Staying Home? Make sure to take care of your physical receipts!

Given that many of us are working at home and in fact even our team at SAENICSA is at home, it’s important to remember that in Nicaragua, it is imperative that you take good care of your invoices, receipts and other supporting documentation.

The digitalization of many business processes and practices has meant that many businesses have foregone physical documents and gone digital. Although, in Nicaragua there are important considerations that need to be kept in mind regarding adequately supporting expenses that are tax deductible.

What does the Tax Concertation Law say?

No one wants to pay more tax than they want to. So to legally pay less it is imperative to adequately document costs and expenses that are related to your revenues. That is why in article 39 of the Tax Concertation Law, it states:

“The costs, expenses incurred, that are general, necessary and normal to produce the taxable income and to preserve its existence and maintenance, are deductible, provided that said costs and expenses are registered and supported by their corresponding invoices.”

What does it mean that they are properly supported? Well article 42 numeral 2 clarifies this point when it states:

“The deduction of the costs and expenses mentioned in article 39 of this Law will be accepted provided that, as a whole, the following requirements are met: … 2. That they have invoices or supporting documents.”

Therefore, any expense, whether it be for the payment of water, electricity, administrative services, taxes or what may have you cannot be supported by a account statement or bank statement. The National Tax Authority will not accept this expense as being deductible if there is no physical supporting document or invoice. It is imperative to have the invoices and ergo maintain them in a legible condition.

Have there been any changes due to the COVID-19 Pandemic?

In light that throughout the world, both governments and businesses have taken different and decisive approaches to mitigate or defer as best as possible the economic, social and other interrelated negative effects of the COVID-19 or Coronavirus pandemic.

Nicaragua at the time of writing this article has not through the Ministry of Public Credit and Finance nor through the DGI published any adjustments, reforms or changes to current fiscal legislature or accounting practices.