc. then come on down and live the good life. It is easy to set up communications with other countries using the Internet now that we have Skype, high-speed Internet connections and regular flights to major cities.
Call centers are starting to appear here and supervisors can make $10 per hour which is very good here. Speaking English is a big plus for many jobs here and the number of locals speaking English is surprisingly low. Land developers are also a good source for jobs though development activity is rather low at this time due to the poor world economy. The most jobs and highest pay is in Managua, the capital city.
Interesting article on working in Nicaragua as a foreigner:
Supposedly there are over 3,500 non-profit organizations or NGOs in Nicaragua. I don’t see how that can be true but there are quite a few. Like any business, there are good ones and there are bad ones. Some are effective and some just exist to further a lost cause. Another section on this website will try to list most of the active foundations with their missions and needs for volunteers.
The point is that Nicaragua is a very poor country and volunteers are needed in many, if not most, of the foundations existing here. Often the pay is zero or just your expenses but you may find a paying position for a needed skill or they may provide room and board. If you are looking for work and the pay is not important, then a volunteer position may be the most satisfactory to you. You probably believe in a special cause such as education, libraries, micro-financing, etc. and there are foundations in all areas.
Starting a Business
Everyone’s dream is to start their own business, especially in a tropical country. Until 2006 the fastest and easiest way to make money in Nicaragua was developing or selling land and some of the developers or sellers were less than scrupulous. Those days are over and the more serious developers offering quality projects are now starting up and they will need businesses and individuals to help them. Let me emphasize that there are still unscrupulous people here so be very careful who you buy from. Nicaragua is like California in the late 1800s. There are many opportunities but there are those ready to fleece you.
Probably the most popular businesses expats want to have are Bed and Breakfasts, small hotels, bars and restaurants. Again, there is stiff competition when many of the entrepreneurs are quite happy to make just a little more than their expenses since they are retired on a small pension that is sufficient to live here.
As always, look around for the opportunities. You wish there was a decent bakery selling fresh donuts? Why are there so few professional web designers here? Wow, those ceramic pots would sell for five times the amount in the states. I’m always looking for a framing shop here for my paintings. We need a nice bar without blaring music. There are no deli sandwich places here, with thick portions of meat. This place needs a company that provides reliable maids, caretakers and gardeners that work hard and the company handles the paperwork. Anyway, you get the picture. If you think the community needs it, then start the business because others will also probably think there is the need.
Nicaragua’s bureaucracy is as daunting as any country’s and that assumes you are fluent in Spanish. Still, Nicaragua welcomes new businesses since they provide jobs and fuel the economy. If the business is tourist-related than there are important tax exemptions that are available.
First Things First
As always, the first thing you will need is a lawyer to assist you in setting up the business. It is even more important here since you probably are not familiar with the rules here. Like the states, there are lawyers everywhere and they charge from a few hundred bucks for everything to the top lawyers that earn $150 per hour here. Yup, in the land of average pay of less than $1 per hour there are lawyers making $150 per hour. Our experience has been that the expensive lawyers are not necessarily the better lawyers for your needs. Friends using the top lawyers to get their residency or other minor paperwork have stated they often were worse and did not meet schedules better. But… if you are doing a major project in Nicaragua and especially those that cross countries, these expensive lawyers may be right for you because they have the connections through family and government agencies. Always talk to other expats having businesses here that will tell you their recommendations and better yet, tell you who to avoid.
I have stated it before but it is worth stating again. Do not be spooked by hearing a horror story about the lawyer, contractor, realtor or whatever entity you plan to work with. Nicaragua is full of misinformation and the expats can be as cruel about spreading rumors as any Nica. Perhaps the reason is that many of the people moving here tend to be Type A personalities. Perhaps it is easier to compete with your competitor by spreading wild stories. There is not one development, realty office, contractor or law firm here that I have not heard a horror story of how they screwed someone or how they misled someone. Most of the stories are false but you should always check several sources before making a decision. Again, it is like hearing both sides of a divorce before you begin understanding the truth.
You will need a good accountant familiar with Nicaraguan procedures. This person will be your barrier from the many government agencies waiting to relieve you of your money. Bookkeeping is very detailed here and little is computerized and sometimes, not allowed to be computerized though this is changing. Finding reliable help is difficult so your sales procedures may be somewhat more complex here to ensure everything is reported and someone does not pocket some of the proceeds. Even the smallest stores here often have a caja (pay office) to ensure employees are not handling the cash. Always talk to other expats or business owners for a recommended accountant. Make sure he/she speaks some English if you are not fluent in Spanish.
Hiring employees will be one of your greatest challenges. Actually, the hiring will be easy since applicants will line up at your door. Again, talk to other business owners first for tips because the people applying for work at your business will include those let go by the other businesses. We have a saying in Granada “Everyone wants a job but nobody wants to work”. Obviously too general to be true but you will hear many horror stories from other businesses. You will have to ensure your work procedures are clear, understood and strongly enforced.
There are employee issues in the states and in Europe but this is a different culture and you will have more issues here. First, unless you are hiring from one of the few wealthier families, you are considered extremely rich, having a home, business and maybe even a vehicle. Many of your employees will not even understand that you would be upset if they kept $20 of the business proceeds. It will take some time to eventually have a solid team of employees you can trust and those will become part of the family.
There are literally hundreds of stories of strange employee behavior which will surprise you. One new NGO that started up hired several female employees and the first day of work they appeared along with their husbands who sat next to their wives. When asked why their husbands were there, the response was that when there was no work to be done they could talk with their spouses. Another example is a bright young woman with a university degree that began work in a store. When there were no clients she would just go to sleep on the desk. More serious stories include trusted employees that were responsible for receiving cash that just couldn’t resist the temptation and left town with rental receipts. And many of those had worked for years and were considered part of the owner’s family. Beware!
According to the World Bank in a study in the year 2OO5 Nicaragua was one of the easiest and fastest countries in Central America to establish a business. The average number of days it takes to establish a company in Nicaragua was stated as being 42 days while other Central American countries averaged 63 days. Nicaragua was rated as one of the best and fastest countries to open a new business.
I'm not an expert on business here and would never advise on any of its finer points. I do know I'm seeing more Nica businesses starting. The Pellas family starting the huge Guacalito development project on the Pacific Coast obviously shows they think the business climate has improved and that there is money to be made.
Registering Your Business
Your lawyer will advise you but here are the basic steps which are similar to other countries.
For more information visit www.mific.gob.ni/vui which is the government site or work with Pro-Nicaragua which helps bring business and investment to Nicaragua. www.pronicaragua.org
1. Sign the incorporation papers before a notary public
The documents of incorporation and the company bylaws must be drafted by a notary public. It is customary to include the company bylaws in the document of incorporation. Most notaries will also perform the remaining steps (explained in the following steps) in the incorporation process, for a fee of USD 200 (average). The notary cost is around USD 750–1,000.
2. Buy company accounting books, corporate books, and invoices from a bookstore
All companies must keep four corporate books: two accounting books (diary and ledger) and two corporate books (minutes book and shares book). Invoices must meet printing legal requirements including company information. The books and initial invoices would cost approximately USD 100.
3. File incorporation statutes for commercial registration and apply for tax and municipal registration at the one-stop shop in Managua
In January 2004, the government created in the Ministry of Commerce (Ministerio de Fomento, Industria y Comercio) a one-stop shop, the Unique Office for Investment (Ventanilla Unica de Inversiones), in which companies can file commercial and tax registrations. The one-stop shop cannot process any registrations but forwards the documentation daily to the relevant agencies. The one-stop shop provides information on four procedures and rationalizes them:
(a) company registration;
(b) tax registration at the Dirección General de Ingresos (DGI);
(c) municipal registration; and
(d) for foreign companies, the Foreign Secretary (Secretario Exterior).
The cost for commercial registration is 1% of capital (with a minimum of NIO 500, maximum of NIO 20,000) and the following fees:
- Inscription of constitution of internal books: NIO 60.
- Registration fee for books: up to 50 pages is NIO 25.00; up to 100 pages is NIO 50.00.
- Application: NIO 100.
- Registration of power of attorney (if applicable): NIO 110.
- Form for municipal license (matricula): NIO 5.
- Municipal license: for social capital lower than NIO 50,000 is NIO 500; higher than NIO 50,000 is 1% of capital.
- Municipal license document (constancia de matricula): 1% of license fee.
The payment must be made in any bank, and the payment receipt must be presented at the one-stop shop. Regardless whether the company has income, it must declare before the Nicaraguan Tax Authority (DGI) each month. If the company has no sales, it will not pay any taxes. However, it will have to pay the fees for the services performed by their representative in Nicaragua before the DGI. Fees are USD 5.
Registration with the City Hall (Alcaldia) of Managua: Regardless of whether the company has sales, it must declare before the City Hall each month. If the company has no sales it will not pay any taxes; it will pay only the fees for the services performed by their representative in Nicaragua.
4. Pay the inscription fees
Fees must be paid into any bank and the receipt presented to the one-stop shop (see Procedure 5).
5. Register for general sales tax (Impuesto al Valor Agregado, IVA) at the local Administración de Renta; register accounting books
Companies with an annual income higher than NIO 240,000 will be levied general sales tax (impuesto al valor agregado, IVA). The accounting books must be registered at the local office of the Tax Collector’s Office (Administración de Rentas).
6. Register for social security and public health with Instituto Nicaragüense de Seguridad Social (INSS)
Foreign Investment & Business in Nicaragua.
Nicaragua is attracting more and more foreign investment in several areas, some of which are big investment like energy, mining, tourism, garment-based free zone companies, farms, real estate, etc. and some others are small investments.
Either type of investment is positive for the country and for Nicaraguans; that is why is mandatory to follow the right track.
For a foreign person it is mandatory to know the steps he/she must follow:
The first step is to incorporate a Corporation in Nicaragua; the best to do it is through a Sociedad Anonima.
The second step is to invest the money in Nicaragua – purchasing a property, importing equipment, etc. If the investment in Nicaragua is over thirty thousand dollars in any kind of business e.g., tourism, industry, farms, etc. the government will consider you a Foreign Investor.
The third step will be the application for Residency as a Foreign Investor. To be considered a Foreign Investor, the Ministry of Economy of Nicaragua must confirm the investment, an Appraiser will visit to the property or investment. Then, a certification will be issued and a copy will be sent to Immigration.
Immigration will require the basic documents:
1. Police Record 2. Health Certificate 3. Birth Certificate 4. Copy of the Corporation documents and a copy of the Power of Attorney of the legal representative. 5. Copy of RUC number from DGI – the equivalent of the IRS in Nicaragua – the RUC is the id of the Corporation. To obtain a RUC for the Corporation or SA a Nicaraguan or a Nicaraguan Resident must be appointed as Legal Representative. The accountant of the Corporation can be appointed. This representation can be changed once one of the business partners obtains residency.
A business person or foreign investor will obtain condition 1 residency – that means permanent for five years and with the right to work in Nicaragua. People with Condition 2 – permanent without right to work – can´t be a legal representative – Retirees obtain Condition 2, that means a retiree can run a Corporation in Nicaragua but can´t be appointed as the legal representative at DGI.
Investment through a corporation is the best way to invest, because it is a legal entity separate and distinct from its owners and there are several advantages. One possible disadvantage would be to start it in some departments which are not used to dealing with foreign investors. Managua´s Registry is more foreign-investor friendly. It doesn't matter where the business will be—for example, in Rivas or Estelí—you can incorporate in Managua and make the company tax report anywhere in the whole country. The Corporation is necessary because as a Sole Proprietorship a foreign person can't get a RUC.
Requirements of incorporation Nicaragua.
1. Sign the articles of Incorporation in a Public Deed with a Nicaraguan Notary, in Nicaragua 2. Registration of the Articles of Incorporation at the Public Registry for Commerce. 3. Registration of the Company Books (Minutes Record, Stock Record, Journal and Ledger) at the Public Registry for Commerce. 4. Registration as a Merchant at the Public Registry for Commerce. 5. Registration at DGI (equivalent to IRS in the USA) 6. Registration at the Municipality. 7. Issue of the Stock and the registration in the Stock Record Book. Minimum Information to the Articles of Incorporation: a. Full name of all the partners. (Minimum 2 business partners) b. Name of the Company. c. The Purpose of the Company – Kind of business it is going to do. d. The Initial Capital. e. The Director Board (members).
Tips: Immigration usually takes 45 days to grant residency as minimum. It could be even 60 days; the cost now is C$ 6,400 (Cordobas) = $ 270. The Corporation will meet the requirements for the business partners and their families to obtain residency. For Foreign Investor – the same as retiree – the law gives to the resident the an exception to pay a deposit equivalent of a one way airplane ticket – people who apply for residency as spouse, missioners, workers, NGO´s members, etc, must pay the deposit in Immigration.
Law defined and interpreted by:
Paul Tiffer R.firstname.lastname@example.org
Abogado y Notario Público
Tiffer & Asociados
Hospital Militar 1 Cuadra al Lago
1 Cuadra Abajo; # 1210
Teléfonos : 22548142 - 22668622
Law 306 for Tourist Related Businesses
Law 306 provides generous benefits to businesses that are tourist related. Seeing the advances from tourism that Costa Rica enjoyed, Nicaragua enacted a progressive tax incentive law in 1999 as an effort to boost foreign and local investment in its tourism sector.
Examples of large and small businesses enjoying the benefits of Law 306:
• Hotels, condominiums
• Tour operators
• Air transportation services
• Water transportation services
• Rental of ground and water vehicles to tourists
• Small hotels & Bed & Breakfast operators
• Sport Fishing Charters
• Food, drink and amusement services
• Investment in filming of motion pictures and events beneficial for tourism
• Investments in tourism infrastructure and connected tourism equipment
• Development of Nicaraguan crafts, recovery of imperiled traditional industries, production of typical music events and of folklore dances, and publications and materials of tourism promotion.
Upon approval, the business owner is able to take advantage of not paying sales tax or import taxes on certain items required to run the business. It also includes exemption from other taxes such as:
• Exemption from having to pay the transfer tax on the purchase of your property (1% of the purchase price)
• Exemption from having to pay property tax on your property for 10 years
• Exemption from having to pay income tax on 80%-100% of rental income earned from your property for 10 years
For more information contact the ProNicaragua at www.pronicaragua.org
ProNicaragua will help any and all investors in Nicaragua.