PROESA Image

Attractive Tax Incentives

 

El Salvador is committed to promoting investment and developing long-term relationships with investors. The country’s solid legal framework provides attractive tax incentives and gives equal treatment to local and foreign investors.

 

 

 

Offers generous tax incentives to export-oriented manufacturing companies located in Free Zones or Warehouses for Inward Processing (DPA, for its acronym in Spanish).

 

Free Zones are industrial parks considered outside the national territory for fiscal purposes, and thus raw material or merchandise required by companies are imported free of taxes and tariffs. If a company – for technical reasons – is unable to operate inside a free zone, it can be authorized to operate outside as a Warehouse for Inward Processing (DPA) and enjoy all the benefits of this law. 

 

Eligible activities :

 

•The production, assembly or maquila, manufacture, processing, transformation or commercialization of industrial goods included in Chapter 3 and Chapters 25 onwards of the Harmonized System
•Fishing of maritime species to undergo industrial transformation, including preparation, canning, derivatives or sub products, as well as their respective processing and commercialization
•Cultivation, processing and commercialization of flora species grown in protected structures in greenhouses and laboratories
•Breeding and commercialization of amphibian and reptile species in captivity
•Dehydration of ethyl alcohol
•The production, assembly or maquila, manufacturing, processing, transformation or commercialization of compensating products that use alcohols as raw material or input.

 

Benefits:

 

·Full exemption from customs duties and other taxes on the import of machinery and equipment used for production
·Full exemption from customs duties and other taxes on the import of raw materials and other goods used for production
·Full exemption from customs duties and other taxes on lubricants, fuel and other substances used for production
·Full exemption from taxes on the transfer of real-estate property, for the acquisition of real estate that will be used in the incentivized activity
·Income tax exemption according to the following table:

 

Shareholders also benefit with full exemption from income tax on the distribution of profits and dividends – originating from the incentivized activity – during the first 12 years.

 

•Exemption from municipal taxes, according to the following table:

 

Municipal councils, with the purpose of promoting the development of their municipalities, have the legal power of granting additional benefits to investors.

Upon the expiration of the full exemptions period, investors established in free zones can benefit of an additional five years of total exemptions if they have increased their investment (in relation to their initial investment) by 100 % in the last five years.

 

Provides tax incentives to companies dedicated to providing services to foreign customers. To enjoy these benefits companies may establish in:

 

•Service Parks: Limited areas considered to be outside the national customs territory, where exporters of services are installed and operate under the benefits of this law .
•Service Centers: When a company – in an eligible activity specified in this law – for physical or technical reasons, is unable to operate inside a service park, it can be authorized to operate outside a Service Park, as a Service Center and enjoy all the benefits of this law.

Eligible activities:

 

•International Call Centers or Contact Centers
•Business Processing Outsourcing (BPO)
•Information Technologies
•Medical and Hospital Services
•Elderly and Convalescent Care
•Telemedicine
•Cinematography
•International Distribution
•International Logistics Operations
•Research and Development
•International Financial Services
•Technological Equipment Repair
•Maintenance and Repair of Airplanes
•Maintenance and Repair of Maritime Vessels
•Maintenance and Repair of Containers
•Specialized services to Aircrafts

Benefits:

 

·Full exemption from customs duties and other taxes on the import of machinery, equipment, tools, replacement parts, accessories, furniture and office equipment, and other goods required for the execution of the incentivized activity
·Total exemption from income tax, exclusively for income deriving from the incentivized activity during the period of operation in the country
·Total exemption from municipal taxes on company assets during the period of operation in the country

 

Tourism projects with a minimum investment of USD 25,000 are eligible to be declared “national touristic interest” and enjoy the following benefits:

 

•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
•The exempted amount cannot be greater than the total capital invested in the project.

 

 

 

If you want to download the documents click here:

 

 

 

Actualizado 04/30/2020
^ Up