A. M. 
With the aim of boosting economic growth and strengthening the expansion of companies already operating in El Salvador, the Legislative Assembly approved the Law for the Promotion of Investment Expansion with 57 votes. This new legal framework introduces tax incentives and special regulations for domestic and foreign capital with a proven track record in the country.
The legislation is geared towards companies with at least a decade of proven operations in El Salvador that decide to expand their production activities. The benefit will apply to investments in strategic sectors such as textiles and apparel, agribusiness, food and beverages, auto parts, electronics, plastics, footwear, pharmaceuticals, construction products, paper and related products, among others linked to the manufacturing industry.
During the legislative analysis, it was highlighted that the approval of this law responds to a key moment in the economic transformation process that the country is going through, in which it seeks to consolidate a favorable environment for investment, based on legal certainty, stability and clear rules for the productive sector.
Congresswoman Dania González pointed out that the new legal framework prioritizes support for companies that already generate employment and contribute to economic dynamism, recognizing their permanence and commitment to national development. According to official estimates, around 3,000 companies could benefit from these incentives, which would have a direct impact on generating new investments and expanding existing operations.
Similarly, the president of the Agencia de Promoción de Inversiones y Exportaciones de El Salvador (INVEST),Rodrigo Ayala, explained that the initiative arose after repeatedly hearing from business owners who expressed the need for specific incentives for expansion projects. He indicated that, while the country already has incentive programs for new investments, a legal instrument focused on companies seeking to grow and reinvest in the country was lacking.
Tiered tax incentives
The law establishes a system of progressive tax credits, which vary according to the amount of expansion investment. Investments between US$1 million and US$10 million will be eligible for a 10% tax credit. For amounts between US$10 million and US$20 million, the incentive will be 20%, while investments exceeding US$20 million will be eligible for a 30% credit.
Additionally, beneficiary companies will be exempt from the Real Estate Transfer Tax on the purchase of properties intended for expansion, provided that these properties remain in productive use for a minimum period of five years.
What is considered an expansion investment?
The regulations define valid expansion activities such as the opening of new production lines, the construction or acquisition of industrial and logistics infrastructure, the purchase of machinery and technology, the creation of research and development centers, and the expansion of production capacity. It is expressly established that projects may not consist solely of the replacement of existing assets nor imply a reduction in current operations.
Requirements and oversight
To access the benefits, investors must submit an investment profile, demonstrate compliance with their tax and customs obligations, and obtain a Qualification Agreement issued by the Ministry of Economy.
Oversight of compliance with the law will be the responsibility of the Ministry of Economy, through the Investment Directorate, and the Ministry of Finance, through the General Directorate of Internal Taxes. Both institutions will conduct inspections and controls to ensure that the incentives are used appropriately and that the investments comply with technical, environmental, labor, and tax regulations.
With this new legislation, El Salvador seeks to consolidate a growth model that incentivizes productive reinvestment, strengthens the competitiveness of the industrial sector, and promotes the sustained generation of formal employment in key sectors of the
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