impuestos en taxes in america

Taxes in America - Edition 2021 • 1Edition 2021 ©

2021THIRD EDITION / TERCERA EDICIÓN

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AMERICAIMPUESTOS ENTAXES IN


San Salvador

El Salvador

Capital city: San Salvador

Aera: 20,742km2

Population: 6,453,550

Language: x

Politicalsystem: x

GDP/capita 2019:

USD 4,187

Currency: US Dollar (USD)

ISO Code: SLV

Telephone code: + 503

Nationalday: 15 september

170 • Taxes in America - Edition 2021 Edition 2021 ©


El Salvador

1. Taxes in El SalvadorEconomic overview

The economic growth of 2.4% registered in 2016 represents an advance with respect to 2014, year in which the economy grew by 1.4%, and to the registe-redin2015,of2.3%.Thistrendexpandedinalleconomicsectors,highlightingtheratesgrowthregistered intheagriculturesectorby4.6%;constructionby2.3%;andthemanufacturingindustryincreasedby2%.Additionally,productivesectors with high added value were boosted, registering growths in the pharma-ceuticalchemistrysectorof3.7%andindustrialmaquila(assembly)servicesof4.7%.

Among the main factors that drove this growth is the increase in household consumption,drivenbytheexpansionoftheflowofremittances,withanan-nual increase of 7.2%, and an increase of 4.4% in real wages in the formal sector.Inaddition,betweenMarch2016andMarch2017,5959newformaljobswerecreated. In addition to these factors, the reduction of the trade deficit wasby -8.3% in 2016, as a result of the reduction in the oil bill due to lower oilprices,and thebetterperformanceofpublic investment,whichamounted toUSD 734.900.000 last year, 23 new companies were established in the country andanother18expandedtheirinvestments.Inaddition,investmentshavebeenannouncedforUSD1.700.000intechnologicalplatformoftelecommunicationsLTE (data transmission at high speed).

Inthefinancialsystem,loansincreasedby6.1%,equivalenttoUSD12,666,000,concentratedinhousing,commerceandmanufacturing.Similarly,publicbanksdisbursed USD 824,200,000 between June 2016 and May 2017, granted to fami-liesandproductivesectorsunattendedbythetraditionalprivatebanking,withemphasis onmicro, small andmedium enterprises. In addition, the nationalfinancial system remainshealthy, capitalizedandprofitable, registeringan in-ter-annual increase in deposits of 7.6% in 2016.

1.1 Taxes in el salvador

Inrecentyears,theSalvadorianTaxSystemhasbeensubjecttoareformprocessinordertosimplifycollectionandoptimizeefficiency.


Income from taxes received by the State as internal taxes has been reduced to two main sources: Income Tax and Transfer Tax on Movable Property and Ser-vices. However, there are other types of internal taxes, such as the Tax on the TransferofRealProperty,theTaxonSoftDrinksorSweetenedandtheTaxonDomesticorForeignAlcoholicBeverages.

Ontheotherhand,Salvadoriantaxlegislationalsoincludesexternaltaxes(whichare import taxes) as a source of State income. In El Salvador there are two levels oftaxation,stateandlocal.

The Salvadorian tax system is based on direct and indirect taxes, although the greatestcontributioncomesfromthesideofindirecttaxes,especiallytheValueAdded Tax (VAT).

The reality is that very few taxes are paid and taxpayers with high incomes and fortunesarethosewho, inrelativeterms,paylesssinceinrelationto incometherearenodifferentiatedrates.

Thetaxsystemhasbeenremarkablysimplified,andtherearecurrentlythreebasictaxes:IncomeTax,ValueAddedTaxandimporttariffs.Specifically,thereisnoestatetaxaftertherepealoftheWealthTaxActin1994.Itshouldbenotedthatintermsoftaxincentivesforinvestments,thereisagreatdiversificationofbenefits,whichareregulatedbyspecificlawsthatapplytothem,whichwewilldetail at the end.

Thedifferentgovernmentshavemadefiscal reformsaimedat increasingeffi-ciencyandthetaxbase.Therehavebeennochangesaffectingthestructureofthesystem,butifaFiscalReformwasadoptedin2004aimedatimprovingfiscalcontrolandthefightagainstfraud,aTaxCodewasintroducedharmonizingthedifferentamparoproceedingsandgeneralregulationsapplicabletoalltaxes.ItisworthnotingthatthisCodeleadtotheTaxAuditwhichisappliedtotaxpayersin a period that has achieved income over USD 571,428.57 or have assets grea-ter than USD 1,142,857, transferring the supervisory power not binding to pro-fessionals inPublicAccountingregisteredbeforetheSupervisoryBoardofthePublicAccountingandAuditingProfession.

To learn more about taxes, we will analyze the most relevant ones:


2. Income tax2.1 Applicable subjects

ItisregulatedintheIncomeTaxAct,applicabletobothindividualsandlegalenti-ties,trusts,successions,artists,athletesorsimilar,eitherdomiciledornotinthecountry,whethertheyarefiledseparatelyasindividualsorgroupedtogether.

Generating Facts

Theyincludetaxesderivedfromtheincomeobtainedinnationalterritoryfromproductsorprofitsreceivedoraccruedbytaxpayers,eitherincashorinkind,fromanykindofsource,eitherfromwork,businessactivity,capitaloranykindofproducts,profits,gains,benefitsorprofits,whatevertheirorigin.

Non-taxable income

Thefollowingareincomesnottaxablebythistax,andconsequentlyareexcludedfromtheresultingcomputationofincome:

• ThosethatbyLegislativeDecreeorthosecomingfromcontractsapprovedbytheLegislativeOrganbydecreearedeclarednottaxable;

• Remuneration, compensation andexpenses of representation received intheperformanceof their dutiesby diplomats, consular agents andotherofficialrepresentativesofforeigncountriesthat,withdueauthorization,re-sideintheRepublic,temporarilyorpermanently,allonconditionofrecipro-city. Notwithstanding the provisions of the preceding paragraph, the income received by taxpayers, as payments for services rendered in El Salvador to aforeigngovernmentor internationalorganization,aresubject tothetaxestablishedinthislaw,exceptforthoseincomesthat,forexpressmentioninagreementssignedandratifiedbythegovernmentofElSalvador,qualifyasnon-taxable or exempt income.

• Indemnitiesthatarereceivedintheformofcapitalorincomeduetodeath,disability,accidentor illness,andthataregrantedbyjudicialmeansorbyprivateagreement.Compensationfordismissalandbonusesforvoluntaryretirement,providedthattheydonotexceedabasicsalaryofthirtydaysforeach year of service. For these purposes, no salary may be higher than the average salary of the earned over the last twelve months, as long as these salarieshavebeensubjecttowithholding.Retirements,pensionsorpawns,both civil and those corresponding to members of the Armed Force Taxable incomeistheordinaryremunerationthatcontinuestobereceivedduringsickleaveorabsence;

EL SALVADOR


• Remuneration,compensationandrepresentationexpensesreceivedintheperformanceoftheirdutiesbySalvadorianindividualsintheforeignserviceasofficialsoremployeesoftheGovernmentoftheRepublic;

• Interest,prizesandotherutilitiesthatcomedirectlyfromdepositsinfinan-cialinstitutionssupervisedbythesuperintendenceofthefinancialsystem,associationsandsavingsandcreditcooperativesocieties,aswellasintheirrespectivefederations,providedthatthetaxpayerbenefitedwiththesein-comes, it is a natural person domiciled holder of the deposits and the ave-rage monthly balance of the deposits is less than USD 25,000.00 of the United States of America.

• The value of the lease that would produce the house of the taxpayer, the fifthorrecreationalorleisurehouse,propertyofthetaxpayer,whichhein-habits. In general, for this purpose, no taxpayer may deduct more than one roomorrecreationhouse;

• The amounts that by any concept and by reason of insurance contracts, the taxpayerreceivesas insuredorbeneficiary, in thecaseofendowment in-suranceorothertypeofinsurance,whentheriskcoveredisnotraisedandthestipulatedtermis lowerorequaltofiveyears,thevaluereceivedwillconstitutetaxableincome,thesametreatmentoftaxableincomestipulatedin the previous paragraph will apply when the contracts have been agreed foraperiodofmorethanfiveyearsandforanyreasonareleftwithouteffectbeforeafterthefive-yeartermhaselapsedwithouttheriskhavingoccurred,in the cases established in the two preceding paragraphs, the corresponding withholdings must be made in a percentage of 10% of the amounts credited orpaidandbeinformedwithintherespectivelegalterm.

• TheAwardsgrantedbytheLegislativeAssemblyforrelevantservicesrende-redtotheHomeland;

• TheprizesawardedtopublicworkersforrelevantservicesrenderedtoHo-melandintheperformanceoftheirduties;

• Interest from loans granted abroad by: - Internationalorganizations;developmentagenciesor institutionsoffo-reign governments; foreign governments; and corporations or founda-tionsofpublicutilitydomiciledabroaddulylegalizedbycompetentau-thoritiesoftheircountryoforiginwhosenon-profitnatureisverifiedintheirconstitutiveactandqualifiedbythecentralreservebank.

- Investment funds, private fund managers, specialized public or private funds,domiciledabroad,dulylegalizedbycompetentauthoritiesintheircountryof origin andqualifiedby the central reservebank, destined tocooperativesavingsandcreditassociations,corporationsandfoundationsofpubliclawandpublicutility,thatarededicatedtothegrantingoffinan-cingtothemicroandsmallbusiness,thegeneraldirectionofinternaltaxesandthecentralreservebank,together,willelaboratethenecessaryinstru-


ment,whichwillincludetheprocedureandrequirementsthatguaranteecompliancewiththepurposeoftheexemptionregulatedinthissection.

• Theproduct,profit,benefitorutilityobtainedbyanaturalpersoninthesaleofhisfirsthomeandthetransactionvaluedoesnotexceed723minimumwages, as long as it is not usually dedicated to the sale or exchange of estate.

• Prizesgrantedbythetaxadministrationinrunningthefiscal lotteryrefer-redtoinarticle118ofthetaxcode,consequently,suchprizeswillnotbesubjecttowithholdingoftheaforementionedtax.Theindemnities,theinte-restonbankdeposits(onlyforindividuals),theamountspaidforinsurancecontractsandtheprofitsreceivedbythepartnersonwhichthecompanyhas paid the corresponding tax. Fixed deposits or government loans, bonds, orsecurities,orprizeswon intheNationalLottery,andfundsreceivedascompensationfor industrialaccidents,orterminationofemployment,areexempt from income tax.

Imposition period

The taxable period is established from January 1 to December 31.

Tax tables

Individuals not domiciled, will calculate the tax applying a rate of 25% to their net or taxable income

Table for calculating tax on individuals

The Income Tax will be calculated according to the table below, for the cases specially provided for in this law:

Income tax for individuals, successions and domiciled trusts, will be calculated according to the table that is detailed below, for the cases specially provided for in this law, as follows:

I SECTION SINCE USD 0.01 UNTIL USD 4,064 RATE EXEMPT

II SECTION USD 4,064.01 USD 9,142.86 10% USD 4,064.00 USD 212.12

III SECTION USD 9,142.87 USD 22,857.14 20% USD 9,142.86 USD 720.00

IV SECTION USD 22,857.15 ONWARDS 30% USD

22,857.14 USD 3,462.86

IV SECTION USD 22,857.15 ONWARDS 30% USD

22,857.14 USD 3,462.86

EL SALVADOR


Individuals, successions or non-domiciled trusts, calculate their tax by applying 30% on their net or taxable income.Excludedfromthecalculationoftax,thoseincomesthatwouldhavebeensub-jecttodefinitivewithholdingofincometaxintheestablishedlegalpercentages.

Employees

Individuals domiciled whose rent as comes exclusively from wages, salaries and otherremunerationandwhohavebeensubjecttowithholdingforthepaymentofthistax,arenotrequiredtofilethetaxreturn;exceptforpersonswithinco-mes greater than USD 60,000.00 per year, as well as those who have not been withheld or whose withholdings made do not correspond to the tax that would resultfromapplyingwhatisestablishedinthetablereferredtoinarticle37ofthislaw,inwhichcase,theymustpresentthecorrespondingdeclarationpayingthetaxormayrequesttherespectivereturn.

Consequently,thosewhoarenotobligatedtofiledeclaration,theirtaxwillbeequaltothesumofthewithholdingsmadeaccordingtotheprovisionsinrela-tiontotheretentiontables.

Sets

Thecultural,sporting,artisticandsimilargroups,notdomiciled,willcalculatethe tax applying a 5% on the gross income obtained in each event.

Legal person

Legalentities,unionsofpersons,irregularordefactocompanies,domiciledornot,will calculate their taxapplying to their taxable income the rateof30%;except taxpayers who have obtained taxable incomes less than or equal toUSD150,000,whichwillapplytherateof25%.Excludedfromthecalculationoftax,thoseincomesthatwouldhavebeensubjecttodefinitivewithholdingofincometaxintheestablishedlegalpercentages.Profitsofdomiciledindividualsreferredtointhisarticlewillbetaxedwithacomplementarytaxwhentheyaredistributed in accordance with the provisions of this law. Capital Gain

Incometaxpayableforthenetcapitalgainofoneormoretransactionsdeter-mined inaccordancewitharticle14of this law, shallbeequivalent to10%ofsaidprofits,exceptwhenmadewithinthetwelvemonthsfollowingthedateofacquisition,inwhichcasethenetcapitalgainmustbeaddedtotheordinarynettaxableincomeandthetaxcalculatedasordinaryincome,attachedtotheincometaxstatementoftherespectivetaxyear,thecalculationformofthecapitalgain.


Deductions

Costs and expenses necessary for the production of the income and for theconservationofitssource,innocasethecostsandexpensesincurredinrelationtoactivitiesthatgenerateincomenottaxedorthatdonotconstituteincome,willbedeductiblefromthetaxedincome.Costs andexpensesaffecting the incomegeneratingactivity, aswell as thosethat affect the untaxed income, and those that do not constitute conformityincome must be provided, based on a factor that will be determined by dividing the taxable income among the sum of the taxable income, not taxed, or not constitutingincomeaccordingtothelaw,onlytheproportioncorrespondingtothe taxed should be deducted.

Transfer of Chattels and Provision of Services Act

Applicable Subjects

Individualsorlegalentitieswillbetaxpayersordebtorsofthetax,eitherastax-payers or as responsible parties; successions trusts; and cooperative associa-tions.

Generating fact

Under this law, a tax is established that will be applied to the transfer, importa-tion,internment,exportationandconsumptionofpersonalchattels;provision,import,internment,exportandself-consumptionofservices,inaccordancewiththeregulationssetforthinthesame.

Transfer concept

For the purposes of this law, transfer of ownership of tangible personal property, notonlythatresultingfromthecontractofsalebywhichthesellerisrequiredtotransfer ownership of a good and the buyer to pay its price, but also those that resultfromallacts,conventionsorcontractsingeneralthathavethepurpose,transferoralienateforconsiderationthetotaloraquotaofthedomainofthosegoods,whateverthequalificationordenominationassignedbythepartiesorinterestedparties,theconditionsagreeduponbythemorcarriedoutintheirown name or on behalf of a third party. Enunciation of acts and facts included in the concept of transfer

In the concept of transfer of ownership, as a tax-generating event are un-derstood,amongothers,thefollowingacts,conventionsorcontractsthatrefer

EL SALVADOR


to tangible personal property from:

- Transfersmadeinpublicauction,adjudicationsinpaymentorauctionoftangiblepersonalpropertybelongingtotaxpayers;

- Swaps; - Donationsaspayment; - Assignmentoftitlesofownershipoftangiblepersonalproperty; - Mutual loans or consumer loans in which one party delivers to the other,

fungible items charged to restore many others of the same gender and quality;

- Contributionsoftangiblepersonalpropertyofthetransfertocompaniesor other legal persons, null, irregular or de facto companies and, in gene-ral,toentitiesorcollectivitieswithoutlegalpersonality;

- Transfers of tangible personal property belonging to the line of business ontheoccasionofthemodification,extension,transformation,mergerorotherformsofreorganizationofcompanies;

- Awardsandtransfersofchattels,madeasaresultofdissolutionsandli-quidationsorcapitalreductionsofcompaniesorotherlegalpersons,null,irregularorde factocompaniesandcollectiveentitieswithorwithoutlegalpersonality.Inthecasesindicatedinthissection,transferoftangiblepersonalpropertyshallnotbesubjecttotaxwhenthesuccessfulbidderis the same partner or shareholder who contributed it, and said asset was nottaxedwiththetaxthatthislawdealswith;

- Transfers of commercial establishments or companies, with respect only totangiblepersonalpropertyoftheassetsincludedintheoperation;

- Constitutionoronerous transferof the rightofusufruct,useorof therighttoexploitorappropriateproductsorchattelsinadvance,extractedfromquarries,mines,lakes,forests,plantations,seedbedsandthelike;

- Promiseofsalefollowedbythetransferofpossession;and - In general, any form of onerous delivery of goods that gives the recipient

the free power to dispose of them economically, as if they were owners. - Transfers of tangible personal property made by taxpayers, whose assets havebeenacquiredbytheminpaymentofdebts.

Moment when the tax is caused

Inthetransferofownershipasageneratingevent,thetaxisdeemedtohavebeencausedwhenthedocumentcertifyingthetransactionisissued.

If the price is paid or the goods are real or symbolically delivered before the is-suanceoftherespectivedocuments,orifduetothenatureoftheactorforanyother reason, said issue does not correspond, the transfer of ownership and the taxshallbecausedwhensucheventstakeplace.


In deliveries of consigned goods, the tax will be caused when the consignee per-forms any of the events indicated in the preceding paragraph.

The tax is caused even when there is omission or delay in the payment of the priceorthatithasnotbeendefinitivelyfixedbytheparties.

Provision of services

Generator fact

Taxableincomeistheprovisionofservicesfromacts,conventionsorcontractsinwhichonepartyisrequiredtoprovidethemandtheotherisrequiredtopayasconsiderationarent,fee,commission,interest,premium,royalty,aswellasanyotherformofremuneration.Itisalsotheuseoftheservicesproducedbythetaxpayer, intendedfortheuseorconsumptionofthepartners,managers,attorneysorpersonnelofthecompany,thefamilygroupofanyofthemorthirdparties.

Paymentsforcompensationfordamagesorlossesarenotincludedinthepre-viousconcept.Donationsoffreeandirrevocableservicesproducedbythetax-payerdonotconstituteageneratingevent.

Service concept

Forthepurposesoftax,allthoseonerousoperations,whichdonotconsistofthe transfer of ownership of tangible personal property, include the following:

- Benefits of all kinds of services are permanent, regular, continuous orperiodic;

- Technicaladviceandpreparationofplansandprojects; - Leases of tangible personal property with or without promise of sale or purchaseoption,subleases,concessionoranyotherformofassignmentoftheuseorenjoymentoftangiblepersonalproperty;

- Lease, sublease of real estate intended for commercial, industrial, ser-viceoranyotheractivity,withorwithoutpromiseofsaleorpurchaseoption,usufruct,concessionoranyotherformofassignmentoftheuseorenjoymentofalltypesofrealestate,establishmentsandmercantilecompanies;

- Leasingofservicesingeneral; - Tomakeorexecutebyhimselforunderhisdirectionamovablematerialwork,withrawmaterialscontributedbythepersoninchargeofthework;

- Executionofengineeringworksorsimilar, inwhichmaterialsormeanssuppliedbythepersoninchargeoftheworkareused;

- Installation, preparation ofworks, specialties or earthworks agreed by

EL SALVADOR


administrationormandate,byafixedorunitarypriceorinanotherform; - Repairs,transformations,expansionsthatdonotinvolvethemakingorconstructionofanewbuildingsite,andmaintenance,repairandconser-vationofchattelsandrealestate;

- Generalbuildingcontractsorconstructionofnewbuildingsbyadminis-trationormandate,inwhichtheexecutororbuildercontributesonlyhispersonalworkandtheoneinchargeoftheworkorconstructionsuppliesthematerials;

- Buildingorconstructionofnewproperties,agreeduponatafixedprice,inwhichthemainmaterialsaresuppliedinfullorinthemajoritybythecontractor;

- Commission,mandate,consignment,salesatauctionorheldwithauc-tioninstitutions,fairsorbags;

- Transportationorcargofreight,land,airandmaritimeandpassenger,airandmaritime;and

- Those rendered in the liberal exercise of university professions and public accountingorindependentnon-subordinateservices,providedbythosewhopersonallypracticeprofessionsortradesrequiringornotatitleorlicensefor itsexercise,whethernaturalor legalpersonsconstitutedbythose. For the purposes of this law, the profession of the notary is consi-dered a liberal profession.

- The lease, sublease, concession or any other form of assignment of the useorenjoymentoftrademarks,inventionpatents,industrialproceduresor formulas and other similar services.

- Paymentofallowancesoranyotheremolumentofequalorsimilarna-ture.Dietsforservicesgovernedbylaborlegislationandthoseprovidedbyemployeesandpublic,municipalandautonomousinstitutionsofficialsare not included.

- Payment of memberships, fees, or any other form of payment of a similar nature that generates a consideration for theuse, enjoymentor satis-factionofgoodsorservices,regardlessofthemannerinwhichtheyarereceived.

Reimbursementsorrefundofexpensesaretreatedasservicebenefits,whichwillbetaxedwiththepresenttaxatthetimeofpayment.Reimbursementsorrefundofexpensesforinsurance,foodandtravelexpensesthatworkersreceive,as well as those reimbursements or refunds, provided that the agent has not deductedtaxcreditsinrelationtosuchsums,arenotincludedinthisprovision.

Imposition period

For the purposes of this law, the tax period will be one calendar month is to ob-servethatthisperiodincludesfilingandpayment.Territorial situation of the goods


Transfer of ownership will constitute a generating fact of this tax, when therespective tangible personal property located, registered or registered in thecountry, although they may be placed temporarily in it or abroad and even when theappropriateacts,conventionsorcontractshavebeenheldabroad.

Imports and exports

TaxonimportsandhospitalizationswillbeliquidatedbytheGeneralDirectorateofCustoms Income in thesameact inwhichcustomsdutiesaredetermined.Proof of payment of this tax will be the proof of the tax credit. Exports will be subjecttoazeropercentrate.

Applicable rate

The tax rate is the 13% applicable on the tax base.

Calculation Process

Theprocessofitsdevelopmentisbasedonthegenerationoffiscaldebitatthemomentofmakingatransferofgoodsandservicesservingasataxcredit,forthetaxpayeracquiringgoodsorservicesorwhenperformingtheexportactivity.Paymentofthetaxisdevelopedbythedifferencebetweenthefiscaldebitsac-quiredthroughsalesatthetimeofthetransferofgoodsandservicesandthosepaid (tax credits) when purchases or expenditures of goods and services or im-port processes are made in the same tax period.

Ifthearithmeticaldifferenceinthetaxcreditexceedsthefiscaldebitofthatpe-riod,theremaindermaybedeductedinthefollowingtaxperiods,untilitstotalextinction.

Perceptions and Withholdings

Ithasbeenruledthatthereisawithholdingandcollection,forlargetaxpayerswho will retain 1% in advance of VAT for the price of goods and services, which theyacquirefromsmallandmediumtaxpayers(retention)andthosethatlargetaxpayers sell to small andmedium taxpayers (perception), the figure of theagentofperceptionandretentionthatareclassifiedaslargetaxpayers,aswellas for those taxpayers transferring goods or providing services and receiving payments by means of credit or debit cards.

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V.A.T. for non-domiciled

Payment of V.A.T. for services rendered by non-domiciled persons, the person hiring the service through withholding said tax is liable.

Excluded subjects

Theywillbeexcludedfromthequalityoftaxpayers,whohavemadetransfersof tangible personal property or services, taxed and exempt, in the previous 12 monthsforanamountlessthanUSD5,71428/100andactiveislessthanUSD2,285 71/100.

3. Import taxesTheCentralAmericanUniformCustomsCode(CAUCA)andtheNationalRegula-tionoftheCentralAmericanUniformCustomsCode(RENCAUCA)establishthebasiccustomslegislationofmandatoryapplicationinthesignatorycountriesfortheorganizationofcustomsactivitiesandtheregulationofadministration,inac-cordancewiththerequirementsoftheCommonMarketandoftheAgreementontheCentralAmericanTariffandCustomsRegime.

ImportsTaxiscalculatedinaccordancewiththeCentralAmericanTariffSystemcommon in all the countries of the region. Currently, there is a gradual decrease intaxesandfeestomaketheregionmorecompetitiveininternationalmarkets.

4. Other taxesInadditiontothethreemainsourcesofincomeoftheState,thereareothertaxesgenerating2%ofincomeinElSalvador.Forexample,theRealEstateTaxratesthe transfer of real estate when its value exceeds ¢250,000.00 (USD 28,571.43), withafixedrateof3%.AsthistaxissubjecttothevalueofthepropertythattheTaxAdministrationdeterminesastherealvalueoftheproperty,itsapplicationissubjecttotechnicalevaluationcriteria.

Finally,ElSalvadorhasspecifictaxescorrespondingtoAlcoholicBeverages,Ciga-rettesandSoftDrinks.


5. Fiscal incentivesIncentivesforforeigninvestmentareregulatedbytheInvestmentActs,Indus-trialandCommercialFreeZonesandExportReactivation.

Thesethreelawsseektopromoteforeigninvestmentbyimprovingthecountry'scompetitivenessinallareasofaction.

TheInvestmentActgrantsequalconditionstodomesticandforeigncompanies.Theaimistoavoiddiscriminatoryand/orunjustifiedmeasuresthatgoagainstthenormalactivitiesofaforeigninvestment.

TheFreeIndustrialandCommercialZonesActgrantsthefollowingincentivestocompaniesExemptionfromIncomeTaxexemptionfromValueAddedTaxandexemptionfrommunicipaltaxexemptionfromtransfersofrealestatewhenthepropertywillbeusedforcommercialpurposesexemptionfromtaxesonimportsofmachinery,rawmaterials,equipmentandintermediategoodsusedforpro-duction.TheoptiontosellpartoralloftheproductioninthelocalorCentralAmericanmarket.

Any foreign company can establish and operate from a Free Trade Zone or Tax Area if it is involved in the production, assembly,manufacturing, processing,transformationorcommercializationofgoodsandservices; inadditiontotheofferofservicesrelatedtointernationalorregionaltrade,suchasthecollection,packingandre-packing,consolidationofcargo,distributionofthemerchandiseandotheractivitiesconnectedwiththemorcomplementarytothem.

TheReactivationofExportsActgrantsthefollowingincentives:Reimbursementof6%oftheFOBvalueofexportsdestinedoutsidetheregiondoesnotlevytaxeson exports.

Exemptionofcustomstaxesforthe importationofrawmaterialand interme-diategoodsforpartialortemporaryoperationsabroad.Companies engaged in the assembly or manufacture abroad and exporting,marketingandmanufacturinggoodsandservicesforpartortemporary,enjoyexemptionfrompropertytaxes,forthesameamountasthevalueofexports.

Juan Cocar

EL SALVADOR


Contact

COCARROMANOYCOMPAÑIAResidencial Escalon NorteCalleElEscorialN°31-BSan Salvadorwww.cocarauditores.comTel. +503 22993400Fax +503 [email protected] COCAR - Juan Francisco COCAR

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