Nicaragua | Approval of the Regulations of the Law of Incentives for Tourism Developments

Published on Dec 23, 2024

Jeynner Gutiérrez and Armando Martínez, experts in Taxation and Tax Planning from Nicaragua, have this article on the Regulations of Law No. 1211, "Law of Incentives for Tourism Developments," which establishes the procedures, requirements, and obligations for individuals and entities interested in developing tourism projects in Nicaragua and applying for the tax exemptions provided by the Law. 

 

In one of our previous publications, it was addressed  the scope of Law No. 1211, "Law of Incentives for Tourism Developments" (the "Law"), which was published on August 2, 2024, in the Official Gazette No. 141. The purpose of the Law is to promote investments in the tourism sector by exempting various taxes, including Income Tax on economic activities ("IR"), Value Added Tax ("IVA"), Import Tariff Duty ("DAI"), Selective Consumption Tax ("ISC"), and Real Estate Tax ("IBI") for operations related to Tourism Developments, as defined by the Law. Pursuant to article 6 of the Law, its regulation was entrusted to the President of the Republic of Nicaragua. 

 

Consequently, on November 23, 2024, Presidential Decree No. 16-2024, "Regulations of Law No. 1211, Law of Incentives for Tourism Developments" (the "Regulation"), came into effect upon its publication in the Official Gazette No. 194. The Regulation establishes the necessary provisions for investors to apply for the benefits provided under the Law. 

 

The Regulation applies to all natural and legal persons seeking to take advantage of the mentioned tax incentives. The benefits are available for various types of projects defined as "Tourism Developments," which the Regulation lists as follows: (1) Hotels and Lodging Centers; (2) Restaurants; (3) Recreation Centers; (4) Amusement Parks; (5) Zoos; (6) Theaters; (7) Museums; (8) Art Galleries; (9) Fair Centers; and (10) Handicraft Centers. 

 

Additionally, the Regulation outlines the functions of the Tourism Incentives Committee—created by Article 5 of the Law (the "Committee")—which include verifying, analyzing, approving, or denying applications for Tourism Development projects submitted by investors. Furthermore, the Committee is responsible for determining the amount of investment to be exempted and the specific incentives granted to each applicant. 

 

Regarding the various requirements that investors must meet to apply for tourism incentives, the Regulation establishes, among others, the following: 

  • A letter of application addressed to the Directorate General of the Nicaraguan Tourism Institute (INTUR); 

  • A form for Tourism Development Projects issued by INTUR; 

  • Identification of corporate documents of the investor, as applicable; 

  • A Profile of the Tourism Development Project, which must include, among other key elements: 

  1. The investment amount; 

  1. The number of jobs projected during the execution and operational stages; 

  1. A detailed description of the tourism activity; 

  1. The project cost and sources of financing; 

  1. The title deed or lease agreement for the property where the Tourism Development will take place; 

  1. Valid certificates for land use, construction permits, and tax and municipal solvencies. 

 

If the requirements are met, the Committee will decide on the application within a maximum period of 60 calendar days. Please note that investors will have a 15-business-day period to address any missing or incorrect documents should the Committee notify them of such deficiencies. 

 

With respect to the investor's obligations, these include, among others: 

  • Signing a Tourism Contract with INTUR; 

  • Investing the amount specified in the application in the Tourism Development Project; 

  • Providing INTUR with a compliance bond and/or guarantee equivalent to six per thousand (0.006) of the investment amount; 

  • Starting construction within a period not exceeding six months from the signing of the Tourism Contract; 

  • Keeping an accurate record of exempted items, which must be accessible to authorized officials from INTUR and the Ministry of Finance and Public Credit; 

  • Hiring Nicaraguan personnel, except for experts and specialized technicians, with prior authorization from the competent national authorities; 

  • Purchasing equipment, materials, and other necessary items exclusively from the formal market. 

 

The Regulation also addresses other aspects, such as the possibility of requesting extensions for the project completion period, increases in the investment amount, enforcement of the guarantee in case of noncompliance by the investor, and mechanisms to appeal exemption resolutions issued. 

 

This Regulation is important for the effective implementation of the Law, as it governs the procedures, requirements, and obligations of investors interested in developing tourism projects in Nicaragua and applying for the exemptions established by the Law. 

 

If you would like more information on this topic, please do not hesitate to contact our team. 

 

The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.