Employer of record in Nicaragua

The economy

Nicaragua’s economy has improved in recent years. It is one of the safest places to do business, and it is one of the fastest growing countries in Latin America. A third of its labor force works in agriculture and the country relies on agricultural exports. The major crops are corn, rice, beans, and plantains.

Another significant source is the cattle and livestock industry. Ranching and farming have cleared a lot of forest areas. Nicaragua also has an abundance of resources related to fish, but it is relatively unexploited.

Nicaragua is rich in natural resources, such as minerals and petroleum. The country’s biggest trading partner is the United States, and the country is also part of the Dominican Republic–Central America Free Trade Agreement (CAFTA-DR).

Small and medium businesses

Small and medium businesses make up about 45% of Nicaragua’s GDP and they account for 74% of jobs. The country has improved its investment climate by reducing the time needed to get a business license or construction permits. There are also improvements in access to patents and trademarks.

The United States has provided grants to the food agribusiness, clothing textiles, leather goods, wooden furniture, and artisan products. The Nicaraguan Ministry of Labor has trained many small and medium businesses on worker health and safety to reduce turnover and absenteeism. SMEs should continue to provide growth for the country.

Starting a business

Any person from any nationality may start a business in Nicaragua. The country uses a One-Stop Shop for Investment; it is housed in the Ministry of Economy, Industry, and Trade.

A person starting a business will need to register the Deed of Incorporation, apply for registration as a merchant, register with the General Power of Administration, get a Unique Taxpayer Registration Number (RUC); and if the investment is greater than $30,000, the person will need a Foreign Investment Registration Certificate. The process takes about 13 days.

Payroll

Tax advantages

Nicaragua is a Free Trade Zone and benefits from exemptions in indirect and export taxes on locally made products, in capital tax and stamp duties, in municipal taxes, and in capital gains tax on property. Import duties are waived for materials, equipment, and machinery needed to run the business.

Renewable energy

Nicaragua benefits from strong winds and sunshine. Sugarcane Biofuel energies make up 33.2% of renewable energies. Geothermal is 24.6%, and Wind is 22.5%. Those types of energies help lower the cost of energy in the long term, which benefits the poorer part of the population.

There is a great opportunity in Nicaragua to develop solar energy. Overall, Nicaragua likes to increase its renewable energy production to become less dependent on foreign oil.

Food culture

Nicaraguan cuisine is hearty and varied. The staple foods are corn, beans, and rice. Foods are typically bought at a fresh market and come from local producers.              

The national food symbol is the Gallo Pinto. This is a mixture of rice and beans, some seasoning, and a Lizano sauce, which resembles a Worcestershire sauce.

Stews and soups are also popular.

Population

There are 6,948 million people in Nicaragua (2022). About half of the population lives in rural areas, and these areas tend to favor more conservative values and place more importance on community. Nicaraguans benefit from a high literacy rate at 82.61% and many enjoy literature and poetry. They also tend to be a giving people, even when they lack resources themselves. About half of the population is considered Roman Catholic, so traditions like baptisms and traditional weddings are very important to this culture.

Geography

Nicaragua is a land of large pine forests and tropical rainforests. It is famous for its lake called Lago de Nicaragua, which is inhabited by freshwater sharks. The climate is tropical and most of the population is located in western Nicaragua on the fertile Pacific Plains. The central mountains separate the denser populated west from the east. Temperatures are typically around 80 degrees Fahrenheit year-round.

• Managua

This is the capital and the nation’s largest city, with a population of 1,262,978. There are more cities, such as León, Granada, Jinotega, Matagalpa, Chinandega, and Masaya, that are popular tourist destinations.

General highlights

What you need to know about employing personal in Nicaragua:

Laws and agencies that regulate labor relationships 

All of the labor laws in Nicaragua are based on the constitution. This establishes the rights of the employees and employers, including the right to work, freedom of association, the right to strike, collective bargaining and social security. People are also allowed to access or not access a union.

Key tax and labor authorities

Labor contracts

Annual Taxable Income

Income tax is 15% for non-residents, and residents pay a graduated tax which is capped out at 25%. If you are married, you must still file separately.

Corporate Tax Rates

Corporate tax is at 30% and is called the corporate income tax or CIT. And a definitive minimum tax of 1%-3% on gross income obtained during the year, unless the first three fiscal periods of a business’ term, the sales prices are controlled by the government, those who ceased operations on account of force majeure and in- vestments are subject to a period of development as approved

Public Holidays

Termination

Employment contracts can be ended if on the date of the contract end, mutual consent, or by either party. Em- ployers must pay bonuses, accrued but unused vacation time and salary on a prorated basis upon separation.

Employers can terminate employment during a probation period without notice or severance. The probation period cannot exceed 30 days. Employers also do not need to give notice or severance if an employee lies, threatens or harms an employer or co-worker, damages the employer’s reputation or finances, or violates rules and regulations that cause damage to the employer.

Otherwise, the employee is entitled to severance pay. It cannot be less than one month or exceed 5 months of wages. If an employee quits they must give 15 days notice. An employer must produce a Notice of Termina- tion of Finiquito which contains all details such as reason, pay, and calculation of other liable amounts. They have 10 days to make this payment.

Other forms of compensation upon termination include:

If an employee is terminated due to unfair dismissal, they are entitled to severance pay. It cannot exceed five months of pay. A full month’s salary is provided after 3 years of service, 20 more days is added per year for 4-6 years, and five full months if the employee has been employed for 7 years.