dinero_admin Salvadoran legislators approved a special regime that will exempt investments exceeding US$2 billion from taxes. With 56 votes, the Legislative Assembly approved the legislation establishing special tax measures to enable the transfer and establishment of large investments or assets. The main objective is to boost the country’s productivity, generate quality jobs, and promote the export of goods and services.
The new legal framework establishes that an investment can be a contribution made by a natural or legal person, salvadoran residing abroad or foreign, to create a business or acquire property for economic purposes. This also applies to financial institutions that provide loans to local companies for new investments in productive activities. The legislation also includes salvadorans who have resided abroad for more than a year and decide to return with their investments.
William Soriano, a representative from Nuevas Ideas, argued that these provisions allow for the readjustment of the country’s tax framework to make it more attractive to large capital. Soriano affirmed that, with this law, salvadorans living in different regions of the world can return their capital and create high-quality jobs in the country. The legislator also highlighted that El Salvador’s security strategies complement these incentives, creating a favorable environment for investment.
Among the main benefits for investors is the exemption from Income Tax (ISR) on the profits from their new investments, as well as the non-application of income withholdings, except for salaries over US$100,000. Taxes will also be waived for the purchase of properties for economic activities, nor will municipal taxes on the value of assets, or for importing machinery, equipment, and materials necessary for their businesses. The objective is to provide every opportunity for investors to establish themselves in the country.
Representative Mauricio Ortiz noted that, while the regime completely exempts high-value investments from income tax, the country will benefit in other areas, such as massive job creation and the collection of payroll taxes.
Ortiz indicated that the legislation will strengthen important sectors such as construction, energy, transportation, and telecommunications, which will boost the economy on multiple fronts. Both representatives agreed that the entry of large companies will increase the Gross Domestic Product and improve the country’s credit profile.
To access these tax incentives, investors must apply to the Ministry of Economy and register in the Ministry of Finance’s Taxpayer Registry. The General Directorate of Internal Revenue will have 10 business days to review the application and issue a resolution. This seeks to provide a streamlined and transparent process for investors, guaranteeing a legal framework that fosters El Salvador’s economic growth and development.
