Taxes on winnings (Nicaragua)

Taxation of winnings (Nicaragua)

Brief conclusion

In Nicaragua, there is a 10% withholding from the source from winnings (lotteries, draws, bingo, etc.), and prizes up to C $50,000 are exempt. The withheld tax is considered final (retención definitiva).

Historically, 10% is charged on prizes in raffles/lotteries; in current tax (DGI) clarifications this qualifies as earnings/" ganancias de capital "from prizes with a 10% deduction.

For wins above the threshold, the operator/promoter withholds 10% until the prize is paid and transfers it to the DGI.

Legal basis

Base: the deduction regime for prizes in Nicaragua has developed since the norms of 10% for draws/reefs (historical norm).

Adjustment of threshold and withholding: The Regulation to the Tax Equality Act (Ley 453/LEF) explicitly states: any National Lottery prize above C $50,000 is subject to a withholding of 10% until payment.

Current DGI Position: On DGI pages, lottery/contest wins refer to capital gains; retention rate - 10%; prizes ≤ C $50,000 - exempt.

💡 Note: Framework Tax Reconciliation Act - Ley 822 and its reforms describe the overall IR/deduction system; the specifics of the prizes are confirmed by the DGI regulations and explanations.

What is taxed and who holds

Object: cash and clothing prizes from lotteries, draws, bingo and similar format; in DGI practice, this qualifies as ganancias de capital.

Exemption threshold: up to C $50,000 (inclusive) - no deduction. Over C $50,000 - 10% deduction for the entire amount of the prize (according to the regulatory norm about "retención en la fuente 10% previa al pago").

Who holds: the organizer/operator (for example, the Lottery National or another authorized organizer) who lists the withholding in the DGI.

How to count "on hand"

1. Prize C $40,000 → ≤ C $50,000 → tax 0 → payable C $40,000.

2. Prize C $120,000 →> C $50,000 → withholding 10% of C $120,000 = C $12,000 → payable C $108,000. (DGI treats the hold as final.)

Lotteries vs. other games

For state/licensed lotteries, the described threshold and retention mode applies.

For other prizes/bets, the tax practice also refers to 10% as "retención definitiva" by ganancias de capital. Old and methodical DGI/CIAT materials mention 10% on prizes and betting winnings as a common benchmark.

Residents, non-residents, declaration

Individual residents: if the tax is withheld from the source, it is final - as a rule, additional declaration is not required for this amount.

Non-residents: Withholding at source is also applied by the arranger when paid domestically (general IR logic on Nicaraguan source income). Confirmation of IR mode - in Ley 822/summary explanations.

If withholding is not made (e.g. offshore winnings): formally income may fall under IR as Nicaraguan resident income; in practice, the question rests on the mechanism of retention and confirmation of the source of income. A conservative approach is recommended - to take into account potential taxability and keep evidence of the tax status of the prize. (Justification - overall IR design + DGI prize position.)

Frequent questions

What is the threshold for lottery prizes?

C$50 000. Below is liberation; above - 10% withholding until payout.

Is 10% retention an advance or final?

For prizes (ganancias de capital) - "retención definitiva": withholding is considered the final tax.

Who lists the tax?

Operator/organizer of the drawing/lottery (including the National Lottery) - he holds and transfers to the DGI.

And if the winnings are not in money (thing, car)?

Clothing prizes are also considered prizes; in DGI this is treated as income/capital gain to which a 10% deduction calculated at the value of the prize applies.

How with offshore sites?

Retention in Nicaragua will not work automatically because there is no source-agent within the country. But a resident may incur an IR obligation as income; Confirm the regime with the accountant, taking into account the source of income/double taxation. (General IR regimen and DGI practice by prize.)

Context and compliance

Operators paying prizes are subject to AML/CFT (Ley 977 as amended 2024), are required to identify the recipient, withhold/remit tax and keep documentation. This is important for large prizes and cross-border payments.

Now in Nicaragua there is an understandable bunch: the threshold of C $50,000 and a retention rate of 10% for prizes (lotteries/draws and similar formats), while the organizer holds and it is final. For offshore winnings, questions of actual source/withholding remain, but IR tax logic allows taxation of resident income at a verifiable source. To minimize risks, keep documents about the winnings and, if necessary, consult with a local tax specialist.

Sources used

DGI (Dirección General de Ingresos): FAQ on income classification and on "ganancias y pérdidas de capital" with retención definitiva 10% and exemption up to C $50,000.

Regulation to Ley 453 (LEF): Mandatory retención en la fuente 10% norm for lottery prizes over C $50,000 before payout.

Historical 10% norm for draws/reefs: confirmation of the tradition of taxing prizes.

Ley 822 frame and reforms: general IR and withholding construction applicable to revenues from Nicaraguan source.

CIAT/DGI Materials at 10% for Prizes and Bet Wins (Context): Overview Presentation.

Relevance dates: DGI norms and clarifications are used in revisions and publications available as of October 09, 2025; key AML framework updates - September 2024 (Ley 977 as amended).