Corporations in Nicaragua for Real Estate and Residency
By Joel Stott-Jess
Update July 26, 2022
*New note for 2022: The rules on the use of corporations to establish residency as an investor are changing. The government is becoming more stringent and focusing on economic activity of said corporations. This article will be updated as the rules, regulations, and facts on the ground here evolve. Please contact me for more information until I update this more extensively.
How can you use corporations in Nicaragua to hold property, register vehicles, apply for residency, potentially save on closing costs, and make your assets more valuable in the future?
The answer is a Sociedad Anonima, or S.A.
An S.A. is a Nicaraguan holding corporation. It’s similar to a .Inc in the US. It is a fictional person created on paper that can have shareholders just like a standard corp in most countries.
It has a number of benefits for foreigners looking to invest in Nicaragua. The first benefit that most of my clients are looking for is that it serves as a vehicle to the investor class residency. You can read more about residency here in Nicaragua in this article.
By purchasing property with a value of at least $30,000 per shareholder, you qualify as an investor if the property is placed in a corporation. After closing and the property is in the corporation, you can apply to become a resident here in Nicaragua.
Also if you are planning on spending more time here, you can own and register a vehicle with that corporation. It actually lets you own a vehicle faster than just waiting until you have residency and then putting it in your personal name.
Here in Nicaragua you must be a citizen or a resident to register a vehicle in your name. However corporations can also own vehicles. Therefore you would own the corporation, and the corporation would own the vehicle. Ergo you own the vehicle yourself via the S.A.. You can see the article on vehicles here.
And finally they can be a large financial benefit if you find a property to purchase already held in a corporation. That is because the sizeable closing costs involved in transferring the ownership of a property are different if yo are purchasing the shares of the corporation that owns the property.
By purchasing a property held in one of these corporations you could save 4% to 7% on closing costs.
How does that work?
The purchase process for property in Nicaragua, if you haven’t seen it, is detailed here. Check out that article for the basics.
When you buy a property held in a person’s name, and transfer ownership to your name, you pay closing costs. They increase in direct relation to the value of the property. From 4-5% for properties under $50,000 to 7-8% for properties over $200,000.
If the property is held in an S.A. corporation, however, these same costs do not apply.
For a property held in an S.A. the buyer would purchase all the shares in the corporation from the seller.
The buyer then becomes the legal owner of the corporation and it’s asset - the property.
The owner of record for the property does not change. It is still the same corporation, now with new ownership.
For example ABC Properties S.A. is owned by the seller, and you simply buy 100% of the shares of that entity.
The owner of record for the property does not change, it is still ABC Properties S.A.
No transfer taxes apply - at the registry office for the property there has been no change in ownership
The only expense is 1.5% for legal fees as we still perform a full due diligence and a share sale
Also the closing process for a property held in an S.A. can also take as little as two days. As opposed to six to eight weeks for a sale with personal names
The legal fees for purchase of a corporation are normally about 1.5% of the purchase price of a home with a value of, say $250k, held in a corporation. Now compare that to 7-8% for a property over $200,000 held in a personal name. The benefit is obvious.
Unlike other countries theres is no minimum requirement for ownership by a national citizen. Foreigners can own both corporations and land outright in Nicaragua. Its a big plus for investing in Nicaragua.
So how can you take advantage of this?
Most properties are not currently held in corporations. However that is changing for all the reasons I have explained.
So we can look for the ones that are, and if the property like is held in one then you can take advantage of the up front savings. If the property is not yet held in a corp we would form one to be ready at closing, and place the property into the corporation you own on closing day.
While in the second scenario you would not save those closing costs, your property will be more attractive to a future buyer. If a buyer is looking at two fairly equivalent properties, and one is in a corporation, it would obviously be more attractive.
Plus it gives you those options for residency and vehicle registration.
Also for people working remotely there can be large tax advantages to having a company here, for an article on working remotely check this out.
The corporation is more valuable the more expensive the home is. That sliding scale of closing costs I mentioned earlier.
There is one more item to consider which is ongoing compliance for the corporation. For most people who use their corporations only to hold their property, vehicle, and use for residency, there will be no declared income. It is just a holding corporation.
However with a corporation you still must declare income on a monthly basis, even if the income is always a zero. There's an online system where you can login and do it yourself, it takes about 15 minutes per month and it's fairly simple. Alternatively you can hire someone to do all of that for you for between 200 and $300 per year.
Thanks for reading!
Have more questions? Feel free to contact me any of the ways below.
Joel Stott-Jess
LifeInNica.com
Cell / WhatsApp: +505 8176 8624
Skype: joelstottjess
Joel Stott-Jess is a New York Times featured agent / broker with Century 21 Nica Life Realty in San Juan Del Sur.
Originally from Alberta, Canada he has been doing business in Nicaragua since 2014.
An investment consultant, serial entrepreneur, surfer, and outdoor enthusiast he is an expert on the real estate and business markets in Nicaragua. He also operates The Central Investor, a real estate and investment blog focused on the entire Central American region.