Nicaragua

Registrations and Establishing an Entity

To process payroll in Nicaragua, your entity must first establish a legal structure (e.g., Sociedad Anónima, Sociedad de Responsabilidad Limitada) and register with the National Registry of Commerce. You'll need a Tax Identification Number (NIT) from the General Directorate of Revenue (DGI).

For payroll specifically, have written employment contracts for all employees, register with the Nicaraguan Social Security Institute (INSS), and maintain accurate payroll records including employee information, salaries, deductions, social security contributions, tax withholdings, and leave/vacation records.

Banking

To manage payroll or conduct business transactions in Nicaragua, it is generally necessary to open a local bank account. Official currency is the Nicaraguan Cordoba (NIO). While USD is widely accepted, transactions should ideally be in NIO.

Standard Banking Hours

• Monday to Friday: 8:30 AM to 4:00 PM
• Saturday: 8:30 AM to 11:30 AM

Working Week

• Standard: 48 hours/week, typically Monday to Saturday
• Daytime hours: 6:00 AM – 8:00 PM (8 hrs/day)
• Night shift: 6:00 PM – 6:00 AM (7 hrs/day, max 42 hrs/week)
• Overtime: 200% of base pay, max 9 hrs/week
• Paid break: 30 mins/day
• Weekly rest: 1 full paid day after 6 days of work

Leave Entitlements

• Annual Leave: 15 days paid vacation every six months of continuous work
• Maternity Leave: 4 weeks before and 8 weeks after birth; 10 weeks for multiples; full pay
• Paternity Leave: 5 paid days post-birth or post-adoption
• Sick Leave: Up to 26 weeks per episode, renewable; paid at 60% of average wage

Christmas Bonus: 13th salary paid by Dec 10 annually

Income Tax

Income included as labor income covers salaries, bonuses, commissions, and other employment-related remuneration. Tax is assessed on net income.

Rates:

• 0.01–100,000 C$: 0%
• 100,000.01–200,000 C$: 15%
• 200,000.01–350,000 C$: 20%
• 350,000.01–500,000 C$: 25%
• 500,000.01 and above: 30%

Social Security

Managed by INSS. Contributions:

• Employee: 7%
• Employer: 21.50%
• INATEC (Employer): 2% for technical/vocational training

Payroll

Employers must provide employees with a wage receipt—physical or digital—as long as employees can access and print it.

Reports

Employers must maintain all payroll records (e.g., salaries, withholdings, contributions) for 7 years. Reporting includes:

• Monthly tax and social security withholdings to DGI and INSS
• Annual bonus (13th salary) to be included in calculations and paid by Dec 10
• Annual Income Tax report and other declarations to DGI and INSS

New Employees

Employers must:

• Establish legal company structure
• Register with INSS and DGI (RUC number)
• Draft employment contracts
• Report staff changes to INSS promptly

Leavers

Termination depends on cause (justified, unjustified, or mutual). Must:

• Notify employee with a formal letter (15 days’ notice where applicable)
• File justified dismissals with Labor Inspectorate
• Pay outstanding benefits
• Report exit to INSS within 3 days

Statutory Benefits

• Christmas Bonus: 13th month pay
• Paid vacation, maternity, paternity, and sick leave

Additional Benefits

May include:

• Private health insurance (dental/vision)
• Performance bonuses
• Training & development
• Remote work/flexible policies
• Transportation/meals subsidies
• Extra vacation days

Visa Application

Processing time: 3–15 working days. Documents:

• Valid passport, 2 photos, health insurance, visa form
• Fee: $185
• Proof of funds, return ticket, job offer/invitation, police clearance

Work Permits

• Valid 1–5 years; renewable ($25 fee)
• Family members included (need marriage/birth certificates)
• New employer requires new permit

The official currency of Nicaragua is the Nicaraguan Cordoba (NIO). While U.S. dollars (USD) are widely accepted in many places, official transactions should ideally be conducted in NIO to avoid unfavorable exchange rates. Most banks in Nicaragua operate from 8:30 AM to 4:00 PM Monday through Friday and from 8:30 AM to 11:30 AM on Saturdays.

Further Information For more information, or assistance with Nicaragua tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.