El Salvador

Corporate - Group taxation

Last reviewed - 20 December 2019

There are no grouping rules in El Salvador between independent entities. Each entity, even if related, is treated separately and must report and pay their taxes independently.

Transfer pricing

In El Salvador, it is mandatory for entities that have operations with related parties or with entities resident in tax havens to undertake these operations in compliance with the arm's-length principle.

Local tax authorities can establish the value of the operations according to market prices rules if, according to their point of view, these operations have not been undertaken according to the arm’s-length principle.

Thin capitalisation

Interest, commissions, and any other payments from financial, insurance, or reinsurance transactions entered into by the taxpayer (borrower) shall not be deductible when, among others, the lender or provider of insurance or reinsurance services is a related subject or is domiciled, incorporated, or located in a country, state, or territory with a preferential tax regime of low or zero tax or considered a tax haven and the debt for credit operations, insurance, or reinsurance exceeds the result of multiplying three times the value of assets or average taxpayer (borrower) equity.

Controlled foreign companies (CFCs)

There are no CFC rules in El Salvador.