BENEFITS AND INCENTIVES FOR FOREIGN INVESTORS

BENEFITS AND INCENTIVES FOR FOREIGN INVESTORS

News / Wed, 10/08/2025 - 11:57

Article written by
Lic. Anael Beltrán
Associate

On February 20, 2025, Law No. 1240, Foreign Investment Law, was published in La Gaceta, the Official Gazette, entering into force on May 26 of the same year, with its regulation issued on June 4. This new legislation introduces a more modern and structured framework, whose main goal is to attract and facilitate foreign investment through tax benefits, formalization mechanisms, and legal security.

Law No. 1240 repealed the former Law No. 344, Law on the Promotion of Foreign Investment, which established a voluntary and merely administrative registration system. This lack of formality led to disorganization and hindered the application of sectoral tax benefits. In contrast, the new Law creates the Unique Foreign Investment Registry (RUIE), which is mandatory and grants a unique number to each investment. This legal mechanism allows for the centralization of information, formalization of investments, and easier access to existing tax incentives in sectoral laws, providing greater order, support, and traceability.

KEY INCENTIVES AND MECHANISMS

Strategic Investment:

The Law introduces the concept of Strategic Investment, which allows projects in priority sectors (such as energy, tourism, agroindustry, infrastructure, among others) to enter into special contracts with the State. These contracts may grant additional incentives and ensure greater alignment with national development plans.

Institutional Centralization:

Another significant improvement is centralized management through the Investment Directorate of the Ministry of Development, Industry and Trade (MIFIC), which serves as a liaison office. Previously, investors had to obtain permits and benefits individually from various institutions; now, the Directorate receives and channels information to entities such as INTUR, CNZF, MEM, MAG, DGI, and DGA, streamlining procedures and avoiding duplication.

Sectoral Tax Benefits Supported by Specific Laws:

Law No. 1240 does not create exemptions on its own but rather organizes access to benefits already established in sectoral regimes. Among the most relevant are:

Tourism – Law No. 1211, “Law on Incentives for Tourism Development” (2024):

For tourism projects, Law No. 1211 offers a set of incentives designed to reduce initial costs and promote investment in tourism infrastructure and services. The main benefits include:

  • Exemption from Income Tax (IR) for 10 years from the start of operations, allowing investors to recover capital more quickly and reinvest in expansion.
  • Exemption from Value Added Tax (VAT), Import Duties (DAI), and Selective Consumption Tax (ISC) during the investment phase, applicable to construction materials, furniture, equipment, and services related to the project.
  • Exemption from Property Tax (IBI) for up to 10 years, reducing initial operating costs.

These incentives apply after review and approval by the Tourism Incentives Committee, ensuring transparency and legal security for investors.

Free Trade Zones – Law No. 917, “Export Free Zones Law” (2015):

Free trade zones are a key mechanism for manufacturing and export projects. Under this law:

  • Companies operating in the zones enjoy full Income Tax exemption during the first 10 years of operation, improving profitability from the early fiscal years.
  • Permanent exemption from VAT and DAI on the import of raw materials, machinery, and equipment, ensuring competitiveness in international markets.

Law No. 917 makes Nicaragua an attractive destination for investments requiring a stable and simplified tax regime, facilitating long-term financial planning.

Renewable Energy – Law No. 532, “Law for the Promotion of Electricity Generation from Renewable Sources” (2005):

For clean and sustainable energy projects:

  • Income Tax exemption for 7 years from the start of operations, encouraging the establishment of new renewable energy plants.
  • DAI and VAT exemptions for 10 years on the import of essential machinery, equipment, and materials, reducing initial costs and improving financial feasibility.

These incentives reflect Nicaragua’s commitment to energy transition and the attraction of foreign capital in strategic sectors.

Agroindustry and Agricultural Exports – Law No. 387, “Special Law on Exploration and Exploitation of Mines” (2001):

Although originally focused on resource exploration, this law and its complementary regulations provide:

  • Income Tax exemption for 10 years for new investments aimed at the export of agricultural and agroindustrial products.
  • VAT and DAI exemptions for 10 years on the import of agricultural equipment, machinery, and technologies, promoting modernization of production processes.

These incentives provide foreign investors with the certainty that their operations in the agroindustrial sector are backed by a solid and competitive legal framework, enhancing efficiency and profitability.

Main Guarantees for Foreign Investors

  • Equal treatment with domestic investors.
  • Legal security through explicit legal guarantees.
  • Streamlined access to sectoral tax incentives through the RUIE.
  • Simplified procedures via the National Foreign Investment Commission.
  • Possibility of profit repatriation according to legal and exchange regulations.

For all these reasons, the Foreign Investment Law of Nicaragua reinforces the notion that the country is an attractive destination for foreign investment, offering clear tax benefits, legal certainty, and more centralized procedures. Investors will find in Law No. 1240 and the related sectoral legislation a competitive regional framework with defined timelines and legal backing, enabling them to project their investment profitability with confidence.

At CALA Attorneys & Counselors at Law, we have a specialized team in foreign investment advisory services, ready to guide you throughout the entire process—ensuring confidentiality, efficiency, and strict compliance with Law No. 1240.