Doing Business 2019 Nicaragua Economy Profile Nicaragua Page 1 Doing Business 2019 Nicaragua Economy Profile of Nicaragua Doing Business 2019 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as post-filing processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Labor market regulation Flexibility in employment regulation and aspects of job quality Page 2 Doing Business 2019 Nicaragua About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation. Although Doing Business does not present rankings of economies on the labor market regulation indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational reports, which exhaustively cover business regulation and reform in different cities and regions within a nation. These reports provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business report, published in 2003, covered 5 indicator sets and 133 economies. This year’s report covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. More about Doing Business (PDF, 5MB) Page 3 Doing Business 2019 Nicaragua Ease of Doing Business in DB 2019 Rank Region Latin America & Caribbean 190 1 Nicaragua Income Category Lower middle income 132 DB 2019 Ease of doing business score Population 6,217,581 0 100 City Covered Managua 55.64 DB 2019 Ease of Doing Business Score 0 100 69.24: Colombia (Rank: 65) 68.89: Costa Rica (Rank: 67) 66.12: Panama (Rank: 79) 65.41: El Salvador (Rank: 85) 58.97: Regional Average (Latin America & Caribbean) 55.64: Nicaragua (Rank: 132) Note: The ease of doing business score captures the gap of each economy from the best regulatory performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s ease of doing business score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance. The ease of doing business ranking ranges from 1 to 190. Rankings on Doing Business topics - Nicaragua 1 28 55 85 87 82 Rank 99 110 106 109 136 144 155 160 163 168 177 190 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Ease of Doing Business Score on Doing Business topics - Nicaragua 100 79.84 80 76.99 68.39 58.58 Score 60 52.69 50.00 46.58 47.19 41.13 40 35.00 20 0 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Page 4 Doing Business 2019 Nicaragua Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate To make the data comparable across economies, several assumptions about the a company (number) business and the procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business - Is a limited liability company (or its legal equivalent). If there is more than one type city of limited liability company in the economy, the most common among domestic firms • Postregistration (for example, social security is chosen. Information on the most common form is obtained from incorporation registration, company seal) lawyers or the statistical office. - Operates in the economy’s largest business city. For 11 economies the data are • Obtaining approval from spouse to start a business or to leave the home to register the also collected for the second largest business city. company - The entire office space is approximately 929 square meters (10,000 square feet). - Is 100% domestically owned and has five owners, none of whom is a legal entity; • Obtaining any gender specific document for has a start-up capital of 10 times income per capita and has a turnover of at least company registration and operation or national 100 times income per capita. identification card - Performs general industrial or commercial activities, such as the production or sale of goods or services to the public. The business does not perform foreign trade Time required to complete each procedure activities and does not handle products subject to a special tax regime, for example, (calendar days) liquor or tobacco. It does not use heavily polluting production processes. • Does not include time spent gathering - Leases the commercial plant or offices and is not a proprietor of real estate and the information amount of the annual lease for the office space is equivalent to the income per capita. • Each procedure starts on a separate day (2 procedures cannot start on the same day) - Does not qualify for investment incentives or any special benefits. - Has at least 10 and up to 50 employees one month after the commencement of • Procedures fully completed online are recorded operations, all of whom are domestic nationals. as ½ day - Has a company deed that is 10 pages long. • Procedure is considered completed once final document is received The owners: • No prior contact with officials - Have reached the legal age of majority. If there is no legal age of majority, they are assumed to be 30 years old. Cost required to complete each procedure (% of - Are sane, competent, in good health and have no criminal record. income per capita) - Are married and the marriage is monogamous and registered with the authorities. - Where the answer differs according to the legal system applicable to the woman or • Official costs only, no bribes man in question (as may be the case in economies where there is legal plurality), the • No professional fees unless services required by answer used will be the one that applies to the majority of the population. law or commonly used in practice Paid-in minimum capital (% of income per capita) • Funds deposited in a bank or with third party before registration or up to 3 months after incorporation Page 5 Doing Business 2019 Nicaragua Starting a Business - Nicaragua Standardized Company Legal form Sociedad Anónima (S.A.) - Corporation Paid-in minimum capital requirement NIO 0 City Covered Managua Indicator Nicaragua Latin America OECD high Best Regulatory & Caribbean income Performance Procedure – Men (number) 7 8.2 4.9 1 (New Zealand) Time – Men (days) 14 28.5 9.3 0.5 (New Zealand) Cost – Men (% of income per capita) 63.6 37.8 3.1 0.0 (Slovenia) Procedure – Women (number) 7 8.2 4.9 1 (New Zealand) Time – Women (days) 14 28.5 9.3 0.5 (New Zealand) Cost – Women (% of income per capita) 63.6 37.8 3.1 0.0 (Slovenia) Paid-in min. capital (% of income per capita) 0.0 1.5 8.6 0.0 (117 Economies) Figure – Starting a Business in Nicaragua and comparator economies – Ranking and Score DB 2019 Starting a Business Score 0 100 92.07: Panama (Rank: 48) 85.31: Colombia (Rank: 100) 79.92: Costa Rica (Rank: 142) 79.84: Nicaragua (Rank: 144) 79.40: Regional Average (Latin America & Caribbean) 78.41: El Salvador (Rank: 147) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2019 Nicaragua Figure – Starting a Business in Nicaragua – Procedure, Time and Cost Time (days) Cost (% of income per capita) 14 45 40 12 Cost (% of income per capita) 35 10 30 Time (days) 8 25 6 20 15 4 10 2 5 0 0 1 2 3 *4 5 6 *7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2019 Nicaragua Details – Starting a Business in Nicaragua – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Sign the incorporation papers before a notary public 3 days USD 875 Agency : Public Notary The documents of incorporation and the company bylaws must be drafted by a notary public. It is customary to include the company bylaws in the document of incorporation. Most notaries will also perform the remaining steps (explained in the following steps) in the incorporation process, for a fee of USD 200 (on average). The notary cost is in between USD 750–1,000. 2 Buy the company's accounting and corporate books 1 day NIO 800 Agency : Bookstore According to Article 28 of the Commercial Code, all companies must keep four corporate books: two accounting books (diary and ledger) and two corporate books (minute book and share book). The cost of the books may vary from one bookstore to another. 3 File the company's deeds (acta constitutiva), register the accounting books 1 week NIO 350 (registration (sellado de libros) and register as a trader (inscripción como comerciante) of accounting books) Agency : Representation of the Commercial Registry at the one-stop shop + NIO 300 (Ventanilla Única de Inversiones - VUI) (application as a In February of 2014, the Public Registry of Nicaragua approved a resolution in allowing trader) entrepreneurs to file the incorporation statutes, to register the accounting books and the inscription as a trader at the same time at the one-stop shop. The cost for commercial registration is 1% of capital (with a minimum of NIO 1,000, maximum of NIO 30,000) and the following fees apply: - Inscription of constitution of internal books: NIO 100. - Registration fee for books (diario, mayor, actas y acciones) NIO 350.00. - Registration as a trader (inscripcion como comerciante): NIO 300. - Form for municipal license (matricula): NIO 5. - Municipal license: for social capital lower than NIO 50,000 is NIO 500; higher than NIO 50,000 is 1% of capital. - Municipal license document (constancia de matricula): 1% of license fee. The payment must be made in Banpro or Banco de Finanzas, and the payment receipt must be presented at the one-stop shop. Regardless whether the company has income, it must declare before the Nicaraguan Tax Authority (Dirección General de Impuestos) each month. If the company has no sales, it will not pay any taxes. However, it will have to pay the fees for the services performed by their representative in Nicaragua before the DGI. 4 Pay the inscription fees 1 day (simultaneous 1% of capital Agency : Commercial Bank with previous (Commercial Fees must be paid into any bank and the receipt presented to the one-stop shop (see procedure) Registration) within a Procedure 5). There is a commercial bank within the Commercial Registry where the minimum of NIO payment can be made. 1,000 and a maximum of NIO 30,000 + NIO 100 (inscription of internal books) 5 File the Single Document (DUR - Documento Único de Registro) to obtain 1 day 1% of capital registration with Tax Authorities (RUC), social security (INSS), and the pre- (municipal license municipal license (pre-matrícula) fee) + 1% of Agency : Representation of DUR (Documento Único de Registro) at the one-stop municipal license fee shop (VUI) or the Tax Authorities (Dirección General de Ingresos - DGI) (municipal license Companies must obtain the Single Registration Document or DUR (Documento Único de document)+ NIO 5 Registro), a document that allows to register at the same time for sales tax (Registro (form for municipal Unico de Contribuyentes - RUC), pre-registration at social security (INSS), and the pre- municipal license (pre-matrícula) at the one-stop shop or at the DGI (Dirección General license) de Ingresos). In addition, the payment of the pre-municipal license is now made at the one-stop shop with the same document. 6 Obtain a municipal license (matrícula) 1 day no charge Agency : Representation of the Municipality (Alcaldia de Managua) at the one- stop shop (Ventanilla Única de Inversiones - VUI) After obtaining the pre-municipal license with the application of DUR, entrepreneurs must go to the delegation of the Municipality (Alcaldía) at the one-stop shop to obtain the official license (matrícula). Page 8 Doing Business 2019 Nicaragua 7 Obtain a Social Security certificate and register the company's employees 1 day (simultaneous no charge Agency : Social Security Institute (INSS – Instituto Nicaraguense de Seguridad with previous Social) procedure) Business founders previously obtain an Employer’s number (número patronal) through the Single Document or DUR (Documento Unico de Registro). Then, an Employer’s Certificate (certificado patronal) must be requested at the Social Security Institute (INSS – Instituto Nicaraguense de Seguridad Social). This visit is to obtain an activation procedure of the pre-obtained registration at INSS, and to activate the registration the company must have at least one employee. The employee needs to fill a form and with a copy of the employee’s ID the employer can request employee’s registration. At the same time, the company can request access to the online declaration service. INSS usually gives a training to use the system, which is set up a couple of days after the registration of the employee is requested. Takes place simultaneously with previous procedure. Page 9 Doing Business 2019 Nicaragua Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2018. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse To make the data comparable across economies, several assumptions about the (number) construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining The construction company (BuildCo): all necessary clearances, licenses, permits and certificates - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest business city. For 11 economies the data are also collected for the second • Submitting all required notifications and receiving largest business city. all necessary inspections - Is 100% domestically and privately owned; has five owners, none of whom is a • Obtaining utility connections for water and legal entity. Has a licensed architect and a licensed engineer, both registered with sewerage the local association of architects or engineers. BuildCo is not assumed to have any other employees who are technical or licensed experts, such as geological or • Registering and selling the warehouse after its completion topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse Time required to complete each procedure upon its completion. (calendar days) The warehouse: • Does not include time spent gathering information - Will be used for general storage activities, such as storage of books or stationery. - Will have two stories, both above ground, with a total constructed area of • Each procedure starts on a separate day— approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 though procedures that can be fully completed meters (9 feet, 10 inches) high and will be located on a land plot of approximately online are an exception to this rule 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the • Procedure is considered completed once final warehouse is valued at 50 times income per capita. document is received - Will have complete architectural and technical plans prepared by a licensed architect. If preparation of the plans requires such steps as obtaining further • No prior contact with officials documentation or getting prior approvals from external agencies, these are counted Cost required to complete each procedure (% of as procedures. income per capita) - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements). • Official costs only, no bribes The water and sewerage connections: Building quality control index (0-15) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there • Quality of building regulations (0-2) is no water delivery infrastructure in the economy, a borehole will be dug. If there is • Quality control before construction (0-1) no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. • Quality control during construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average • Quality control after construction (0-3) wastewater flow of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and a peak wastewater flow of 1,136 liters (300 • Liability and insurance regimes (0-2) gallons) a day. • Professional certifications (0-4) - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 10 Doing Business 2019 Nicaragua Dealing with Construction Permits - Nicaragua Standardized Warehouse Estimated value of warehouse NIO 3,249,530.40 City Covered Managua Indicator Nicaragua Latin America OECD high Best Regulatory & Caribbean income Performance Procedures (number) 18 15.4 12.7 None in 2017/18 Time (days) 225 199.0 153.1 None in 2017/18 Cost (% of warehouse value) 5.5 3.2 1.5 None in 2017/18 Building quality control index (0-15) 3.5 8.9 11.5 15.0 (3 Economies) Figure – Dealing with Construction Permits in Nicaragua and comparator economies – Ranking and Score DB 2019 Dealing with Construction Permits Score 0 100 71.05: Costa Rica (Rank: 74) 68.77: Colombia (Rank: 89) 66.76: Panama (Rank: 108) 63.48: Regional Average (Latin America & Caribbean) 51.82: El Salvador (Rank: 173) 46.58: Nicaragua (Rank: 177) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Figure – Dealing with Construction Permits in Nicaragua – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 2.5 200 Cost (% of warehouse value) 2 150 Time (days) 1.5 100 1 50 0.5 0 0 1 *2 3 4 5 *6 7 8 9 10 11 12 * 13 14 15 16 17 18 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 11 Doing Business 2019 Nicaragua Figure – Dealing with Construction Permits in Nicaragua and comparator economies – Measure of Quality 15 11.0 11.0 Index score 10.0 10 9.0 8.9 5 3.5 0 Nicaragua Colombia Costa Rica El Salvador Panama Latin America & Caribbean Details – Dealing with Construction Permits in Nicaragua – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain a soil test study 18 days USD 2,200 Agency : Instituto Nicaragüense de Estudios Territoriales According to Article 27 (f) of Reglamento de Permiso de construcción para el Área del Municipio de Managua – Reg No 2996-R/F 858897, a soil study is a requirement by law. This is to ensure that the foundation of the building is solid since Nicaragua is a country with seismic activity. The engineer must understand the suitability of the soil for the proposed construction work. Soil test allows to build a solid foundation and avoid structures to be damaged or collapsed or leaned. 2 Obtain a topographical survey of the land 11 days USD 700 Agency : Private Engineer Build Co. needs to obtain the topographical survey for the site plan design. 3 Request and obtain consultations with Municipality of Managua (Alcaldía 7 days no charge de Managua - ALMA) about the urban plans Agency : Municipality of Managua (Alcaldía de Managua – ALMA) It is common practice to have an initial consultation with the Technical Urban Planning Committee (Comité Técnico Urbanístico) to verify all conditions before submitting any document. The board will open a file for the building permit if it is considered feasible. If BuildCo does not agree with the decision, an appeal may be filed with the Technical Urban Planning Committee (Comité Técnico Urbanístico). 4 Request and obtain the land use certificate (constancia de uso de suelo) 30 days NIO 500 from the Municipality of Managua Agency : Municipality of Managua (Alcaldía de Managua – ALMA) Once the file and the decision are obtained, a record number is created (to be used for the following procedures until the project is approved). The documents to be submitted at this stage are an application form, a copy of the location map, a site map, and the cadastral number of the property. 5 Request feasibility analysis from ENACAL 15 days NIO 5,000 Agency : ENACAL Upon the reception of the certificate for land use, a feasibility analysis from ENACAL is required to determine whether the site can be connected to water and sewerage services. If no sewage system exists, an alternative would be a treatment system approved by the MARENA (Environmental Impact Assessment, Ministry of the Environment and Natural Resources). Measurement of pressures at each coupling point - NIO 2,000 Gauging sewage in each probably discharge point: NIO 3,000 Total = 5,000 The costs are based on Resolution No. CD-RT-028-2008 published in Official Gazette No. 212 of November 4, 2008 The documents to be submitted are an application form, the land use certificate, a project description (physical modulation and activities), a plot plan on a scale of 1:10,000, the water demand and use statement, and specifications of the inflow rate and the sewage characteristics. The ENACAL approval certificate covers the project conceptualization and indicates that the project is compliant with the standards and regulations. The required documents are a project identification title page, topographic maps, an urban development plan, an existing infrastructure plan, design drawings, detail drawings, and a descriptive report. Page 12 Doing Business 2019 Nicaragua 6 Request feasibility analysis from DISNORTE-DISSUR 7 days no charge Agency : DISNORTE-DISSUR In parallel, regarding electrical connection, a feasibility analysis from DISNORTE- DISSUR is required to determine whether the site can be connected to the electrical network. The following documents are needed: the (original) location map, a specification of the electrical capacity to be installed, and the estimated start date of construction work. Moreover, DISNORTE-DISSUR provides a review, design approval, and authorization, and issues a decision stating that the proposed project conforms with the Manual of Norms of Construction of Distribution (Manual de Normas de Construcción de Distribución), the electrical power supply company. The following documents are required: • Design license • Electrical specifications • Stack-out sheet • List of materials • Project drawings • Photocopy of the electrical power and light contract • Photocopy of the feasibility certificate 7 Request and obtain preliminary design approval from the Municipality of 25 days NIO 1,000 Managua Agency : Municipality of Managua (Alcaldía de Managua – ALMA) BuildCo must obtain an approval stating that the proposed preliminary designs conform to the Regulating Plan of the Municipality of Managua and to the land-use certificate. The required documents are the land-use certificate; a notarized deed certifying ownership of the land; the feasibility analyses by the Nicaraguan Institute of Energy (INE) and the Nicaraguan Company of Water and Sewage (ENACAL); a local fault study endorsed by the Nicaraguan Institute of Territorial Studies INETER, if required by the land use certificate; and two sets of maps, each consisting of a location map on a scale of 1:10,000 (a site map on a scale of 1:10,000, 1:500, or 1:200 and a contour map); an architectural layout; exterior work drawings; and area frames. 8 Request and obtain project approval at the Municipality of Managua 30 days NIO 3,902 Agency : Municipality of Managua (Alcaldía de Managua – ALMA) A project approval is a decision stating that the project conforms to the Regulating Plan of the Municipality of Managua. The fee for obtaining the approval is NIO 3.00 per sq. m., and payment can be made either in cash or in two equal installments. The required documents are three sets of plans and the approved preliminary designs. The following documents are required: Letter of request for service Public deed duly registered Preliminary Design approved Two sets of plans Memory calculation of the drainage system Detailed Project Budget Detailed Project Programming Technical approval issued by ENACAL and UNION FENOSA 9 Request and obtain approval from Dirección General de Bomberos (DGB) 15 days USD 650 Agency : Dirección General de Bomberos (DGB) Upon the approval from the municipality, BuildCo. can engage in the electric part of the construction. is granted.Indoor electrical layout drawings must be reviewed and be found to conform to all fire protection standards. For construction projects with commercial and service purposes, the fee is US$ 0.50 per sq. m. (15-05-13 La Gaceta-Diario Oficial) The required documents are electrical installation layouts, fire protection system plans, safety measures, or plans provided for the construction work. Because the national firefighting system (SINACOI) no longer exists, the institution in charge of this procedure is now Dirección General de Bomberos (DGB). Page 13 Doing Business 2019 Nicaragua 10 Request and obtain building permit from the Municipality of Managua 20 days NIO 40,947 Agency : Municipality of Managua (Alcaldía de Managua – ALMA), One-Stop Shop The building permit authorizes the start of construction. The cost of a building permit includes a tax of 1.1% of the total market value of the construction. This tax must be paid in full at the start of construction work. Buildings are also subject to an inspection fee, as follows: -NIO 2.00 per sq. m. for areas from 101 to 200 sq. m. -NIO 3.00 per sq. m. for areas from 201 to 1,000 sq. m. -NIO 4.00 per sq. m. for areas from 1,001 sq m and above (in the case considered here, NIO 4.00 x 1,300.6 = NIO 5202.4). Therefore, 1.1%* warehouse value + 4 * sq m. = NIO 29,648.4 The required documents are a project approval, an annual real estate tax (solvencia de bienes inmuebles), the registration number with ALMA (the business registration), a tax clearance certificate (solvencia municipal) for the project owner and builder, a builder’s license granted by the Ministry of Transportation and Infrastructure (Ministerio de Transporte e Infraestructura, MTI), the builder's signature on the construction plans, bank guarantees, and official payment receipts. The building permit carries the same weight as a public deed. Inspections may occur during construction. However, these are rare due to a shortage of inspectors. Even if an inspection is carried out, the inspector would simply verify that the building permit is valid. 11 Request fire inspection 1 day no charge Agency : Dirección General de Bomberos (DGB) The cost of a fire and electricity inspection is included in the inspection fee, which is paid at the Dirección General de Bomberos (DGB). A site visit may be scheduled, but it is not a rigid procedure. 12 Request and connect to water and sewage services 45 days NIO 20,000 Agency : ENACAL (Empresa Nicaraguense de Acueductos y Alcantarillados), Municipality of Managua (Alcaldía de Managua – ALMA) According to Resolution No. CD-RT-028-2008 published in Official Gazette No. 212 of November 4, 2008 ("Norma para el Desarrollo de Proyectos de Agua Potable y Alcantarillado Sanitario de Centros Residenciales, Industriales y Comerciales") the cost associated to review and approval of designs of industrial developments is NIO 17,000. Moreover,the installation cost is approximately NIO 3000. This cost can be higher or lower depending on a possible rupture of pipelines. Receive fire inspection 1 day no charge 13 Agency : Dirección General de Bomberos (DGB) Fire inspection is conducted in parallel with water and sewage request. 14 Receive inspection from the Municipality of Managua 1 day no charge Agency : Municipality of Managua (Alcaldía de Managua – ALMA) The municipal inspection is a random inspection that may occur at least once during the 30-week construction period. Thus, no request is needed. An inspection report is drafted and provided to BuildCo. The construction work is not stopped during the inspection, and no costs are associated with this procedure. 15 Receive inspection from the Ministry of Labor 1 day no charge Agency : Ministry of Labor Inspection by the Ministry of Labor is a random inspection that may occur at least once during the 30-week construction period. Thus, no request is needed. An inspection report is drafted and provided to the company. The construction work is not stopped during the inspection, and no costs are associated with this procedure. 16 Receive inspection from the General Directorate of Hygiene and 1 day no charge Occupational Safety of Ministry of Labor Agency : General Directorate of Hygiene and Occupational Safety of Ministry of Labor Inspection from the General Directorate of Hygiene and Occupational Safety of Ministry of Labor is a random inspection that may occur at least once during the 30-week construction period. Thus, no request is needed. An inspection report is drafted and provided to the company. The construction is not stopped during the inspection, and no costs are associated with this procedure. 17 Receive inspection from the National Social Security Institute 1 day no charge Agency : National Social Security Institute Inspection by the National Social Security Institute is a random inspection that may occur at least once during the 30-week construction period. Thus, no request is needed. An inspection report is drafted and provided to the company. The construction work is not stopped during the inspection, and no costs are associated with this procedure. Page 14 Doing Business 2019 Nicaragua 18 Register the building with the Real Estate Appraisal Office 15 days no charge Agency : Real Estate Appraisal Office (Avalúo de Bienes Inmuebles), Municipality of Managua (Alcaldía de Managua – ALMA) As a final step, BuildCo. register the new warehouse in the Real Estate Agency. Takes place simultaneously with previous procedure. Page 15 Doing Business 2019 Nicaragua Details – Dealing with Construction Permits in Nicaragua – Measure of Quality Answer Score Building quality control index (0-15) 3.5 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; 1.0 Free of charge. Which requirements for obtaining a building permit are clearly specified in the building List of required 1.0 regulations or on any accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in Licensed 1.0 compliance with existing building regulations? (0-1) architect; Licensed engineer. Quality control during construction index (0-3) 0.0 What types of inspections (if any) are required by law to be carried out during construction? Unscheduled 0.0 (0-2) inspections. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 0.0 inspections are not always done in practice during construction; Mandatory inspections are done most of the time during construction. Quality control after construction index (0-3) 0.0 Is there a final inspection required by law to verify that the building was built in accordance Final inspection 0.0 with the approved plans and regulations? (0-2) is not required by law. Do legally mandated final inspections occur in practice? (0-1) Final inspection 0.0 does not always occur in practice. Liability and insurance regimes index (0-2) 0.5 Which parties (if any) are held liable by law for structural flaws or problems in the building Architect or 0.5 once it is in use (Latent Defect Liability or Decennial Liability)? (0-1) engineer; Owner or investor. Which parties (if any) are required by law to obtain an insurance policy to cover possible No party is 0.0 structural flaws or problems in the building once it is in use (Latent Defect Liability Insurance required by law or Decennial Insurance)? (0-1) to obtain insurance . Professional certifications index (0-4) 0.0 What are the qualification requirements for the professional responsible for verifying that the University degree 0.0 architectural plans or drawings are in compliance with existing building regulations? (0-2) in architecture or engineering. What are the qualification requirements for the professional who supervises the construction University degree 0.0 on the ground? (0-2) in engineering, construction or construction management. Page 16 Doing Business 2019 Nicaragua Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection To make the data comparable across economies, several assumptions about the (number) warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining The warehouse: all necessary clearances and permits - Is owned by a local entrepreneur and is used for storage of goods. • Completing all required notifications and - Is located in the economy’s largest business city. For 11 economies the data are receiving all necessary inspections also collected for the second largest business city. • Obtaining external installation works and possibly - Is located in an area where similar warehouses are typically located and is in an purchasing material for these works area with no physical constraints. For example, the property is not near a railway. - Is a new construction and is being connected to electricity for the first time. • Concluding any necessary supply contract and - Has two stories with a total surface area of approximately 1,300.6 square meters obtaining final supply (14,000 square feet). The plot of land on which it is built is 929 square meters Time required to complete each procedure (10,000 square feet). (calendar days) The electricity connection: • Is at least 1 calendar day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed • Each procedure starts on a separate day capacity of 140-kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 • Does not include time spent gathering kilowatt (kW). information - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution network and is either overhead or underground, whichever is more • Reflects the time spent in practice, with little common in the area where the warehouse is located and requires works that involve follow-up and no prior contact with officials the crossing of a 10-meter road (such as by excavation or overhead lines) but are all Cost required to complete each procedure (% of carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road. income per capita) - Does not require work to install the internal wiring of the warehouse. This has • Official costs only, no bribes already been completed up to and including the customer’s service panel or • Value added tax excluded switchboard and the meter base. The reliability of supply and transparency of The monthly consumption: tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 • Duration and frequency of power outages (0–3) p.m. (8 hours a day), with equipment utilized at 80% of capacity on average and that • Tools to monitor power outages (0–1) there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest • Regulatory monitoring of utilities’ performance supplier. (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation • Financial deterrents limiting outages (0–1) purposes only 30 days are used. • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor the ranking on the ease of getting electricity. Page 17 Doing Business 2019 Nicaragua Getting Electricity - Nicaragua Standardized Connection Price of electricity (US cents per kWh) 33.7 Name of utility DISNORTE - DISSUR City Covered Managua Indicator Nicaragua Latin America OECD high Best Regulatory & Caribbean income Performance Procedures (number) 6 5.5 4.5 3 (25 Economies) Time (days) 55 65.5 77.2 18 (3 Economies) Cost (% of income per capita) 838.7 946.3 64.2 0.0 (3 Economies) Reliability of supply and transparency of tariff 4 4.3 7.5 8.0 (27 Economies) index (0-8) Figure – Getting Electricity in Nicaragua and comparator economies – Ranking and Score DB 2019 Getting Electricity Score 0 100 86.65: Panama (Rank: 30) 85.10: Costa Rica (Rank: 38) 75.77: Colombia (Rank: 80) 71.24: El Salvador (Rank: 97) 70.59: Regional Average (Latin America & Caribbean) 68.39: Nicaragua (Rank: 110) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Page 18 Doing Business 2019 Nicaragua Figure – Getting Electricity in Nicaragua – Procedure, Time and Cost Time (days) Cost (% of income per capita) 900 50 800 Cost (% of income per capita) 700 40 600 Time (days) 30 500 400 20 300 200 10 100 0 0 1 *2 3 *4 5 6 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Figure – Getting Electricity in Nicaragua and comparator economies – Measure of Quality 8 7 7 7 6 6 6 Index score 5 4.3 4 4 3 2 1 0 Nicaragua Colombia Costa Rica El Salvador Panama Latin America & Caribbean Page 19 Doing Business 2019 Nicaragua Details – Getting Electricity in Nicaragua – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Submit informal application to DISNORTE-DISSUR to establish feasibility of 7 calendar days NIO 0 project Agency : DISNORTE - DISSUR The customer submits a first informal application to DISNORTE-DISSUR indicating the required electricity load and the location of the business that is to be connected. The Planning Department of the utility will prepare a feasibility study based on its own plans for the primary distribution lines in Managua and the existing demand in the system. No inspection of the site is necessary if the connection point is within 150 meters. 2 Obtain compliance certificate for internal wiring from Fire Department 7 calendar days USD 155 Agency : Direcciòn General de Bomberos The customer has to obtain a certification of the internal wiring installations from the Fire Department. The Fire Department (Dirección General de Bomberos ) certifies that the internal wiring has been done in accordance with the relevant standards for buildings as specified by the ""Norma CIEN"" (Código de instalaciones Eléctricas de Nicaragua). This certification has to be obtained before applying for a new electricity connection with the utility. In order to prepare the certification of the internal wiring the Fire Department (Dirección General de Bomberos ) will visit the site. 3 Submit design and service application to DISNORTE-DISSUR and await 21 calendar days NIO 0 approval Agency : DISNORTE - DISSUR The customer submits the service application together with the designs in person. The following documents have to accompany the application: • Name, address and telephone number of the applicant • Photocopy of national identity card or power of attorney • Photocopy of the property title or rental contract • Inspection certificate from the Fire Department indicating that the internal wiring installation complies with the norms established by the CIEN (Código de instalaciones Eléctricas de Nicaragua). • Photocopy of the social security number or business registration number of the customer (RUC - Registro único del contribuyente) • Photocopy of the company registration of the firm (used to assess which electricity tariff is applicable). DISNORTE-DISSUR has a list of approved firms that will realize the design of the actual connection works. In order to be part of the list, firms have to be approved every year by the utility. In most cases the design is done by the same firm that also will later do the works. The utility will also approve the designs that have been prepared by the approved firm and work hand in hand with the executing firm. 4 Receive site inspection by DISNORTE-DISSUR for design approval 1 calendar day NIO 0 Agency : DISNORTE - DISSUR The utility inspects the site to approve the design 5 Await completion of connection works by private firm 18 calendar days USD 17,025 Agency : Contratista Privado The works are done according to the relevant standards. They can be done either by a construction firm or an approved electrical design firm. The customer can decide who he wants to delegate the works to. The works are supervised by the technical department of the utility. 6 Sign supply contract and receive meter installation and electricity flow 8 calendar days NIO 20,855.61 Agency : DISNORTE - DISSUR Once the works are finalized, the meter and metering accessories are installed by the distribution utility and remain property of the utility. The meter is installed in a location that can be accessed from outside the premise of the customer for inspections and meter reading. Otherwise the customer has to given a written consent that the distribution utility can enter the premise. The customer has to deposit a security that is calculated on the basis of one month of the future consumption of the customer. The security deposit is returned with interest (average deposit rate in the country) after 18 months if the customer had no late payment in this period. Takes place simultaneously with previous procedure. Page 20 Doing Business 2019 Nicaragua Details – Getting Electricity in Nicaragua – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 4 Total duration and frequency of outages per customer a year (0-3) 0 System average interruption duration index (SAIDI) 73.7 System average interruption frequency index (SAIFI) 39.6 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of Yes supply? Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages No exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online http://www.ine.gob.ni /DGE/tarifasdge/201 7/12/pt_diciembre_2 017_MT1.pdf Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 21 Doing Business 2019 Nicaragua Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on To make the data comparable across economies, several assumptions about the immovable property (number) parties to the transaction, the property and the procedures are used. • Preregistration procedures (for example, The parties (buyer and seller): checking for liens, notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). - Are located in the periurban area of the economy’s largest business city. For 11 • Registration procedures in the economy's largest economies the data are also collected for the second largest business city. business city. - Are 100% domestically and privately owned. • Postregistration procedures (for example, filling - Have 50 employees each, all of whom are nationals. title with municipality) - Perform general commercial activities. Time required to complete each procedure The property (fully owned by the seller): (calendar days) - Has a value of 50 times income per capita, which equals the sale price. • Does not include time spent gathering - Is fully owned by the seller. information - Has no mortgages attached and has been under the same ownership for the past • Each procedure starts on a separate day - 10 years. though procedures that can be fully completed - Is registered in the land registry or cadastre, or both, and is free of title disputes. online are an exception to this rule - Is located in a periurban commercial zone, and no rezoning is required. - Consists of land and a building. The land area is 557.4 square meters (6,000 • Procedure is considered completed once final square feet). A two-story warehouse of 929 square meters (10,000 square feet) is document is received located on the land. The warehouse is 10 years old, is in good condition, has no • No prior contact with officials heating system and complies with all safety standards, building codes and legal requirements. The property, consisting of land and building, will be transferred in its Cost required to complete each procedure (% of entirety. property value) - Will not be subject to renovations or additional construction following the purchase. - Has no trees, natural water sources, natural reserves or historical monuments of • Official costs only (such as administrative fees, duties and taxes). any kind. - Will not be used for special purposes, and no special permits, such as for • Value Added Tax, Capital Gains Tax and illicit residential use, industrial plants, waste storage or certain types of agricultural payments are excluded activities, are required. - Has no occupants, and no other party holds a legal interest in it. Quality of land administration index (0-30) • Reliability of infrastructure index (0-8) • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 22 Doing Business 2019 Nicaragua Registering Property - Nicaragua Indicator Nicaragua Latin America OECD high Best Regulatory & Caribbean income Performance Procedures (number) 9 7.2 4.7 1 (4 Economies) Time (days) 56 63.3 20.1 1 (New Zealand) Cost (% of property value) 6.0 5.8 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 6.5 11.9 23.0 None in 2017/18 Figure – Registering Property in Nicaragua and comparator economies – Ranking and Score DB 2019 Registering Property Score 0 100 74.36: Costa Rica (Rank: 47) 71.22: Colombia (Rank: 59) 66.32: El Salvador (Rank: 73) 65.18: Panama (Rank: 81) 55.25: Regional Average (Latin America & Caribbean) 47.19: Nicaragua (Rank: 155) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Figure – Registering Property in Nicaragua – Procedure, Time and Cost Time (days) Cost (% of property value) 3.5 50 3 Cost (% of property value) 40 2.5 Time (days) 2 30 1.5 20 1 10 0.5 0 0 1 *2 3 4 5 *6 7 8 9 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 23 Doing Business 2019 Nicaragua Figure – Registering Property in Nicaragua and comparator economies – Measure of Quality 30 25 Index score 20 17.5 16.5 15 14.0 11.0 11.9 10 6.5 5 0 Nicaragua Colombia Costa Rica El Salvador Panama Latin America & Caribbean Details – Registering Property in Nicaragua – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain a non-encumbrance certificate ("Libertad de gravamen") from Land 5 days NIO 150; (NIO 100 registry (simple non- Agency : Land registry (Registro Público de la Propiedad Inmueble y Mercantil) encumbrance The non-encumbrance certificate ("certificado de libertad de gravamen") is an official certificate) + NIO 50 document that lists all encumbrances tied to a particular immovable property, and the (for annotation of last successive list of owners of that property since its first annotation or since the time that property transfer).) the petitioner requests. The certificate must be obtained by the seller before before notarizing the sale and purchase agreement. Additionally, anyone can request a "certificado de historia registral" (cost NIO 150 + NIO 50 for every additional past transaction), which lists all previous transactions related to the property, and therefore contains the list of all owners since its first registration. 2 Obtain tax clearance from the Municipality (Solvencia Municipal) 1 day NIO 20 Agency : Municipality A tax clearance certificate ("Solvencia Municipal") must be obtained by the seller from the municipality. The registered time of 1 day assumes that the seller is up-to-date with tax payments on the property, and that he pays a fee of NIO 20. If he were to wait till the next business day to obtain it, it would be free of charge. This certificate is valid for one year. 3 A notary prepares and signs the public deed 2 days NIO 56,866.78; (1.5 – Agency : Notary 2.0% of property A notary public prepares the sale and purchase agreement and notarizes it as a public value (notary’s fees)) deed. The preparation of the deed is an exclusive act of the notary. The notary will review all past transactions from the record book on the Land Registry with the documents obtained above, to verify the ownership of the property. Additionally, he will request the (i) non-encumbrance certificate; (ii) tax clearance certificate; (iii) cadastral certificate; (iv) cadastral valuation; and (v) payment receipt of the Property Transfer Tax. In practice, the notaries estimate their fees for this type of contract based on a percentage of the property value, which varies between 1.5 and 2% according to agreement between the parties and notary. 4 Obtain the Cadastre certificate at INETER 14 days NIO 500 Agency : National Cadaster (Dirección Catastro Físico del INETER) INETER is the national cadaster and is in charge of surveying the land and keeping a database of plots and boundaries. This certificate is necessary to obtain the cadaster valuation at the DGI 5 Obtain Cadastre valuation at the DGI 18 days NIO 50 Agency : Fiscal Cadaster (Catastro Fiscal, Dirección General de Ingresos) Parties must obtain the Cadaster Certificate and request a valuation from an inspector. In practice, the Cadaster requires a special power granted to notaries or any other person when the interested parties cannot realize this Procedure. The parties can go to the Cadaster directly, in which case they do not need to present a special power. The Cadaster requests to see original property title (of the Seller). In case a special power is needed, the costs rise about NIO 2,000 as the fees for the person who will go to the Cadaster, and NIO 1,000 for the notary who will previously authorize and issue the special power. 6 Inspector visits property to assess value 2 days NIO 20 Agency : Fiscal Cadaster (Catastro fiscal - Direccion General de Ingresos) After the cadastral certificate is obtained, an inspector visits the property to assess the value. In practice, one picks up the inspector and drives him/her to the property. It will take the inspector about one week to write the report on the value. Page 24 Doing Business 2019 Nicaragua 7 Payment of Income/Transfer Tax 1 day NIO 97,509.91; (In Agency : Tax agency (Administracion de Rentas - Direccion General de Ingresos) accordance with Art. The Income/Transfer Tax to the Tax Administration Office depends on the Cadaster value 87 ‘Alicuota del of the plot. The Cadaster value generally is not the same as the market price. For payment impuesto’ of the Tax of transfer taxes, the fiscal authority takes as a base of calculation the highest value Covenant law between the sale price in the public deed of purchase or the Cadastral value. Then, Number 891 of 2014, according to the value, a different rate will apply (the tax follows a progressive scheme). the following Additionally, it will be necessary to pay fees of NIO 4 + 2 stamps of NIO 10. withholding rates for transfer of property In accordance with Art. 87 ‘Alicuota del impuesto’ of the Tax Covenant law Number 891 shall apply: 1% for of 2014, fee scheme for the Property Transfer Tax is: 1% for properties with a value properties with a between USD 0.01 and USD 50,000.00, 2% for values between USD 50,000.01 and USD value between USD 100,000.00; 3% for values between USD 100,000.01 and USD 200,000; and 4% for 1.00 and USD values above USD 200,000.01. 50,000.00, 2% for values between USD 50,000.01 and USD 100,000.00 and 3% for values between USD 100,000.01 and USD 200,000.00 and 4% for values above USD 200,001. Fees of NIO 4 + 2 stamps of NIO 10 need to be paid to make the payment.) 8 Apply for registration of the public deed at the Land Registry 15 days NIO 39,494.36; (1% Agency : Land Registry (Registro Público de la Propiedad Inmueble y Mercantil ) of cadastral value Parties submit the public deed at the Land Registry for registration. The fee for this (registration fee) + procedure is calculated based on 1% of the cadastral value, with a maximum fee of NIO NIO 500 (Notary’s 30,000 and a minimum of NIO 100. This payment is made directly in the branch of a fees) + 20% of the commercial bank that is located inside the Land Registry Office. The notary applying for registration fee for the registration will charge NIO 500 as fees. At submission, the request for transfer is expedited Procedure) recorded manually in books, signaling priority rights over the property. When finalized, the Land registry will write down in the original deed, the book and page where the transfer has been recorded. This document is then returned to the notary with all the other certificates provided. The Land registry operates with paper documents. However, deeds are being scanned by the Land Registry in Managua. In the rest of the departments in the country, records are not always accessible digitally. Newer transactions (less than 1 year) are not always digitized. Any person can access past deeds with computers at the Land registry at no cost. It is possible to track the status of the deed registration online through the website: www.registropublico.gob.ni/servicios/consultatramite.aspx. 9 Apply for name change at Municipality 1 day no charge Agency : Municipal cadastre The new owner should update the records at the municipal cadaster in order to update ownership records as to determine the new taxpayer for the Property Tax. It is not compulsory to carry out this procedure, but common in practice. Takes place simultaneously with previous procedure. Page 25 Doing Business 2019 Nicaragua Details – Registering Property in Nicaragua – Measure of Quality Answer Score Reliability of infrastructure index (0-8) 0.0 What is the institution in charge of immovable property registration? Land Registry (Registro Público de la Propiedad Inmueble y Mercantil) In what format are the majority of title or deed records kept in the largest business city—in a Paper 0.0 paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions No 0.0 and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Cadastral Office (Instituto Nicaraguense de Estudios Territoriales INETER, Dirección del Catastro Físico) In what format are the majority of maps of land plots kept in the largest business city—in a Paper 0.0 paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing No 0.0 cadastral information (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral Separate 0.0 or mapping agency kept in a single database, in different but linked databases or in separate databases databases? Do the immovable property registration agency and cadastral or mapping agency use the No 0.0 same identification number for properties? Transparency of information index (0–6) 3.0 Who is able to obtain information on land ownership at the agency in charge of immovable Freely accessible 1.0 property registration in the largest business city? by anyone Is the list of documents that are required to complete any type of property transaction made Yes, online 0.5 publicly available–and if so, how? Link for online access: http://www.registr opublico.gob.ni/S ervicios/Inscripci on/BienesInmueb les/Default.aspx http://www.registr opublico.gob.ni/M onoX/Pages/New sDetails.aspx? newsid=e7a194b b-c666-4bb5- b0f8- a45300c7e342 Is the applicable fee schedule for any property transaction at the agency in charge of Yes, online 0.5 immovable property registration in the largest business city made publicly available–and if so, how? Page 26 Doing Business 2019 Nicaragua Link for online access: http://www.poderj udicial.gob.ni/pju pload/registros/p df/rg_gaceta01.p df http://www.registr opublico.gob.ni/Fi les/PDF/MarcoLe gal/Leyes/Ley- 920-Tasas- Registros- Publicos.pdf http://www.poderj udicial.gob.ni/pju pload/sgc/pdf/20 17_18.PDF Does the agency in charge of immovable property registration commit to delivering a legally No 0.0 binding document that proves property ownership within a specific time frame–and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that No 0.0 occurred at the agency in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the No 0.0 immovable property registration agency? Number of property transfers in the largest business city in 2017: Who is able to consult maps of land plots in the largest business city? Only 0.0 intermediaries (notaries, lawyers, etc.) Is the applicable fee schedule for accessing maps of land plots made publicly available— Yes, on public 0.5 and if so, how? boards Link for online access: Does the cadastral or mapping agency commit to delivering an updated map within a Yes, online 0.5 specific time frame—and if so, how does it communicate the service standard? Link for online access: https://tramites.in eter.gob.ni/ Is there a specific and separate mechanism for filing complaints about a problem that No 0.0 occurred at the cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.0 Are all privately held land plots in the economy formally registered at the immovable property No 0.0 registry? Are all privately held land plots in the largest business city formally registered at the No 0.0 immovable property registry? Are all privately held land plots in the economy mapped? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Land dispute resolution index (0–8) 3.5 Does the law require that all property sale transactions be registered at the immovable Yes 1.5 property registry to make them opposable to third parties? Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Is there a specific compensation mechanism to cover for losses incurred by parties who Yes 0.5 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a property Yes 0.5 transaction (e.g., checking the compliance of contracts with requirements of the law)? Page 27 Doing Business 2019 Nicaragua If yes, who is responsible for checking the legality of the documents? Registrar; Notary; Does the legal system require verification of the identity of the parties to a property Yes 0.5 transaction? If yes, who is responsible for verifying the identity of the parties? Registrar; Notary; Is there a national database to verify the accuracy of identity documents? No 0.0 For a standard land dispute between two local businesses over tenure rights of a property The Civil District worth 50 times gross national income (GNI) per capita and located in the largest business Court city, what court would be in charge of the case in the first instance? How long does it take on average to obtain a decision from the first-instance court for such a More than 3 0.0 case (without appeal)? years Are there any statistics on the number of land disputes in the first instance? No 0.0 Number of land disputes in the largest business city in 2017: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 28 Doing Business 2019 Nicaragua Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of • Rights of borrowers and lenders through indicators. The depth of credit information index measures rules and practices collateral laws (0-10) affecting the coverage, scope and accessibility of credit information available • Protection of secured creditors’ rights through through a credit registry or a credit bureau. The strength of legal rights index bankruptcy laws (0-2) measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first Depth of credit information index (0–8) determined whether a unitary secured transactions system exists. Then two case • Scope and accessibility of credit information scenarios, case A and case B, are used to determine how a nonpossessory security distributed by credit bureaus and credit registries interest is created, publicized and enforced according to the law. Special emphasis (0-8) is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest In some economies the legal framework for secured transactions will allow only case credit bureau as a percentage of adult population A or case B (not both) to apply. Both cases examine the same set of legal provisions Credit registry coverage (% of adults) relating to the use of movable collateral. • Number of individuals and firms listed in credit Several assumptions about the secured borrower (ABC) and lender (BizBank) registry as a percentage of adult population are used: - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 29 Doing Business 2019 Nicaragua Getting Credit - Nicaragua Indicator Nicaragua Latin America OECD high Best Regulatory & Caribbean income Performance Strength of legal rights index (0-12) 2 5.4 6.1 12 (5 Economies) Depth of credit information index (0-8) 8 4.9 6.7 8 (42 Economies) Credit registry coverage (% of adults) 21.7 14.6 21.8 100.0 (4 Economies) Credit bureau coverage (% of adults) 59.5 44.5 65.3 100.0 (25 Economies) Figure – Getting Credit in Nicaragua and comparator economies – Ranking and Score DB 2019 Getting Credit Score 0 100 95.00: Colombia (Rank: 3) 85.00: Costa Rica (Rank: 12) 80.00: Panama (Rank: 22) 80.00: El Salvador (Rank: 22) 51.56: Regional Average (Latin America & Caribbean) 50.00: Nicaragua (Rank: 99) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Figure – Legal Rights in Nicaragua and comparator economies 12 10 9 8 8 7 6 5.4 Index Score 5 4 3 2 2 1 0 Nicaragua Colombia Costa Rica El Salvador Panama Latin America & Caribbean Page 30 Doing Business 2019 Nicaragua Details – Legal Rights in Nicaragua Strength of legal rights index (0-12) 2 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and No enforcement of functional equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without No requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a No specific description of collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and No replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be No secured between parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by Yes asset type, with an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed No online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency Yes procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? No Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization No procedure? Does the law protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow No the secured creditor to sell the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Nicaragua and comparator economies 8 8 8 7 7 7 7 6 Index Score 4.9 5 4 3 2 1 0 Nicaragua Colombia Costa Rica El Salvador Panama Latin America & Caribbean Page 31 Doing Business 2019 Nicaragua Details – Credit Information in Nicaragua Depth of credit information index (0-8) Credit Credit Score bureau registry Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and Yes No 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes No 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes Yes 1 By law, do borrowers have the right to access their data in the credit bureau or Yes Yes 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes Yes 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help Yes No 1 banks and financial institutions assess the creditworthiness of borrowers? Total Score ("yes" to either public bureau or private registry) 8 Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 2,411,454 879,607 Number of firms 11,234 5,636 Total 2,422,688 885,243 Percentage of adult population 59.5 21.7 Page 32 Doing Business 2019 Nicaragua Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Review and To make the data comparable across economies, a case study uses several approval requirements for related-party assumptions about the business and the transaction. transactions; Disclosure requirements for related- party transactions The business (Buyer): • Extent of director liability index (0–10): Ability - Is a publicly traded corporation listed on the economy’s most important stock of minority shareholders to sue and hold exchange. If there are fewer than ten listed companies or if there is no stock interested directors liable for prejudicial related- exchange in the economy, it is assumed that Buyer is a large private company with party transactions; Available legal remedies multiple shareholders. (damages, disgorgement of profits, fines, - Has a board of directors and a chief executive officer (CEO) who may legally act on imprisonment, rescission of the transaction) behalf of Buyer where permitted, even if this is not specifically required by law. • Ease of shareholder suits index (0–10): - Has a supervisory board in economies with a two-tier board system on which Mr. Access to internal corporate documents; James appointed 60% of the shareholder-elected members. Evidence obtainable during trial and allocation of - Has not adopted bylaws or articles of association that go beyond the minimum legal expenses requirements. Does not follow codes, principles, recommendations or guidelines that are not mandatory. • Extent of conflict of interest regulation index - Is a manufacturing company with its own distribution network. (0–10): Simple average of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two • Extent of shareholder rights index (0-10): directors to Buyer’s five-member board. Shareholders’ rights and role in major corporate - Mr. James also owns 90% of Seller, a company that operates a chain of retail decisions hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-10): - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Governance safeguards protecting shareholders Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price from undue board control and entrenchment is equal to 10% of Buyer’s assets and is higher than the market value. - The proposed transaction is part of the company’s principal activity and is not • Extent of corporate transparency index (0-10): outside the authority of the company. Corporate transparency on ownership stakes, - Buyer enters into the transaction. All required approvals are obtained, and all compensation, audits and financial prospects required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0– - The transaction causes damages to Buyer. Shareholders sue Mr. James and the 10): Simple average of the extent of shareholders executives and directors that approved the transaction. rights, extent of ownership and control and extent of corporate transparency indices • Strength of minority investor protection index (0–10): Simple average of the extent of conflict of interest regulation and extent of shareholder governance indices Page 33 Doing Business 2019 Nicaragua Protecting Minority Investors - Nicaragua Indicator Nicaragua Latin America OECD high Best Regulatory & Caribbean income Performance Extent of disclosure index (0-10) 1.0 4.1 6.5 10 (13 Economies) Extent of director liability index (0-10) 5.0 5.2 5.3 10 (Cambodia) Ease of shareholder suits index (0-10) 6.0 6.7 7.3 10 (Djibouti) Extent of shareholder rights index (0-10) 4.0 5.4 6.4 10 (Kazakhstan) Extent of ownership and control index (0-10) 1.0 3.2 5.4 None in 2017/18 Extent of corporate transparency index (0-10) 4.0 3.9 7.6 10 (6 Economies) Figure – Protecting Minority Investors in Nicaragua and comparator economies – Ranking and Score DB 2019 Protecting Minority Investors Score 0 100 75.00: Colombia (Rank: 15) 51.67: Panama (Rank: 99) 48.33: Costa Rica (Rank: 122) 47.50: Regional Average (Latin America & Caribbean) 38.33: El Salvador (Rank: 161) 35.00: Nicaragua (Rank: 168) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Figure – Protecting Minority Investors in Nicaragua and comparator economies – Measure of Quality Nicaragua 4 5 1 1 4 6 Colombia 6 7 9 9 6 8 Costa Rica 3 5 5 4 4 8 El Salvador 6 0 3 1 6 7 Panama 6 4 4 1 8 8 OECD high income 7.4 5.5 6.5 5.2 6.3 7.4 Latin America & Caribbean 4.2 5.4 4.4 3.5 5.6 6.5 0 5 10 15 20 25 30 35 40 45 50 Sub-Indicator Score Extent of corporate transparency index (0-10) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-10) Extent of shareholder rights index (0-10) Ease of shareholder suits index (0-10) Page 34 Doing Business 2019 Nicaragua Details – Protecting Minority Investors in Nicaragua – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-10) 4 Extent of disclosure index (0-10) 1.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Shareholders or 1.0 board of directors including interested parties Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) No disclosure 0.0 obligation Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) No disclosure 0.0 obligation Must Buyer immediately disclose the transaction to the public? (0-2) No disclosure 0.0 obligation Extent of director liability index (0-10) 5.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the Yes 1.0 transaction caused to Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0- Liable if negligent 1.0 2) Can shareholders hold the other directors liable for the damage the transaction caused to Liable if negligent 1.0 Buyer (0-2) Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by Yes 1.0 shareholders? (0-1) Must Mr. James repay profits made from the transaction upon a successful claim by No 0.0 shareholders? (0-1) Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Voidable if 1.0 negligently concluded Ease of shareholder suits index (0-10) 6.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the Yes 1.0 transaction documents? (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying No 0.0 specific ones? (0-1) Can the plaintiff directly question the defendant and witnesses at trial? (0-2) No 0.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) Yes 1.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-10) 3.0 Extent of shareholder rights index (0-10) 4.0 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of Yes 1.0 shareholders? Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new No 0.0 shares? Page 35 Doing Business 2019 Nicaragua Must shareholders approve the election and dismissal of the external auditor? No 0.0 Are changes to the rights of a class of shares only possible if the holders of the affected No 0.0 shares approve? Assuming that Buyer is a limited company, does the sale of 51% of its assets require Yes 1.0 member approval? Assuming that Buyer is a limited company, can members representing 10% call for a No 0.0 meeting of members? Assuming that Buyer is a limited company, must all or almost all members consent to add a No 0.0 new member? Assuming that Buyer is a limited company, must a member first offer to sell their interest to No 0.0 the existing members before they can sell to non-members? Extent of ownership and control index (0-10) 1.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of No 0.0 directors? Must the board of directors include independent and nonexecutive board members? No 0.0 Can shareholders remove members of the board of directors without cause before the end Yes 1.0 of their term? Must the board of directors include a separate audit committee exclusively comprising board No 0.0 members? Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of No 0.0 Buyer? Must Buyer pay declared dividends within a maximum period set by law? No 0.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? No 0.0 Assuming that Buyer is a limited company, must Buyer have a mechanism to resolve No 0.0 disagreements among members? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to No 0.0 all shareholders upon acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer distribute profits within a maximum No 0.0 period set by law? Extent of corporate transparency index (0-10) 4.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? No 0.0 Must Buyer disclose information about board members’ primary employment and No 0.0 directorships in other companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? No 0.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting Yes 1.0 agenda? Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Assuming that Buyer is a limited company, must members meet at least once a year? No 0.0 Assuming that Buyer is a limited company, can members representing 5% put items on the Yes 1.0 meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual financial statements be No 0.0 audited by an external auditor? Page 36 Doing Business 2019 Nicaragua Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2018 covering for the Paying Taxes indicator calendar year 2017 (January 1, 2017 – December 31, 2017). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in Using a case scenario, Doing Business records taxes and mandatory contributions a 2017 (number per year adjusted for electronic medium size company must pay in a year, and measures the administrative burden and joint filing and payment) of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of filing and payments, time taken to comply with tax • Total number of taxes and contributions paid or laws, time taken to comply with the requirements of postfiling processes and time withheld, including consumption taxes (value waiting. added tax, sales tax or goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2016. Time required to comply with 3 major taxes It produces ceramic flowerpots and sells them at retail. All taxes and contributions (hours per year) recorded are paid in the second year of operation (calendar year 2017). Taxes and • Collecting information, computing tax payable mandatory contributions are measured at all levels of government. • Preparing separate tax accounting books, if The VAT refund process: required - In June 2017, TaxpayerCo. makes a large capital purchase: the value of the • Completing tax return, filing with agencies machine is 65 times income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are • Arranging payment or withholding equally expensed per month (875 times income per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred in June will be Total tax and contribution rate (% of commercial profits) fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will • Profit or corporate income tax exceed Output VAT in June 2017. • Social contributions, labor taxes paid by The corporate income tax audit process: employer - An error in calculation of income tax liability (for example, use of incorrect tax • Property and property transfer taxes depreciation rates, or incorrectly treating an expense as tax deductible) leads to an • Dividend, capital gains, financial transactions incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. taxes discovered the error and voluntarily notified the tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax liability • Waste collection, vehicle, road and other taxes due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. Postfiling Index • Time to comply with a VAT refund (hours) • Time to obtain a VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 37 Doing Business 2019 Nicaragua Paying Taxes - Nicaragua Indicator Nicaragua Latin America OECD high Best Regulatory & Caribbean income Performance Payments (number per year) 43 27.1 11.2 3 (Hong Kong SAR, China) Time (hours per year) 201 330.0 159.4 49 (Singapore) Total tax and contribution rate (% of profit) 60.6 46.7 39.8 26.1% (32 Economies) Postfiling index (0-100) 52.55 47.04 84.41 None in 2017/18 Figure – Paying Taxes in Nicaragua and comparator economies – Ranking and Score DB 2019 Paying Taxes Score 0 100 77.99: Costa Rica (Rank: 57) 77.30: El Salvador (Rank: 62) 60.49: Regional Average (Latin America & Caribbean) 57.85: Colombia (Rank: 146) 52.69: Nicaragua (Rank: 160) 46.68: Panama (Rank: 174) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Figure – Paying Taxes in Nicaragua and comparator economies – Measure of Quality 100 87.15 80 Index score 60 52.55 48.17 49.54 47.04 40 20 12.84 0 Nicaragua Colombia Costa Rica El Salvador Panama Latin America & Caribbean Page 38 Doing Business 2019 Nicaragua Details – Paying Taxes in Nicaragua Tax or Payments Notes on Time Statutory Tax base Total tax Notes on mandatory (number) Payments (hours) tax rate and TTCR contribution contribution rate (% of profit) Employer 12.0 76.0 19% gross salaries 21.43 paid - Social security contributions Turnover tax 12.0 1% sales 17.68 (purchase cost) Corporate 1.0 online 63.0 30% taxable 17.30 income tax income Employer 12.0 2% gross salaries 2.26 paid - Training tax Real estate 1.0 1% property 1.19 tax value Capital Gains 1.0 10% land value 0.51 tax on property sale Tax on 1.0 10% interest 0.26 interest income income Vehicle Tax 1.0 0.0 fixed amount weight of the 0.02 truck Value added 0.0 online and 62.0 15% value added 0.00 not included tax (VAT) jointly Employee 0.0 jointly 6.25% gross salaries 0.00 withheld paid - Social security contributions Fuel tax 1.0 0.6985% fuel 0.00 small amount consumption Minimum tax 1.0 online 1% turnover 0.00 included in other taxes Totals 43 201 60.6 Page 39 Doing Business 2019 Nicaragua Details – Paying Taxes in Nicaragua – Tax by Type Taxes by type Answer Profit tax (% of profit) 17.3 Labor tax and contributions (% of profit) 23.7 Other taxes (% of profit) 19.6 Page 40 Doing Business 2019 Nicaragua Details – Paying Taxes in Nicaragua – Measure of Quality Answer Score Postfiling index (0-100) 52.55 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? Yes Restrictions on VAT refund process none Percentage of cases exposed to a VAT audit (%) 50% - 74% Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) 54.0 0 Time to obtain a VAT refund (weeks) 42.6 23.95 Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 0% - 24% Time to comply with a corporate income tax correction (hours) 9.0 86.24 Time to complete a corporate income tax correction (weeks) No tax audit per 100 case study scenario Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 41 Doing Business 2019 Nicaragua Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are or border handling in origin economy recorded as 22×24=528 hours). If customs clearance takes 7.5 hours, the data are • Obtaining, preparing and submitting documents recorded as is. Alternatively, suppose documents are submitted to a customs agency required by destination economy and any transit at 8:00a.m., are processed overnight and can be picked up at 8:00a.m. the next day. economies The time for customs clearance would be recorded as 24 hours because the actual • Covers all documents required by law and in procedure took 24 hours. practice, including electronic submissions of Cost: Insurance cost and informal payments for which no receipt is issued are information excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors Border compliance are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Contributors are private sector • Customs clearance and inspections experts in international trade logistics and are informed about exchange rates. • Inspections by other agencies (if applied to more than 20% of shipments) Assumptions of the case study: - For all 190 economies covered by Doing Business, it is assumed a shipment is in a • Handling and inspections that take place at the warehouse in the largest business city of the exporting economy and travels to a economy’s port or border warehouse in the largest business city of the importing economy. - It is assumed each economy imports 15 metric tons of containerized auto parts (HS Domestic transport 8708) from its natural import partner—the economy from which it imports the largest • Loading or unloading of the shipment at the value (price times quantity) of auto parts. It is assumed each economy exports the warehouse or port/border product of its comparative advantage (defined by the largest export value) to its • Transport between warehouse and port/border natural export partner—the economy that is the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while - The mode of transport is the one most widely used for the chosen export or import shipment is en route product and the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 42 Doing Business 2019 Nicaragua Trading across Borders - Nicaragua Indicator Nicaragua Latin America OECD high Best Regulatory & Caribbean income Performance Time to export: Border compliance (hours) 72 61.9 12.5 1 (19 Economies) Cost to export: Border compliance (USD) 240 529.8 139.1 0 (19 Economies) Time to export: Documentary compliance (hours) 48 52.5 2.4 1 (26 Economies) Cost to export: Documentary compliance (USD) 47 110.4 35.2 0 (20 Economies) Time to import: Border compliance (hours) 72 62.6 8.5 0 (25 Economies) Cost to import: Border compliance (USD) 400 647.2 100.2 0 (28 Economies) Time to import: Documentary compliance (hours) 16 79.1 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 86 116.3 24.9 0 (30 Economies) Figure – Trading across Borders in Nicaragua and comparator economies – Ranking and Score DB 2019 Trading Across Borders Score 0 100 89.76: El Salvador (Rank: 44) 85.47: Panama (Rank: 57) 79.32: Costa Rica (Rank: 73) 76.99: Nicaragua (Rank: 85) 69.15: Regional Average (Latin America & Caribbean) 61.83: Colombia (Rank: 133) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Figure – Trading across Borders in Nicaragua – Time and Cost Time (hours) Cost (USD) 80 72 72 450 400 70 400 60 350 Time (hours) Cost (USD) 48 300 50 240 250 40 200 30 150 20 16 86 100 47 10 50 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 43 Doing Business 2019 Nicaragua Details – Trading across Borders in Nicaragua Characteristics Export Import Product HS 09 : Coffee, tea, matï and spices HS 8708: Parts and accessories of motor vehicles Trade partner United States Japan Border Puerto Corinto Corinto port Distance (km) 153 153 Domestic transport time (hours) 4 4 Domestic transport cost (USD) 611 611 Details – Trading across Borders in Nicaragua – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required 12.0 150.0 by customs authorities Export: Clearance and inspections required 48.0 0.0 by agencies other than customs Export: Port or border handling 24.0 90.0 Import: Clearance and inspections required 72.0 270.0 by customs authorities Import: Clearance and inspections required 0.0 0.0 by agencies other than customs Import: Port or border handling 72.0 129.8 Page 44 Doing Business 2019 Nicaragua Details – Trading across Borders in Nicaragua – Trade Documents Export Import Phytosanitary certificate Customs Import Declaration Export License Commercial Invoice Export Customs Declaration Packing List Bill of lading Fiscal Solvency Commercial invoice Bill of Lading Certificate of Origin SOLAS certificate Terminal handling receipt SOLAS certificate Certificate of Quality Page 45 Doing Business 2019 Nicaragua Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the The dispute in the case study involves the breach of a sales contract between 2 courts (calendar days) domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt • Time to file and serve the case enforcement. • Time for trial and to obtain the judgment To make the data comparable across economies, Doing Business uses several • Time to enforce the judgment assumptions about the case: Cost required to enforce a contract through the - The dispute concerns a lawful transaction between two businesses (Seller and courts (% of claim) Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. • Attorney fees - The buyer orders custom-made goods, then fails to pay alleging that the goods are • Court fees not of adequate quality. - The value of the dispute is 200% of the income per capita or the equivalent in local • Enforcement fees currency of USD 5,000, whichever is greater. - The seller sues the buyer before the court with jurisdiction over commercial cases Quality of judicial processes index (0-18) worth 200% of income per capita or $5,000. • Court structure and proceedings (-1-5) - The seller requests the pretrial attachment of the defendant’s movable assets to secure the claim. • Case management (0-6) - The dispute on the quality of the goods requires an expert opinion. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. • Alternative dispute resolution (0-3) - The seller enforces the judgment through a public sale of the buyer’s movable assets. Page 46 Doing Business 2019 Nicaragua Enforcing Contracts - Nicaragua Standardized Case Claim value NIO 146,256 Court name Managua Local Civil Court City Covered Managua Indicator Nicaragua Latin America OECD high Best Regulatory & Caribbean income Performance Time (days) 490 768.5 582.4 None in 2017/18 Cost (% of claim value) 26.8 31.4 21.2 None in 2017/18 Quality of judicial processes index (0-18) 6.5 8.5 11.5 None in 2017/18 Figure – Enforcing Contracts in Nicaragua and comparator economies – Ranking and Score DB 2019 Enforcing Contracts Score 0 100 58.58: Nicaragua (Rank: 87) 55.30: El Salvador (Rank: 109) 53.39: Regional Average (Latin America & Caribbean) 53.33: Costa Rica (Rank: 121) 47.11: Panama (Rank: 147) 34.29: Colombia (Rank: 177) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Figure – Enforcing Contracts in Nicaragua – Time and Cost Time (days) Cost (% of claim value) 1400 1288 45.8 50 Cost (% of claim value) 1200 38.0 40 Time (days) 1000 31.4 852 816 768.5 26.8 790 30 800 24.3 19.2 582.4 21.2 600 490 20 400 10 200 0 0 Colombia Costa El Latin Nicaragua OECD Panama Rica Salvador America high & income Caribbean Page 47 Doing Business 2019 Nicaragua Figure – Enforcing Contracts in Nicaragua and comparator economies – Measure of Quality Nicaragua 2.5 0.5 0 3.5 Colombia 2.5 1.5 1.5 3.5 Costa Rica 2.5 2.5 0.5 3 El Salvador 2.5 2 0.5 3 Panama 2.5 1 0 3.5 OECD high income 2.5 3.1 2.3 3.6 Latin America & Caribbean 2.4 2.1 0.9 3.5 0 2 4 6 8 10 12 14 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Nicaragua Indicator Time (days) 490 Filing and service 60 Trial and judgment 230 Enforcement of judgment 200 Cost (% of claim value) 26.8 Attorney fees 16.3 Court fees 5.5 Enforcement fees 5 Quality of judicial processes index (0-18) 6.5 Court structure and proceedings (-1-5) 3.5 Case management (0-6) 0.5 Court automation (0-4) 0.0 Alternative dispute resolution (0-3) 2.5 Page 48 Doing Business 2019 Nicaragua Details – Enforcing Contracts in Nicaragua – Measure of Quality Answer Score Quality of judicial processes index (0-18) 6.5 Court structure and proceedings (-1-5) 3.5 1. Is there a court or division of a court dedicated solely to hearing commercial cases? No 0.0 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 0.5 1. Time standards 0.5 1.a. Are there laws setting overall time standards for key court events in a civil Yes case? 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? No 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be No granted? 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to No 0.0 disposition report; (ii) clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the No 0.0 competent court? 5. Are there any electronic case management tools in place within the competent court for No 0.0 use by judges? 6. Are there any electronic case management tools in place within the competent court for No 0.0 use by lawyers? Court automation (0-4) 0.0 1. Can the initial complaint be filed electronically through a dedicated platform within the no 0.0 competent court? 2. Is it possible to carry out service of process electronically for claims filed before the No 0.0 competent court? 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 0.0 4.a Are judgments rendered in commercial cases at all levels made available to the No general public through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme No court level made available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 1. Arbitration 1.5 Page 49 Doing Business 2019 Nicaragua 1.a. Is domestic commercial arbitration governed by a consolidated law or Yes consolidated chapter or section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public No order or public policy—that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes 2. Mediation/Conciliation 1.0 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or Yes consolidated chapter or section of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation No (i.e., if mediation or conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 50 Doing Business 2019 Nicaragua Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s - The value of the hotel is 100% of the income per capita or the equivalent in local estate) currency of USD 200,000, whichever is greater. - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s • Measured as percentage of estate value real estate. The hotel cannot pay back the loan, but makes enough money to • Court fees operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to • Lawyers’ fees judicial liquidation and reorganization proceedings and the extent to which best • Assessors’ and auctioneers’ fees insolvency practices have been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 51 Doing Business 2019 Nicaragua Resolving Insolvency - Nicaragua Indicator Nicaragua Latin America OECD high Best Regulatory & Caribbean income Performance Recovery rate (cents on the dollar) 35.8 30.9 70.5 None in 2017/18 Time (years) 2.2 2.9 1.7 0.4 (Ireland) Cost (% of estate) 14.5 16.8 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going 0 .. .. .. concern) Strength of insolvency framework index (0-16) 7.0 7.1 11.9 None in 2017/18 Figure – Resolving Insolvency in Nicaragua and comparator economies – Ranking and Score DB 2019 Resolving Insolvency Score 0 100 67.40: Colombia (Rank: 40) 45.63: El Salvador (Rank: 89) 41.13: Nicaragua (Rank: 106) 39.59: Panama (Rank: 113) 38.91: Regional Average (Latin America & Caribbean) 34.53: Costa Rica (Rank: 134) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Figure – Resolving Insolvency in Nicaragua – Time and Cost Time (years) Cost (% of estate) 4 30 3.5 3.5 25.0 Cost (% of estate) 3.0 25 2.9 3 Time (years) 2.5 20 2.5 16.8 2.2 14.5 14.5 2 1.7 12.0 1.7 15 1.5 8.5 9.3 10 1 5 0.5 0 0 Colombia Costa El Latin Nicaragua OECD Panama Rica Salvador America high & income Caribbean Page 52 Doing Business 2019 Nicaragua Figure – Resolving Insolvency in Nicaragua and comparator economies – Measure of Quality Nicaragua 2 2 3 0 Colombia 5.5 3 1 0.5 Costa Rica 2 3 1 0 El Salvador 4 2 3 0 Panama 3 2.5 2 0.5 OECD high income 5.3 2.8 2.2 1.9 Latin America & Caribbean 3.7 2.4 1.9 0.8 0 2 4 6 8 10 12 14 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Nicaragua and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 100 80 67.2 60 40 35.8 32.5 29.3 30.9 27.1 20 0 Nicaragua Colombia Costa Rica El Salvador Panama Latin America & Caribbean Page 53 Doing Business 2019 Nicaragua Details – Resolving Insolvency in Nicaragua Indicator Answer Score Proceeding foreclosure As a secured creditor, the bank will face only one option: a judicial foreclosure proceeding. In Nicaragua, banks prefer the foreclosure judicial track in order to request the sale of the assets used as collateral in satisfaction of the secure lending. It is not possible to start a reorganization procedure in Nicaragua. The foreclosure proceeding would start by the creditor filing a claim before the court requesting the sale of the property used as a collateral. The debtor will have the opportunity to counter-claim. After that an approval to initiate foreclosure will be handed down by the Court and an order to set up an auction will be issued. Once the time allocated by law for appeal lapses the auction would take place and the sale of debtor’s real estate will occur. The sale in public auction shall be validated by the court. Outcome piecemeal sale As a result of the foreclosure proceeding, the hotel will cease operations and its assets will be sold separately. The foreclosure will take place based on article 66 of Law No. 561. Time (in years) 2.2 The foreclosure procedure in Nicaragua will take approximately 2.2 years until the debt is fully paid from the moment of the debtor's default until the debt is repaid to the secured creditor. It will take 1 year until the approval to initiate foreclosure is handed down by the Court including all required notifications and the debtor’s counter-claim. Henceforward, it will take 1 years for the auction to take place (including the necessary time to appoint an auctioneer, the scheduling of the auction and the sale of the real estate). There hasn’t been any improvements in the time to resolve foreclosure cases in the last 5 years. Cost (% of 14.5 The cost for a foreclosure proceeding will amount to approximately 14.5% of the value of Mirage’s estate) estate. The main component of this expenditure would be the attorney’s fees, which would amount 8% of the value of Mirage’s estate and the auctioneer’s fees, which will amount 4%. The rest will include notification and other judicial costs (0.25%), expenses related to the auction (0.25%) and fees of other professionals (2%). Recovery rate 35.8 (cents on the dollar) Page 54 Doing Business 2019 Nicaragua Details – Resolving Insolvency in Nicaragua – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 7.0 Commencement of proceedings index (0-3) 2.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (b) Debtor may 0.5 file for liquidation only Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a 0.5 creditor may file for liquidation only What basis for commencement of the insolvency proceedings is allowed under the (a) Debtor is 1.0 insolvency framework? generally unable to pay its debts as they mature Management of debtor's assets index (0-6) 2.0 Does the insolvency framework allow the continuation of contracts supplying essential goods No 0.0 and services to the debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome No 0.0 contracts? Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after No 0.0 commencement of insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 0.0 Which creditors vote on the proposed reorganization plan? N/A 0.0 Does the insolvency framework require that dissenting creditors in reorganization receive at No 0.0 least as much as what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, No 0.0 does each class vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 3.0 Does the insolvency framework require approval by the creditors for selection or Yes 1.0 appointment of the insolvency representative? Does the insolvency framework require approval by the creditors for sale of substantial Yes 1.0 assets of the debtor? Does the insolvency framework provide that a creditor has the right to request information No 0.0 from the insolvency representative? Does the insolvency framework provide that a creditor has the right to object to decisions Yes 1.0 accepting or rejecting creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 55 Doing Business 2019 Nicaragua Labor Market Regulation Doing Business presents detailed data for the labor market regulation indicators on the Doing Business website (http://www.doingbusiness.org). The report does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the (i) whether fixed-term contracts are prohibited for worker and the business are used. permanent tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the The worker: probationary period; (iv) minimum wage. - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. Working hours - Is a full-time employee. (i) maximum number of working days allowed per - Is not a member of the labor union, unless membership is mandatory. week; (ii) premiums for work: at night, on a weekly rest day and overtime; (iii) whether there are The business: restrictions on work at night, work on a weekly rest - Is a limited liability company (or the equivalent in the economy). day and for overtime work; (iv) whether - Operates a supermarket or grocery store in the economy’s largest business city. nonpregnant and nonnursing women can work For 11 economies the data are also collected for the second largest business city. same night hours as men; (v) length of paid annual - Has 60 employees. leave. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the food retail sector and they apply even to firms that are not party to them. Redundancy rules - Abides by every law and regulation but does not grant workers more benefits than (i) whether redundancy can be basis for terminating those mandated by law, regulation or (if applicable) collective bargaining workers; (ii) whether employer needs to notify agreements. and/or get approval from third party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments due when terminating a redundant worker. Job quality (i) whether law mandates equal remuneration for work of equal value and nondiscrimination based on gender in hiring; (ii) whether law mandates paid or unpaid maternity leave; (iii) length of paid maternity leave; (iv) whether employees on maternity leave receive 100% of wages; (v) availability of five fully paid days of sick leave a year; (vi) eligibility requirements for unemployment protection. Page 56 Doing Business 2019 Nicaragua Labor Market Regulation - Nicaragua Details – Labor Market Regulation in Nicaragua Answer Hiring Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) No limit Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage applicable to the worker assumed in the case study (US$/month) 238.7 Ratio of minimum wage to value added per worker 0.9 Maximum length of probationary period (months) 1.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 0.0 Premium for work on weekly rest day (% of hourly pay) 100.0 Premium for overtime work (% of hourly pay) 100.0 Restrictions on night work? Yes Whether nonpregnant and nonnursing women can work the same night hours as men Yes Restrictions on weekly holiday? Yes Restrictions on overtime work? Yes Paid annual leave for a worker with 1 year of tenure (working days) 30.0 Paid annual leave for a worker with 5 years of tenure (working days) 30.0 Paid annual leave for a worker with 10 years of tenure (working days) 30.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 30.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? No Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure 0.0 Notice period for redundancy dismissal for a worker with 5 years of tenure 0.0 Notice period for redundancy dismissal for a worker with 10 years of tenure 0.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 0.0 Severance pay for redundancy dismissal for a worker with 1 year of tenure 4.3 Page 57 Doing Business 2019 Nicaragua Severance pay for redundancy dismissal for a worker with 5 years of tenure 18.8 Severance pay for redundancy dismissal for a worker with 10 years of tenure 21.7 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 14.9 Job quality Equal remuneration for work of equal value? No Gender nondiscrimination in hiring? Yes Paid or unpaid maternity leave mandated by law? Yes Minimum length of maternity leave (calendar days)? 84.0 Receive 100% of wages on maternity leave? Yes Five fully paid days of sick leave a year? No Unemployment protection after one year of employment? No Minimum contribution period for unemployment protection (months)? n.a. Page 58 Doing Business 2019 Nicaragua Business Reforms in Nicaragua In the past year, Doing Business observed a peaking of reform activity worldwide. From June 2, 2017, to May 1, 2018, 128 economies implemented a record 314 regulatory reforms improving the business climate. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. = Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2019 Getting Credit: Nicaragua strengthened access to credit by establishing a new unified collateral registry. DB2018 Enforcing Contracts: Nicaragua made enforcing contracts easier by adopting a new code of civil procedure that introduces stricter case management rules. DB2017 Trading across Borders: Nicaragua made trading across borders more expensive by introducing a new security fee, increasing the cost of border compliance for exporting and importing. DB2015 Starting a Business: Nicaragua made starting a business easier by combining multiple registration procedures. Getting Credit: Nicaragua improved access to credit information by starting to provide credit scores to banks and financial institutions. DB2014 Starting a Business: Nicaragua made starting a business easier by merging the procedures for registering with the revenue authority and with the municipality and by reducing the time required for incorporation. Getting Electricity: Nicaragua reduced the time required for getting electricity by increasing efficiency in granting approval of the connection design and by informing the customer in advance what the amount of the security deposit will be. DB2012 Registering Property: Nicaragua made transferring property more efficient by introducing a fast-track procedure for registration. Paying Taxes: Nicaragua made paying taxes easier for companies by promoting electronic filing and payment of the major taxes, an option now used by the majority of taxpayers. Enforcing Contracts: Nicaragua raised the monetary threshold for commercial claims that can be brought to the Managua local civil court, leaving lower-value claims in the local courts, where proceedings are simpler and faster. DB2011 Paying Taxes: Nicaragua increased taxes on firms by raising social security contribution rates and introducing a 10% withholding tax on the gross interest accrued from deposits. It also improved electronic payment of taxes through bank transfer. Trading across Borders: Nicaragua expedited trade by migrating to a new electronic data interchange system for customs, setting up a physical one-stop shop for exports and investing in new equipment at the port of Corinto. Page 59 Doing Business 2019 Nicaragua Page 60