Nicaraguan law requires companies to register as taxpayers with the General Revenue Directorate (DGI). The Single Registry of Taxpayers (DGI) contemplates basic data of the company, such as:
- Shareholder composition.
- Current Board of Directors.
- Tax domicile.
- Economic activity.
- Legal representative.
It is the taxpayer’s obligation to keep this information updated, being necessary to carry out an updating procedure at least every 2 years.
In this sense, the Tax Code of the Republic of Nicaragua imposes the obligation to all registered taxpayers to file the tax returns required by law. For example, every registered taxpayer would be obliged to file annual tax returns and the annual income tax return.
Additionally, there is a wide variety of tax and formal obligations that every registered taxpayer must comply with, such as:
- Declaring their income before the Tax Administration.
- To make and declare withholdings in its capacity as Withholding Taxpayer.
- To transfer the Value Added Tax (VAT) and to collect it in its capacity as Responsible Collector.
- To update its taxpayer information at least every 2 years.
- To keep the accounting records in an actaulized manner.
- To allow audits by the Tax Administration.
The tax and formal obligations described above, and in general any type of obligation that corresponds to the taxpayer by law, remain in force as long as the taxpayer is registered in the Single Taxpayers Registry (RUC) of the General Revenue Directorate (DGI). By virtue of the foregoing, even when the taxpayer stops its economic activity and closes the company, as long as it does not process and satisfactorily complete the definitive closing of tax obligations before the Tax Administration, all the obligations it has as a taxpayer remain in force.
Therefore, it is important that, when a company decides to stop operating in Nicaragua and proceeds with the dissolution and liquidation of the company, the respective procedure is carried out before the tax authority to close the tax obligations in a definitive manner. Otherwise, the obligations that remain in force will cause the taxpayer to fall into a state of insolvency which may even affect the solvency of its partners, directors and legal representatives, as well as generate fines and penalties for noncompliance with formal obligations.
Finally, we clarify that this is an extensive process that involves an audit of the tax periods not prescribed for authorization and may take up to one year to be completed.