Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 70-97

1970-1 C.B. 159

Sec. 901

IRS Headnote

The taxes imposed by the Government of Nicaragua under Article 1 of Decree No. 55, December 16, 1952, and Article 121 of Decree No. 1067, March 10, 1965, are creditable foreign taxes.

Full Text Rev. Rul. 70-97

Article 1 of Nicaragua's Decree No. 55 of December 16, 1952, as amended (Decreto Legislativo No. 55 del 16 de Diciembre de 1952) imposes a tax on all income originating in Nicaragua. Income is defined in Article 2 to include all income derived from property existing in that country, from services rendered within the National Territory, and from business conducted in, or producing effects in, Nicaragua regardless of the place of business where income is received. Article 121 of Decree No. 1067, dated March 10, 1965 (Decreto No. 1067 del 20 de Marzo -1965- "Ley Especial sobre Exploracion y Explotacion de Minas y Canteras"), provides, in part, that the holders of exploration and exploitation concessions must pay taxes on the participation of the State in industrial and commercial profits but that such tax shall take the place of the income tax.

Held, the taxes imposed by the described Article 1 and Article 121 are allowable as credits against United States income tax under section 901 of the Internal Revenue Code of 1954, subject to the limitations of section 904 of the Code.