Foreign Investment & Business in Nicaragua. Residency as Foreign Investor.-

Foreign Investment & Business in Nicaragua.

Nicaragua is attracting more and more foreign investment in several areas, some of which are big investment like energy, mining, tourism, garment-based free zone companies, farms, real estate, etc. and some others are small investments.

Either type of investment is positive for the country and for Nicaraguans; that is why is mandatory to follow the right track.

For a foreign person it is mandatory to know the steps he/she must follow:

The first step is to incorporate a Corporation in Nicaragua; the best to do it is through a Sociedad Anonima.

The second step is to invest the money in Nicaragua – purchasing a property, importing equipment, etc. If the investment in Nicaragua is over thirty thousand dollars in any kind of business e.g., tourism, industry, farms, etc. the government will consider you a Foreign Investor.

The third step will be the application for Residency as a Foreign Investor. To be considered a Foreign Investor, the Ministry of Economy of Nicaragua must confirm the investment, an Appraiser will visit to the property or investment. Then, a certification will be issued and a copy will be sent to Immigration.

Immigration will require the basic documents:

1. Police Record 2. Health Certificate 3. Birth Certificate 4. Copy of the Corporation documents and a copy of the Power of Attorney of the legal representative. 5. Copy of RUC number from DGI – the equivalent of the IRS in Nicaragua – the RUC is the id of the Corporation. To obtain a RUC for the Corporation or SA a Nicaraguan or a Nicaraguan Resident must be appointed as Legal Representative. The accountant of the Corporation can be appointed. This representation can be changed once one of the business partners obtains residency.

A business person or foreign investor will obtain condition 1 residency – that means permanent for five years and with the right to work in Nicaragua. People with Condition 2 – permanent without right to work – can´t be a legal representative – Retirees obtain Condition 2, that means a retiree can run a Corporation in Nicaragua but can´t be appointed as the legal representative at DGI.

Investment through a corporation is the best way to invest, because it is a legal entity separate and distinct from its owners and there are several advantages. One possible disadvantage would be to start it in some departments which are not used to dealing with foreign investors. Managua´s Registry is more foreign-investor friendly. It doesn't matter where the business will be—for example, in Rivas or Estelí—you can incorporate in Managua and make the company tax report anywhere in the whole country. The Corporation is necessary because as a Sole Proprietorship a foreign person can't get a RUC.

Requirements to incorporate a Corporation ( S.A.) in Nicaragua:

1. Sign the articles of Incorporation in a Public Deed with a Nicaraguan Notary, in Nicaragua 2. Registration of the Articles of Incorporation at the Public Registry for Commerce. 3. Registration of the Company Books (Minutes Record, Stock Record, Journal and Ledger) at the Public Registry for Commerce. 4. Registration as a Merchant at the Public Registry for Commerce. 5. Registration at DGI (equivalent to IRS in the USA) 6. Registration at the Municipality. 7. Issue of the Stock and the registration in the Stock Record Book. Minimum Information to the Articles of Incorporation: a. Full name of all the partners. (Minimum 2 business partners) b. Name of the Company. c. The Purpose of the Company – Kind of business it is going to do. d. The Initial Capital. e. The Director Board (members).

Tips: Immigration usually takes 45 days to grant residency as minimum. It could be even 60 days; the cost now is C$ 6,400 (Cordobas) = $ 270. The Corporation will meet the requirements for the business partners and their families to obtain residency. For Foreign Investor – the same as retiree – the law gives to the resident the an exception to pay a deposit equivalent of a one way airplane ticket – people who apply for residency as spouse, missioners, workers, NGO´s members, etc, must pay the deposit in Immigration.

Best Regards,

Paul Tiffer R. Nicaraguan Attorney at Law ptiffer@cablenet.com.ni

P.S. In January 2014 I found another option for people who haven´t invest their money yet, but it is the process and already has incorporated a Corporation or a Nicaraguan Sociedad Anónima, it is a provisional residency per one year, please check this: http://www.nicaliving.com/node/21765

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Thank you Paul, as always, you have posted very useful and accurate information.

I hope you won't mind if I expand on a few of your points. Please do correct me if anything I say in this post is incorrect.

First, note that there are two agencies involved in granting your application for Residency as a Foreign Investor; MIFIC (the economic ministry) and Immigration. MIFIC is the agency that assesses and certifies your status as someone who is eligible to apply for this type of residency. Once they certify you, you must take the package to Immigration, which is the agency that actually grants the status. In practice, Immigration rubber-stamps your application if MIFIC certifies you, and you are also meticulous about providing Immigration with the other information which they require to process the application.

As stated by Paul, to qualify as an investor you need to invest a minimum of $30,000 in an eligible business.

Let me make a point about claiming the purchase price of assets in the business. For big-ticket items such as real estate, vehicles and machinery, it is the custom here in contracts of sale to quote a purchase price that is far lower than the real amount of money that changed hands (in order to lower the costs of property transfer taxes as well as other taxes).

As hard as it may be to believe, MIFIC will actually allow you to claim the real price rather than the lower purchase price stated in the contract. To do so you will need to provide hard evidence, such as providing MIFIC with a bankbook entry that you shows you withdrew the real amount from your bank account immediately prior to buying the asset. MIFIC will not share this information with the tax authorities or any other government agency.

Now let's talk about indirect costs.

Let's say for example you have bought a house and plan to transform it into a tourist guest house.Your direct costs of course include the purchase price of the property and associated legal fees, government fees and property transfer taxes; plus whatever you spend on materials and wages for the project.

In addition, you can also apply indirect costs toward the $30,000 minimum.

If for example you own a car, you can apply the cost of buying, insuring, maintaining and operating the car (including fuel costs), on the grounds that you needed the car to search for a property to buy, to transport building materials and workers to the job site, to keep appointments with professional advisors, etc. You can apply the full cost of buying and operating the car, even if it's clear that you also use it from time to time for personal trips not related to the project.

Also, you can apply living expenses that you incurred while making your investment. Let's say you have invested in the fishing industry while renting a house. You can apply the full costs of the rent plus utilities such as electricity, water and the internet.

You can also apply your expenses for daily living expenses such as food, soda, bus trips, phone calls, photocopies etc. (but not alcohol or cigarettes).

A big-ticket item you can apply is the cost of airline tickets back to your home country during your period of investment, on the grounds that you needed to return occasionally to get your finances in order.

Note that you may need to fly home immediately prior to submitting your application, in order to obtain the required long-form birth certificate with your parent's name on it, as well as a police report stating that you have a clean record, and a doctor's letter stating that you are in good health and have no contagious diseases. The expense for the flight applies to the $30,000 minimum. Also included is the costs of paying for these 3 documents, notarizing them, apostilling them, and fedexing them to the Nicaraguan Embassy (including attaching a pre-paid fedex envelope which the embassy will use to fedex the package back to you after it has certified it).

You can apply indirect costs that you began to incur before you actually began to invest. Let's say for example you bought a farm exactly one year ago, after first deciding to buy a farm four months before then. You can apply eligible costs which you began to incur 16 months ago, on the ground that your investment process began on that date, and that it took you four months of running around looking at farms and negotiating the purchase of the property before you actually paid for it.

A final point about all the information above: MIFIC wants to see receipts for every one of your disbursements. Therefore, if you are contemplating applying for Residency as a Foreign Investor at some point in the future, you should begin now to ask for receipts for every single purchase that you make, and every single disbursement you make regarding your investments here.

Leaving aside this topic, I hope Paul won't mind if I make a comment about obtaining a RUC number from DGI and business license from the Alcaldia.

MIFIC does not actually require that you obtain a RUC # from DGI and a business license from the Alcaldia to apply for residency as a foreign investor. But it does require that you demonstrate that you TRIED to obtain these two items. So if for any reason you are turned down by DGI and/or the Alcaldia, make a point of asking for the name and work phone number of the person who turned you down, and write down the reason you were given for being rejected. MIFIC will almost certainly accept this.

But if this happens to you, once you obtain the letter from MIFIC confirming your status as a foreign investor, you should immediately return to DGI and/or the Alcaldia with the letter, because then they will grant you a RUC # and a license. You will need to obtain these two items before completing the final stage of obtaining residency: going to the Immigration agency with MIFIC's approval of your status and the other documents the Immigration agency requires.

You do not need to form a Corporation or SA to obtain the RUC #. You can also apply as unincorporated individual (in Spanish, "natural person"). In fact, at no point during the process of qualifying as an investor are you required to incorporate. Paul is recommending that you do so only because there are advantages of doing business as a corp.or SA: But there are also many advantages of doing business as an unincorporated individual (for one thing there is a lot less paperwork involved).

A final point about timing:

The package of information you obtain from your home country to begin the process (long-form birth certificate, doctor's letter, police report) has a shelf life of 6 months, starting on the date that you had it notarized and apostilled there.

When you present this package to MIFIC together will all the other documents it requires, MIFIC will call you a few days later to arrange for the inspection of your investments. The inspection usually takes places within two weeks. About three weeks after the inspection, MIFIC will then provide you with a formal letter stating that it certifies your status as a foreign investor for the purposes of residency. MIFIC letters often have a shelf life of only one month.

So that means you only have one month to run down to Immigration to complete the final step (but once you apply to Immigation, the shelf life of the MIFIC letter no longer matters -- all you have to do is show Immigration that MIFIC letter hasn't expired at the time you applied).

So in terms of timing, this would be my approach.

First, pull together the all the MIFIC documents (including your attempt to get a RUC # and business license) you need except the package of three items you need to obtain from your home country. Don't submit it at that point but have it up-to-date at the time you return to your home country to obtain the three items. At the same time, fill out all the Immigration agency forms and documents and have them ready to go to.

Then as soon as you return to Nicaragua, update the MIFIC package to reflect what happened while you were gone, have the three documents translated and notarized, and submit the package right away to MIFIC.

About 6 weeks later you will get the MIFIC letter. Run down the next day to get a RUC # and license, then turn around the next day and submit your package to Immigration. Now you're done and the final stage of the process is when Immigration officials come to visit it you in your home.

Hope this helps. Please jump in if you spot anyone misleading or incorrect I've stated above.

Excellent DetaIled Info

Mike, thank you.

I'm wavering between becoming a pensianado or an investor resident. On the one hand, the import duty relief on a vehicle and household items is nice, but I also have some long term business plans. The restrictions placed on a pensionado might prove problematic in the future. I just don't know.

I have already invested more than the requirement, and planned to set up an SA in January.

I plan on visiting with Paul Tiffer to explore the various long term ramifications of the decision. This will be money well spent. I don't believe I really needed a "Letter Of No Objection" for my last farm purchase, but I had my lawyer obtain one anyway.

This post just highlights the importance of proceeding slowly and methodically, and gathering as much quality information as possible in order to make the right decision.

There are any number of ways to skin this proverbial cat: Pensionado, Investment, Marriage to a Nica national. Each has its pluses and downsides.

The importing of older used items for one's business

.This thread was very helpful as aways, but would like to know how to deal with importing items related to entry under investor for small and micro tourism.

As I get close to moving now is the time for me to get all my ducks in a row and to be ready to go as the time to leave approaches and everything has been thinned out and now only the important items remain.

These items are mostly relate to the business that will be created. I have some new items and they have receipts, but I also have plenty that don't and are used and older in nature. I also made some items like solar panels myself. Also what does one do about a tool box full of old, but useful crap. How are these to be addressed by DGI, customs, and any other agency involved in this process?

I'm guessing that receipts will have to appear one way or the other?

Thanks in advance to those that reply.

Marjorie

You must contact Marjorie Freer of the shipping company.!

Best Regards,

Paul Tiffer

Thanks for your concern about this topic and your comments.

First of all Mike, thanks for your comment, according with my professional experience let me tell this: MIFIC will confirm if a Foreign Investor has invest in Nicaragua, not your status; in order to do it will check the property and receipts of the most important expenses, I afraid the gas your vehicle will use is not going to be consider as part of your investment, I am not sure about your air plane ticket but you can try. For a Real Estate property the MIFIC, will value the property regardless price reported in the Deed to avoid taxes – which is illegal and it could be a problem even with banks.- Regarding some cost you said, is not a good idea to return to your country to apply for the documents you will need – police, birth and health certificates – usually will takes some months to get it ready to be submit. Nowadays MIFIC is requiring the Police Record to apply for their approval or certification. Regarding a RUC number from DGI and business license from the Alcaldia, I afraid you are wrong, is mandatory to have one, before to apply for residency, even if MIFIC can skip those documents, Immigration will not process your application without does documents – the last 3 applications can confirm it.- DGI is not allow to give RUC to any non-resident, so I can´t understand how an individual (in Spanish, "natural person") non-resident is able to get RUC; I can understand that as mistake it could happen in the past, but according the law is prohibit. Mike regarding your comment, which I respect: “there are also many advantages of doing business as an unincorporated individual” (for one thing there is a lot less paperwork involved). I can understand for an individual who wants to get some money and it is going to invest $30,000.00 more or less is a big problem the paperwork, however for a group of Foreign Investor who are going to open a branch of their business abroad or just run a new one – as a Mining Companies, Free Zone Companies, Hotels, Energy, big farms, as example – which is not a personal investment, it is a group of investors, 2, 3 or more they can´t apply as individual, it’s will be a big mistake. They are NL readers too, I was surprised when two south American business a group from Peru, and another group from Colombia & Venezuela contacted me and the first comment was “we found your name in NL”.- Corporations are create for several reason but just to talk about three: 1.- To separate the liabilities – personal or from other companies- actually some accountants & lawyer in USA advice their clients to invest through Corporation in Nicaragua, even for a house – Some clients has a beach house which is value in $500,000.00 nowadays and they rent it; as a Corporation they separated their liabilities from US, and if there is a suit their properties in US are save, even their personal assesses in Nicaragua.- 2.- To state the right of each shareholder – as individual you can´t incorporate new business partners, at least in the proper, legal and save way.- 3. To be able to do tax deduction, as Individuals individual there are many expenses you can do the tax deduction of your Income tax.- For example to anyone who is in Real Estate business –buying, improving and selling properties, beach lots for example or houses is Mandatory to be organized as Corporation for tax reasons.- Of course there are others, as the fast and easy way to transfer the property and company, just selling the shares, avoiding cost, taxes and others.- Probably if the DGI grant the RUC to an Individual, apply as Individual will be good enough for a one person business. Of course that is my professional experience, my comment just try to offer a guidance to readers who are trying to obtain information from Nicaragua, and are not the last word, because I afraid not there is a last work with governments institutions or agencies in Nicaragua, the law usually is the same, but the interpretation change from one agent to another, or even the same agent can change their mind in two weeks, just as example: I tried to submit the application of a client (2) who are building a Hotel and at the same time have two large coffee farms, they received the MIFIC certification and their investment was valued by $320,000.00 and the Hotel is not finished yet; I submit their application using a Limited Power of Attorney granted in my favor to submit the application … Immigration didn´t accepted because now they are requiring the applicants must be in Nicaragua, and they were in US, that is why they gave the POA to submit their application – actually I wrote a comment about it in NL – I can assure you I followed this way several times, I can assure I talked with several agents even with the director of the area .. the answer was the same, now I am waiting for November for my clients to go together, of course the police record will be expire for that time… they need to bring new ones. The worse part two weeks before I talked this the director of the area and she assure me she will be able to accept POA…? It doesn’t matter the MIFIC certification – that is why MIFIC is very important as support but the Agency in charge of Residency is just Immigration Department.- Best Regards, Paul Tiffer

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Paul, thank you for clarifying several more points and correcting my errors. Once again you have proved to be very well-informed and helpful.

Not new

Hello NL Readers,

This topic is not new, however I realized I posted about it in NL in differents articles, but not in a very organized article; that is why I posted today. I hope this article will be useful for people interesting to invest money in Nicaragua and at the same time to obtain a Permanet Residency in Nicaragua (for 5 years).

I thanks those who wants to invest and create new jobs for Nicaraguans, I invite to everybody to do it in the proper way from the legal point of view.-

Best Regards,

Paul Tiffer

Always appreciated

Paul,

You continue to impress me. As I read your article, I learned more and it was very helpful. Reading “Mike”s response was also helpful. It seems he is an expat by his command of English. He also appeared quite knowledgeable. Your treatment of his comments was extremely professional and courteous, which speaks highly of you. Your rebuttal of his comments was extremely helpful too.

Continued thanks,

Bob