El Salvador

Corporate - Significant developments

Last reviewed - 14 January 2021

Tax measures in response to COVID-19

General measures

  • Exemption from the payment of the special contribution for the promotion of tourism for a period of three months as of 20 March 2020.

Corporate income tax (CIT) measures

  • Extension of deadlines for payment of 2019 CIT (without imposing fines or interest) for the following taxpayers:
    • Taxpayers in the tourism sector whose tax liability is equal to or less than 25,000 United States dollars (USD): Extension until 31 May 2020.
    • Taxpayers whose tax liability is equal to or less than USD 10,000, taxpayers in the electric sector and television companies may request instalment payments (up to eight) cancelling the first instalment of 10% in the month of May 2020.
    • Taxpayers in the telecom business, provided that they provide at least two lines of business (cable television, residential and commercial Internet, landline and mobile telephone services), may request instalment payments (up to eight) cancelling the first instalment of 10% in the month of May 2020. For the purposes of the advance payment of income tax corresponding to the months of March, April, and May 2020, they could be postponed for six months.

Value-added tax (VAT) and customs measures

  • Exemption from import duties, VAT (i.e. ITBMPS), and any other type of tax or municipal charges that could be triggered on goods brought into El Salvador as humanitarian aid and which are brought in by any person, body, or entity and delivered to the government or Municipal Councils as a donation to be used by the population that has been affected by the emergency.

Legislative Decree No. 643

In May 2020, the Legislative Assembly approved the Legislative Decree No. 643, Transitional Law to Facilitate the Voluntary Compliance of Tax Obligations Under the National Emergency Caused by the COVID-19 Pandemic.

Annual income tax return deadline extensions

The deadline to file the income tax return corresponding to the 2019 tax year is extended until 30 June 2020 for all those taxpayers classified by the tax administration as medium, large, or as other taxpayers, as well as to natural persons not registered as taxpayers of the tax on the transfer of personal property and the provision of services. In addition, this law exempts the taxable person from penalties, interests, or surcharges on the income tax return in the following cases:

  • Modification of the tax return filed until 30 April 30 2020, where the tax return is filed within the legal term and the taxpayer has not requested authorisation of term payments of income tax.
  • Tax return filed and paid outside the established legal term, for which the taxpayer must make the respective modification in the terms established above. For the taxpayers who submitted their tax return before the entry into force of this Decree, and who have requested payment in instalments, they may choose the benefits previously indicated for the instalments pending payment and may also request an extension of the term.
  • Medium taxpayers, other taxpayers, and unregistered natural persons can request payments in quota up to a maximum of 7 quota, having to pay the first instalment corresponding to 10% of the tax to be paid during the month of June 2020. In addition, large taxpayers can request quota payments up to a maximum of 4 quota, having to pay the first quota, corresponding to 30% of the tax to be paid, during the month of June 2020.

Special Contribution of Large Taxpayers for the Public Safety Plan deadline extension

The deadline to present and pay the tax return of the Special Contribution of Large Taxpayers for the Public Safety Plan is extended to all those subjects obligated to said tax, corresponding to the 2019 tax year, until 30 June 2020. It will not cause interest surcharges or penalty; this same benefit applies to the modification of the declarations in which said tax is settled.

Tax reports extension

The tax reports with formal obligations contained in the tax laws and which expired on 30 April 2020 may be presented for a period of two months from the effective date of this Decree without causing penalty.

Income tax advance payment exemption

There is an exemption of the income tax advance payment for the monthly periods of April, May, and June 2020 for medium taxpayers and other taxpayers. However, the formal obligation to file the respective return must be within the period established in the corresponding tax regulations.

Balance sheet and income statement deadline extension

For medium and other taxpayers, the deadline to file the balance sheet, income statement, and fiscal reconciliations at the close of the 2019 fiscal year is extended until 30 June 2020.

Appointment of the tax auditor deadline extension

The deadline has been extended until 31 July 2020 to make the appointment of the fiscal auditor for fiscal year 2020. The extension is granted for all those taxpayers who comply with the conditions of paragraphs (a) and (b) of Article 131 of the Tax Code.

Criteria regarding the consideration of a jurisdiction as a preferential tax regime

In September 2018, the tax administration issued guideline DG-002/2018 by which it is updating previous criteria regarding the consideration of a jurisdiction as a preferential tax regime or a low or no-tax jurisdiction by indicating that any jurisdiction not specifically named in the guide that grants an exemption on income tax (or other taxes with a similar or identical nature) or has such a tax that is inferior by more than 80% of the income tax that would be due in El Salvador will be considered a preferential tax regime or a low or no-tax jurisdiction, as well as holding companies, principal companies, auxiliary or mixed companies, service companies, finance branches, family wealth management companies, headquarters of multinational companies (SEM for its acronym in Spanish), international trusts, companies with which international financial lease contracts are celebrated, and international business corporations, among others.