Pursuant to Art. 245 of Law No. 822 “Ley de Concertación Tributaria de la República de Nicaragua” (LCT), the flat-rate tax is a tax that is a tax that is a conglomerate of the Income Tax on Economic Activities (IR) and the Value Added Tax (VAT), which taxes the income received by small taxpayers that carry out economic activities with a flat-rate tax according to the monthly income received.
This special tax regime is mainly aimed at small taxpayers and entrepreneurs engaged in the sale of goods or rendering of services, since there is a limit of monthly gross income received monthly to qualify for this simplified regime. Below, we detail the requirements and restrictions that must be observed for a taxpayer to register in the Simplified Fixed Quota Regime before the General Revenue Directorate:
Requirements:
- The taxpayer must be a natural person and have a valid identity card or residency card.
- Only small taxpayers may register, which are those natural persons who receive a monthly income less than or equal to one hundred thousand cordobas (C$100,000).
- They must have an inventory of merchandise with a maximum value of five hundred thousand cordobas (C$500,000).
Restrictions/exclusions:
- Legal entities.
- Importers and exporters.
- Permanent establishments of non-residents.
- Administrators of trusts.
- De facto companies.
- Natural persons exercising liberal professions.
- Natural persons registered as suppliers of the State, and who make sales or render services in an amount greater than fifty thousand cordobas (C$50,000) per transaction.
- Taxpayers located in shopping centers, shopping malls and similar locations.
According to the provisions of Art. 253 LCT, the monthly rate applicable to the fixed fee regime varies according to the strata defined by law according to the monthly gross income received by the small taxpayer, as follows:
Among the main advantages that the registration in this simplified regime represents for the taxpayer are:
- Formalization of the business and obtaining the RUC (Registro Único de Contribuyente) card.
- Issuing invoices authorized by the General Directorate of Revenues (DGI) with imprint, which allows customers to use such invoice as a fiscal support in case such purchase or service contracting represents a deductible expense.
- It is not obliged to transfer VAT to its clients, since this is included in the fixed fee paid by the taxpayer.
- To keep a simple accounting of its income and costs/expenses.
- Access to sources of financing from financial institutions.
- Is not obliged to apply withholdings or file returns, etc.
Notwithstanding the above, it is important to take into account that if during six months the taxpayer reports monthly gross income that on average exceeds the limit of one hundred thousand cordobas (C$100,000), he/she is obliged to inform the Tax Administration where he/she is registered in order to proceed with the transfer to the general income regime of economic activities, therefore, the taxpayer would lose the benefits of this simplified tax regime.