Nicaragua Tax Incentive Law 306

Realizing the economic advances from tourism that has been afforded to its neighbors over the past several decades, Nicaragua enacted a progressive tax incentive law in 1999 as an effort to boost foreign and local investment in its tourism sector. Under Nicaragua’s tourism tax incentive Law 306, generous breaks have been extended to a variety of businesses that drive Nicaragua’s tourism industry. These include, but are not limited to:

• Hotels, condo-hotels, and similar accommodation services
• Eco-tourism operators
• Air transportation services
• Water transportation services
• Rental of ground and water vehicles to tourists

Since the enactment of Law 306, Nicaragua’s tourism industry has flourished and become much more advanced and capable of catering to a broad range of travelers. Many recognized names in the travel industry have entered Nicaragua’s tourism market, such as:

More importantly, an abundance of small business owners, both foreign and local, have found their niche in this market. Examples of successful tourism related businesses taking advantage of the Law 306 tax incentives are:

• Small hotels & Bed & Breakfast operators
• Tour Operators
• Sport Fishing Charters

In recent years, a number of real estate developments have leveraged the Law 306 tax incentives in the form of condo-hotel offerings. A condo-hotel can qualify for Law 306 because it caters to tourism related activities. As an approved project, the developer is able to take advantage of not paying sales tax or import taxes on certain items required to build the condo-hotel and its amenities. As an owner of a condo unit in a Law 306 approved condo-hotel, you are also able to leverage certain tax incentives. These include:

• 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

To understand which real estate offerings in Nicaragua allow you leverage the Law 306 tax incentives, and which projects are best suited to provide you with rental income returns, contact us for an updated list. You can also read Nicaragua’s tax incentive Law 306 in English here.