How to obtain residency in Nicaragua and stop paying taxes

Living in Nicaragua can be a great choice for many, as it not only boasts a territorial taxation system, meaning that you do not pay taxes on your income from overseas, but it is also not all that difficult to obtain residency there.

This option for those searching for a residence without taxes is one of the most affordable places to live in Central America. In fact, the cost of living is still lower than in Panama or Costa Rica, two countries which we have already spoken about in our blog, as well as Paraguay.

Rental prices are extremely low, as well as the cost of food, transport and leisure activities.

Regardless of what it is you are looking for, you will certainly find it over there. There are beaches off the coasts of the Pacific and the Atlantic, islands of the Caribbean, lakes, volcanoes and rainforests throughout the whole country. The climate is warm but easy to get used to, and the monsoon season is relatively short and not all that extreme.

In today’s article, we are going to talk about the options of starting a business in Nicaragua, how to become a resident there, taxes and even how to obtain a second passport.

Starting a business in Nicaragua

Nicaragua remains the poorest country in Central America. The average monthly salary of a rural worker is about €120. This, of course, makes the country one of the cheapest destinations in the region. You will really be able to profit from geoarbitrage here.

Thanks to the low crime rate, the country is currently experiencing a surge in tourism, a sector that, given the diversity of the landscape (volcanoes, lakes and beautiful colonial cities), has great potential.

Poor infrastructure and, above all, the slow pace of the government are disadvantages but, if we have enough initiative and adaptability, these do not have to stop us from finding good business opportunities.

If you have always dreamed of building your own hotel, hostel, restaurant or bar, you can do so in Nicaragua with very little start-up capital. Furthermore, if you have good contacts in your home country, or any other for that matter, you will certainly be able to start making money quickly.

The low costs of labour and of renting (or buying) properties will allow you to turn your dream into a reality in a very short period of time. With a few thousand euros as a backup and a good business idea, you have everything you need to start your business over there.

Of course, the tourism sector is not the only option. Over there you will find workers for any type of business that you want to start. The only fundamental is that you take advantage of the options that geoarbitrage offers, meaning you recruit there and sell outside of the country.

How to obtain residency in Nicaragua

Nicaragua opens its doors to all immigrants (provided that they do not have criminal records). It is one of the countries in which obtaining permanent residency can be done with great ease. In fact, you do not have to spend much time there, nor do you have to spend a fortune to get hold of a residency permit. Often, the cost is less than $1,000.

Generally, you have two ways of obtaining a permanent residency permit in Nicaragua, one expensive and slow, the other cheap and quick, the choice is yours.

1. The first way requires an investment of at least $30,000 in a Nicaraguan limited company, of which you have to have a majority share. You would also have to establish a subsidiary of your company in Nicaragua. This could be useful if you really want to do business in the country and could spare you from certain red tape.
2. You can also prove that you have a monthly income of more than $600 ($750 for couples). And that’s it. With this amount, you would be considered poor in Western Europe, but in Nicaragua, this allows you to obtain a permanent residency permit and live comfortably.

For only $600, you could apply for “pensioner” or “rentier” status. As a pensioner, you have to be at least 45 years old, but as a rentier, age is not a factor. All you have to do is show steady incomes of $600 per month, something that any digital nomad who has started their business up should be able to do.

There are, of course, some additional conditions, but these are easy to meet: a medical examination and a criminal record that shows you have not had problems with the law.

Alternatively, if, for some reason, it is difficult for you to produce those documents, the Nicaraguan authorities have been known to ignore the need for these in exchange for extra money.

After completing these steps, you will have permanent residency in Nicaragua, which you have to renew after 5 years.

According to the law, you have to spend 6 months out of the year in Nicaragua but the laws can be interpreted in many ways. If you do have a good reason for being out of the country for longer, more often than not, you will have no problems with this.

Be that as it may, if we keep the richness of nature and the variety of places with the Pacific on one side, the Caribbean Ocean on the other and the enormous Lake Cocibolba running through the middle in mind, those 6 months will certainly pass much quicker than you could ever have expected.

Taxes in Nicaragua

As we said before, you will not have to pay taxes on income stemming from abroad. You can start companies and open bank accounts anywhere in the world without the state causing you problems.

Even if you have income from within the country, the maximum you will have to pay is 30%, which is relatively reasonable if we compare this to Spain and other countries in Western or Central Europe.

Features of the second passport in Nicaragua

For those who want a second passport, the permanent residency permit can be a good first step.

In order to apply for a Nicaraguan passport, you will have to have lived there for at least 7 years. But it is not enough to just have lived there on paper, you have to have really lived in the country for the majority of this time.

Therefore, if you do not speak Spanish or you do not know the history of Nicaragua yet, you will have ample time to learn. For the majority, becoming a citizen in Nicaragua will not be a problem. Nicaragua also allows dual citizenship.

One of the added advantages of the Nicaraguan passport, especially if you are not Spanish, is that it gives you access to the Schengen area. Even if you are not looking for a second nationality, having permanent residency in Nicaragua is a good option in case of conflict or problems in your country of origin.

Conclusion

Nicaragua is both large enough and cheap enough to allow anyone to build a new life from scratch in a quiet and isolated place.

Even if you are looking for a piece of land, you will find extremely fertile volcanic soils over there that will make this very easy for you. A great place to escape possible crises and wars in Europe and North America and lead a peaceful life.

Of course, Nicaragua is also a good option if what you are looking for has nothing to do with agriculture and tranquillity. There you will not pay any taxes on your income from abroad and you will have no problems in relocating and travelling to other countries, provided that you spend a short time in the country.

Therefore, if you are looking for a quick and cheap option to get hold of a permanent residency permit in a country where you do not pay taxes and/or you want to make your dream of starting a tourism business a reality, I recommend that you take a look at the options that Nicaragua offers. There your life will be much less defined by communism than it could possibly be in your country of origin.

Now, if you want our help with escaping the burden of the state and to stop paying taxes, you can book a consultation here.