The growing sophistication of business structures has led to many investments in Nicaragua being channeled through foreign holding companies, intermediate companies, and regional vehicles. In this context, indirect transfers of shares take on particular relevance from a tax perspective.
In general terms, an indirect transfer can be understood as a transaction whereby shares or interests in a foreign entity are sold, which in turn directly or indirectly owns a Nicaraguan company. Although the main legal act occurs outside the country, a local tax analysis may be generated when the transferred value is linked to assets located in Nicaragua.
These transactions require special attention, as they involve the interaction between the rules on territorial source of income, the provisions on capital gains, and the general principles of tax interpretation.
The Tax Agreement Law (LCT) taxes Nicaraguan-source income, including capital gains derived from the transfer or disposal of property and rights (Articles 3 and 15 LCT). Article 16 LCT establishes that income earned outside the country may also be considered Nicaraguan source income when it comes from assets or capital of Nicaraguan origin.
In the absence of specific regulations on indirect transfers, the analysis must be based on these general provisions. The key point is to determine whether the transaction generates a gain linked to assets located in Nicaragua in accordance with the source criteria established in the LCT.
If a capital gain of Nicaraguan source is configured, the tax base will be determined in accordance with Articles 82 and 83 LCT, i.e., the difference between the transfer value and the duly documented acquisition cost.
In multilevel structures, the determination of the transfer value is particularly important, especially in order to identify which part of the value corresponds to Nicaraguan assets. The LCT stipulates that this value cannot be less than the market value. Consequently, it is essential to have consistent documentation supporting:
- The price agreed upon in the transaction.
- The valuation methods used and the justification for the portion attributable to Nicaraguan assets.
- Relevant financial statements and accounting records.
- Background information on acquisitions and capital contributions by the entities involved.
- Documentary consistency is key to the proper determination of tax liability.
If the indirect transfer is made between related parties, the transfer pricing provisions set forth in Articles 93 to 106 of the LCT must also be considered.
Indirect transfers are part of the normal dynamics of international investment. They do not, in themselves, constitute an irregularity or necessarily generate a gain. However, when there is an economic link with Nicaragua, it is advisable to assess their possible tax effects in advance.
Prudent measures include:
- Analyzing the proportion of value attributable to assets located in Nicaragua.
- Reviewing the ownership structure and corporate documentation.
- Assessing the correct determination of capital gains in accordance with the LCT.
- Consider possible formal obligations or applicable withholdings.
In multilevel structures, a technical reading of the rules on source of income, capital gains, and market value, accompanied by adequate documentation, strengthens legal certainty and reduces future contingencies. Preventive tax management continues to be an essential tool for investment protection.