Fiscal Incentives

Incentives and Protection of Foreign Investment

The Republic of El Salvador has implemented many reforms, in order to create incentives for foreign investment. The country’s strategy is to position itself as the regional leader for foreign investment.

What laws regulate incentives and protection of foreign investments?

Renewable Energy Incentives Law

  • Customs duties exemption on imports of machinery, equipment and materials for 10 years. 
  • Income tax exemption for a period of 5 to 10 years.
  • Total tax exemption on revenues from the sale of Certified Emission. Reductions.
  • Full exemption from special contributions for major taxpayers for security.

International Services Law

  • Total exemption of income tax, municipal taxes and the real estate transfer tax for the acquisition of real estate to be used in theauthorized activity.
  • Free entry of machinery, equipment, tools, spare parts, accessories and other goods necessary for the promoted activity.
 
Tourism Law

  • Full exemption from taxes on the transfer of real-estate property, for the acquisition of real estate intended for the project.
  • Full exemption from customs duties on the import of goods, equipment and accessories, machinery, vehicles, aircrafts or maritime vessels and construction materials used for buildings until the completion of the project.
  • Full exemption from income tax for a period of 10 years, starting in the fiscal year in which the business begins operations.
  • Partial exemption from municipal taxes (up to 50%) for a period of 5 years, starting in the fiscal year in which the business begins operations.
 
Investment Law
 
Equal treatment to national & international investors Liberty to transfer funds and profits abroad Access to local financing Law of Legal Stability for Investments Guarantees legal certainty to investors on taxes, customs and immigration issues, for a period of up to 20 years depending on the amount of the investment. Applies for an amount greater than or equal to USD1,283,597.4 in new investment projects or the expansion of existing investments. 
 
 
Public Private Partnership Law (PPP)

Establishes the legal framework for development of Public-Private Partnership projects for the provision of infrastructure, public services or activities of interest.

  • The minimum value of the project for opting for PPP is 45 thousand times the minimum salary for trade and services (USD 365.00), which is equivalent to USD 16,425,000.
  • The maximum term of the contract is 40 years.
  • Private initiative regime: any investor can propose projects to public institutions, which is declared of national interest. It will be submitted to public bidding. In this procedure, there are advantages for the competitor who originally proposed the initiative.

Commercial and Industrial Free Zone Law

  • Total exemption from income tax, municipal taxes and real estate transfer tax for the acquisition of real estate to be used in the authorizedactivity.
  • Free entry of machinery, equipment, tools and other necessary goods for the promoted activity, including raw materials, parts, pieces,components or elements and other goods necessary for the authorized activity.

 

El Salvador has industrial spaces that stand out for their strategic location and easy access to competitive infrastructure. 

The declared Free Zones Are:

Santa Ana, Las Mercedes, Free Zone 10, EXPORTSALVA, PIPIL, SAM-LI, American Park,  Santa Tecla, San José, San Marcos, San Bartolo, Santo Tomás,  Internacional Free Zone, MIRAMAR, El Pedregal, Concordia Industrial Park and Calvo

Agreements and International Treaties

El Salvador’s principal free trade agreement is the Central American Free Trade Agreement (CAFTA), which integrates the economies of El Salvador, Guatemala, Honduras, Nicaragua and Costa Rica.

CAFTA has free trade agreements with: USA, Mexico, Dominican Republic and Chile.

There are additional treaties, such as:

  • El Salvador – Honduras – Taiwan Free Trade Agreement
  • Colombia – El Salvador, Honduras, Guatemala Free Trade Agreement
  • Double Taxation Treaty with Spain

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