Employer Tax Contributions

Tax Type	Rate	Base
INSS (Social Security)	22.5% (standard)	Employee's gross salary
INATEC (Training Tax)	2%	Employer's payroll
Income Tax Withholding	Progressive (0% - 30%)	Employee's annual taxable income

Filing & Compliance

• Monthly filings and payments for INSS contributions and withheld income tax are typically due within the first few days of the following month, usually around the 5th or 10th.
• Employers must file an annual declaration summarizing total salaries and taxes withheld, typically due by February or March.
• Employers are responsible for withholding employee income tax via payroll and submitting monthly tax returns.

In Nicaragua, employers are responsible for withholding and remitting various taxes on behalf of their employees.

Employee Income Tax (IR)

Employees in Nicaragua are subject to a progressive income tax based on their annual earnings. No tax is due on annual income up to C$100,000. Income above that threshold is taxed at rates ranging from 15% to 30%. Employers withhold this tax monthly based on the employee's projected annual income.

• 0 - C$100,000: 0%
• C$100,000.01 - C$200,000: 15%
• C$200,000.01 - C$350,000: 20%
• C$350,000.01 - C$500,000: 25%
• Above C$500,000.01: 30%

Employee Social Security Tax (INSS)

Employees contribute 7% of their monthly salary to the Nicaraguan Social Security Institute (INSS). This contribution covers pensions, healthcare, and other social security benefits. The employer withholds this amount and remits it to INSS.

Other Deductions

While not strictly taxes, employers also typically deduct the following:

• 13th Salary: One-twelfth of the employee's annual salary is accrued each month and paid as a bonus, typically in December. While deducted monthly, it is not remitted to the government but held by the employer.
• Vacation Allowance: Similar to the 13th salary, vacation allowance is accrued and paid to the employee upon taking vacation leave.

Employer Taxes and Contributions

Employers in Nicaragua contribute to INSS at rates dependent upon the number of employees.

• Less than 50 Employees: 21.5% of each employee's gross salary.

• 50 or more Employees: 22.5% of each employee's gross salary.

Employers also contribute to the National Technological Institute (INATEC) based on employee salaries.

Tax Filing and Compliance

Employers are responsible for withholding employee taxes and social security contributions and remitting them to the appropriate authorities. They must also file various tax returns and declarations, including monthly and annual payroll tax returns.

Employee Tax Filing Responsibilities

Generally, employees are not required to file annual tax returns if their income is solely from employment and tax has been withheld correctly. However, an employee must file if they have:

• More than two employers and their total annual income exceeds C$100,000
• Utilized allowable tax deductions or are claiming tax credits

Important Considerations

• Minimum Wage: Nicaragua has industry-specific minimum wages, and employers must ensure compliance.
• Overtime: Overtime pay is regulated, with specific rates for work beyond standard hours and on weekends or holidays.

This information is current as of February 5, 2025, and may be subject to change. It is recommended to consult with a local tax advisor for the most up-to-date information and personalized guidance.