A. M. The Ministry of Finance of El Salvador implemented a modification in the Income Tax withholding tables, as part of a reform that raised to US$550 per month the amount exempted from such tax. This measure, effective as of May 2025, seeks to alleviate the tax burden on lower-income workers and improve fiscal equity in the country.
With the reform, monthly incomes of up to US$550 are exempt from withholding, which broadens the tax-free margin in the first bracket of the table. The second bracket now starts from US$550.01 to US$895.24, applying a withholding tax of 10% on the excess of US$550, plus a flat fee of US$17.67. The next two brackets maintain the existing percentages and fixed fees.
In the third bracket, income between US$895.25 and US$2,038.10 continues to be subject to a 20 % withholding on the excess of US$895.24 plus a fixed fee of US$60. The fourth bracket applies to income above US$2,038.11 per month, with a 30 % withholding on the excess of US$2,038.10 plus a fixed fee of US$288.57.
The exempt amounts for biweekly and weekly payments were also updated. Thus, incomes of up to US$275 biweekly and US$137.50 weekly are exempt from withholding. This adjustment allows for greater precision and fairness in the calculation of the tax applied to workers with different forms of payment.
For purposes of the semi-annual recalculation (June), income up to US$3,300 will be exempt from withholding. For the next bracket, from US$3,300.01 to US$5,371.44, 10% will be applied on the excess of US$3,300 plus a fixed fee of US$106.20. In the annual recalculation (December), the exempt bracket reaches US$6,600 and the following bracket, up to US$10,742.86, will have a withholding of 10% on the excess of US$6,600 plus a fixed fee of US$212.12.
In addition, the Treasury established that all individuals domiciled in the country and subject to withholding must file their income tax returns electronically, using the applications available in the official website of the Ministry. The purpose of this is to facilitate tax compliance and modernize tax processes in El Salvador.
