Taxes on Textiles and Footwear Companies in Nicaragua

NICARAGUA BUSINESS NEWS – The amendment to the Law on Tax Coalition sent by the Executive to the Assembly repeals the exemption from VAT on domestic production of clothing and footwear.

Elvira Cuadra, Directora Adjunta IEEPP
Elvira Cuadra, Directora Adjunta IEEPP

If the reform is approved, SMEs in these sectors will be the most affected “… as it states that they must pay Value Added Tax (VAT) and also orders that they withhold income tax, through an unclear mechanism within the fixed quota system. ”

This would mean a loss of competitiveness in the international market, since “… it would increase manufacturing costs by 15%,” said Alejandro Delgado, president of the National Leather, Footwear and Allied companies in Nicaragua.

Delgado added that “… By paying VAT the value of the shoes, backpacks and everything made in national workshops will be more expensive. And this I assume the final consumer will pay for in the form of higher prices for the this domestic product. ” reports that “… By making local manufacturing more expensive those favor is given to imported products such as school and women’s shoes, and that threatens the livelihoods of local workshops and export targets. This year along between 80 and 100 new shops opened in the country. ”