FREE TRADE ZONE (FTZ

Regulatory Framework of Free Trade Zone (FTZ):

46-91 “Law on Industrial Export Free Trade Zones,” ( 1991).
50-2005 “Regulations for the Decree on Industrial Export Free Trade Zones,” (2005).

Concepts:

Free Trade Zone: All areas in the national territory, without resident population, under the supervision of the General Directorate of Customs Services, and subject to special customs controls and declared as such by the Executive Branch.

Free Trade Zones should be considered as located outside of the national territory for tax purposes, subject to the periods of tax exemption defined in Decree No. 46-91 and its Regulations, Decree No. 50-2005. The Zones may be situated in any part of the national territory, except in protected areas or national parks. The respective Executive Order shall establish specific locations, dimensions and boundaries thereon.

The primary objective of FTZs is to foster investment and exports by establishing and operating companies that manufacture and export goods or services under special tax and customs regimes.

FTZs shall operate outside national customs territory, subject to exemptions. Raw materials or goods imported by FTZ Companies shall be duty-free.

Prior to operations start-up, FTZ perimeter shall be fully enclosed so that customs entry points shall be the only means of ingress. The remainder of the Zone shall be subject to the same controls and surveillance.

Tenant Companies : Any business or industrial or service company that has been authorized by the National Commission on Free Trade Zones to operate inside of a Free Trade Zone (within a Free Trade Zone Industrial Park) will be considered a Free Trade Zone TENANT company. Only those companies that are dedicated to producing and exporting goods or services, as specified in their respective Operating Permit, will be considered eligible to operate in a Zone. Tenant Companies are classified as Producers of Goods or Suppliers of Services.

Those companies that are dedicated to industrializing agricultural-livestock or forestry products (of high aggregate value) for export are also considered Tenant Companies.

All Free Trade Zone TENANT Companies should be constituted as a Commercial Corporation or Trading Company, as specified in Nicaraguan legislation, with the SOLE OBJECTIVE of conducting company operations within the Zone. Foreign corporations may operate through subsidiaries or subdivisions duly registered in the country, with the same restriction regarding their OBJECTIVE. All TENANT Companies will be subject to the laws of the Republic of Nicaragua.

Free Trade Zone Operating Company: A company organized as a Commercial Corporation, according to Nicaraguan laws, and whose sole objective is developing and administering a free trade zone industrial park that operates as part of the Free Trade Zone System. In other words, the business of an operating company is to rent constructed industrial floor space to tenant companies.

Foreign corporations may function as operating companies through subsidiaries or subdivisions duly registered in the country, with the same restriction regarding their objective. All Operating Companies will be subject to the laws of the Republic of Nicaragua, and their objective will be promoting investment and exports through setting up and operating different companies dedicated to producing and exporting goods or services in a free trade zone, under an exonerated tax and customs system.

CAFTA-DR and FTZs

CAFTA – DR was ratified by the Nicaraguan National Assembly in October, 2005. This historic agreement creates the second largest free trade zone in Latin America for U.S. exports. Once implemented, CAFTA – DR will eliminate eighty percent of the tariffs immediately, with the remaining tariffs phased out over 10 years.

CAFTA – DR makes Nicaragua an attractive platform to export to the US.

Under this treaty, Nicaragua enjoys unique market access and tariff preference levels (TPL). Nicaragua is the only country covered in the pact to receive the TPL benefit, which means that up to 100 million square meters equivalents (SME) of fabric coming from any part of the world may be used to assemble garments in Nicaragua that will enjoy tariff-free access to the U.S.

According to World Trade Organization (WTO) requirements, Nicaragua will be one of the few countries in the world to offer fiscal incentives to exporters after 2008.

Herdocia & Garcia Abogados offer a specialize service in the establishing Free Trade Zone Tenant Companies or Free Trade Zone Operations Companies in Nicaragua.

Our services:

Conformation of the commercial corporation or trading company.
Registration of foreign corporations.
Project presentation and handling of all pertinent documents to the National Commission on Free Trade Zones (CNZF).
Leasing contracts.
Legal representation.
Strategic and technical advice on complying with and benefiting by the U.S. - Central America Free Trade Agreement - Dominican Republic (CAFTA-DR) as well as other free trade agreements ratified by Nicaragua.

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