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If you go into tourism business there are many incentive
afforded under Law 306, which offers benefits and tax
exemptions to qualifying businesses (see section Law 306).
Foreign income is exempt from taxation in Nicaragua. You will
have to pay taxes on income earned in Nicargua. However, if you
go into business in Nicaragua and form a tax sheltered
corporation, many of your expenses can be written off.
Don't panic! A good accountant or one of the lawyers we list in
the guide can help you minimize your taxes and avoid problems
later on.
You form Sociedad Anónima, to shelter your earnings. Some
foreigners choose to set up these types of corporations while
many don't. Briefly, a Sociedad Anónima is an anonymous
corporation you can set up without their names appearing on
any records. The initials S.A. will appear after a corporation's
name instead of Inc. A Nicaraguan corporation is similar to its
U.S. counterpart in having a board of directors, shareholders and
shares which can be bought and sold freely. You control all the
stock in the corporation but your identity remains unknown.
This way you're able to maintain some degree of secrecy in
financial matters and protect yourself from some tax problems.


These offshore corporations are used in most business
transactions within Nicaragua and abroad. Because they are
foreign corporations they are not subject to U.S. taxes.
There are additional benefits to establishing an "offshore"
corporation in any Latin American country. If you put your
property in your corporation's name, it is easier to transfer title.
All that is involved is the exchange of the company's stocks. This
way your assets can be transferred or sold by simply giving your
shares to the new owner or visa versa. Owning one of these
corporations entitles you to start a business and open a checking
account in the company's name even though you are not a legal
resident or citizen.
If you have relatives on the board of directors of your company,
there will be no probate taxes in case of your demise. It is well-
nigh impossible to find out whose name appears in the public
records since ownership is confidential. Furthermore, if you get
involved in any serious litigation it will be difficult to sue you
directly. You will be protected against most judgments and liens.
This affords your assets greater protection. If you are a non-
resident foreigner you must have one of these corporations to
own a business.
Contact your attorney if you are seriously thinking about
forming one of these anonymous corporations. Your lawyer can
explain how these corporations work and why they have
advantages and disadvantages. The fee for starting one of these
corporations is usually between $500 and $1000. It will usually
take a few months to finish all of the paperwork depending on
how fast your lawyer works.
Be forewarned: A corporation's secrecy is not "foolproof." If
you attempt to use your corporation for fraudulent purposes,


you are asking for big trouble. Fortunately the IRS usually won't
go after you unless you are a "big fish" who has done something
obvious to attract their attention.
If you desire better protection for your assets or business we
suggest you form a Panamanian corporation. If you don't know
all of the nuances of setting up one of these corporations, we
suggest you contact one of the companies listed at the end of the
next section.
You must file your U.S. income tax returns yearly through the
American Embassy. You have to declare all income earned abroad
but you may claim a tax exemption up to $74,000 on overseas-
earned income. The $74,000 applies to individual, unmarried
taxpayers. If you are married, you and your spouse may exclude
up to $144,000 of foreign income, but you cannot combine the
two exemptions. You must reside outside of the U.S. for at least
330 days a year or be a legal resident of a foreign country to
qualify for this exemption. Your primary business must also be
located abroad to qualify for the foreign-earned income
exemption. Fortunately, if you live outside the U.S. you may wait
to file your taxes until June 15th. You need to use a U.S. tax form
2555 to apply for this exemption.
Even if you earn no income in Nicaragua, it is imperative to file
a standard 1040 tax form to avoid problems. Payment of taxes,
interest and penalties can now be done by credit card by dialing
1-888-2PAY-TAX.
If you have any tax questions, contact the U.S. Embassy or IRS.
Call either the Consular Section of the U.S. Embassy, 266-6010
/ 266-6018 or the nearest IRS office in Mexico City at 525 211-
0042, ext. 3557. You may consult the IRS Web site at:
http://www.irs.gov. There is also book titled The Expats Guide


to U.S. Taxes. It may be purchased through
http://www.amazon.com.
Canadians will have to contact the local Canadian Consulate at
268-1983 concerning their tax obligations while living abroad.