DISCOVER INVESTMENT OPPORTUNITIES IN NICARAGUA: EVERYTHING YOU NEED TO KNOW ABOUT THE FOREIGN INVESTMENT LAW 1240

DISCOVER INVESTMENT OPPORTUNITIES IN NICARAGUA: EVERYTHING YOU NEED TO KNOW ABOUT THE FOREIGN INVESTMENT LAW 1240

News / Mon, 03/31/2025 - 17:14

The Foreign Investment Law No. 1240, published in La Gaceta, Official Journal No. 36 on February 24, 2025, is of utmost importance for Nicaragua's economic development, as it establishes a clear and attractive legal framework for foreign investment. This law has been designed to encourage the influx of foreign capital, which allows for the growth of new economic sectors, increased competitiveness, and job creation in the country. Its significance extends beyond simply attracting investments; it also ensures that these investments are sustainable, protected, and beneficial for both investors and the national economy.

Below, we outline some of the reasons why we consider this law crucial for Nicaragua's economic future:

  1. Promotion of Economic Growth: Foreign Direct Investment (FDI) is globally recognized as a key driver of economic growth. The law creates conditions for foreign companies to contribute to the expansion of infrastructure, improve the country's competitiveness, and generate a higher volume of production and exports.
  2. Job Creation: As foreign companies establish and expand in Nicaragua, new jobs are created, improving the quality of life for Nicaraguans. Law 1240 promotes investment in sectors that require skilled labor, which also positively impacts the training and development of the local workforce.
  3. Generation of Technology Transfer: Foreign investments are generally accompanied by the transfer of technology and knowledge, allowing local companies to improve their production processes and become more competitive in the global market. This aspect is essential for the progress of key sectors such as manufacturing, agriculture, and technology.
  4. Diversification of the National Economy: Law 1240 opens doors to economic diversification by attracting investments in various sectors, not only in agriculture but also in tourism, manufacturing, renewable energy, and infrastructure. This diversification will help mitigate economic risks arising from dependence on a few sectors.
  5. Stability and Confidence for Investors: Law 1240 provides guarantees and a solid legal framework that protects the rights of foreign investors. This stability is essential for investors to feel secure when making long-term investments in the country, contributing to a constant flow of capital.
  6. Incentives for Investment in Strategic Areas: Nicaragua has identified certain areas of the economy as strategic for its development, such as renewable energy, tourism, infrastructure, and free trade zones. Law 1240 promotes investments in these areas through tax benefits and special conditions that encourage the development of these key sectors.

It is important to mention that Law 1240 is aimed at anyone wishing to make a foreign investment in Nicaragua and primarily applies to international investors and foreign companies wishing to establish themselves, operate, or engage in commercial activities in the country. The following are the subjects of the law:

  1. Foreign Investors: The law is primarily focused on foreign investors wishing to place their capital in Nicaragua. These can be individuals (natural persons) or legal entities (companies). According to the law, a foreign investor is one who comes from another country and makes investments in productive sectors within Nicaragua.
  2. Foreign Companies: Foreign companies looking to expand their operations or establish new subsidiaries in Nicaragua fall under the scope of Law 1240. They can do this in various ways: by establishing a company in Nicaragua, opening branches of their companies, or entering into strategic alliances with existing Nicaraguan companies.
  3. Investors in Specific Sectors: The law establishes priority sectors for investment, such as agriculture, energy, manufacturing, tourism, and infrastructure. Investors interested in these key sectors can receive additional benefits, such as tax incentives and exemptions.
  4. Investors in Free Trade Zones: Nicaragua offers special economic development zones known as free trade zones, where foreign investment is allowed under more favorable conditions. Companies operating in free trade zones are subject to Law 1240 and benefit from tax exemptions, such as Income Tax (ISR), among others. These zones are designed to encourage production and export.
  5. Investors in Strategic Projects: According to the law, certain large-scale projects that have a significant impact on the country's economic development can be considered strategic projects. Strategic projects include those that positively affect job creation, infrastructure development, technology transfer, and national competitiveness. Investors involved in these projects can access tax benefits and other advantages.
  6. Legal Entities with Foreign Capital: Nicaraguan companies with foreign capital are also regulated by Law 1240. In these cases, foreign investors must comply with the procedures established for the registration and recognition of their investment, as well as for accessing the tax incentives and other benefits provided by the law.

It is important to note that foreign investors will have obligations and procedures they must follow to enjoy the benefits of this law, subject to the following:

  1. Registration with the National Foreign Investment Commission (CNIE): Every foreign investor must register with the National Foreign Investment Commission (CNIE) to be recognized as such and access the benefits of the law. The CNIE is the body responsible for coordinating and overseeing all foreign investments in Nicaragua.
  2. Obtaining the Unique Foreign Investment Registration Certificate (RUIE): As part of the investment formalization process, investors must obtain the Unique Foreign Investment Registration Certificate (RUIE). This certificate is a mandatory requirement to enjoy the tax benefits and legal stability established by the law.
  3. Compliance with Local Regulations: Investors must comply with applicable labor, environmental, and safety regulations in Nicaragua. These laws aim to ensure that investments contribute to the sustainable development of the country.
  4. Authorization for Strategic Projects: To qualify a project as strategic, the investor must request special authorization to obtain the additional benefits that this category entails. This authorization is granted after an analysis of the project's feasibility and its impact on the Nicaraguan economy.

The Foreign Investment Law No. 1240 is a key pillar for attracting foreign capital to Nicaragua, thus promoting economic growth, job creation, and the development of new productive sectors. By creating the National Foreign Investment Commission (CNIE) and implementing the Unique Foreign Investment Registration Certificate (RUIE), the law establishes a clear and accessible regulatory environment for international investors.

It is important to highlight that the law is designed to benefit both foreign investors and the national economy, allowing for greater integration of Nicaragua into international markets and fostering the creation of strategic projects that contribute to the country's sustainable development.

If you are considering investing in Nicaragua, we recommend obtaining the appropriate legal advice to navigate the processes and maximize the benefits offered by this law. At CALA Lawyers, we have the experience necessary to guide you through every stage of the investment process, ensuring that your project develops under a secure and efficient legal framework.

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If you have any questions or would like more information about Law 1240 and how it can benefit you, do not hesitate to contact us.

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