El Salvador

Corporate - Tax credits and incentives

Last reviewed - 18 July 2023

El Salvador offers a wide range of incentives to attract foreign investment and drive new commercial and industrial developments. There are also no restrictions on foreign ownership or on mergers, acquisitions, or joint ventures.

There are five specific laws in El Salvador that seek to encourage foreign investment by improving the country’s competitiveness in all areas involving the granting of tax incentives. These laws are the Industrial and Commercial Free Zone Law, the Law of International Services, the Renewable Energy Incentives Law, the Tourism Law and the Law for the promotion of Manufacturing and Technological Innovation.

The Industrial and Commercial Free Zone Law No. 405, dated 3 September 1998, grants companies the following incentives:

  • CIT exemption.
  • VAT exemption.
  • Municipal tax exemption.
  • Exemption from real estate transfer taxes when land is intended to be used for productive activities.
  • Exemption from duties for imports on machinery, raw materials, equipment, and intermediate goods used for production.
  • An option to sell merchandise or services linked to international trade produced in the free zone in the Salvadoran market as long as the corresponding import taxes, CIT, VAT, and municipal taxes are paid on the final goods or services.

Any foreign company may establish and function in a free zone or bonded warehouse and benefit from these incentives if they are engaged in production, assembly, manufacturing, processing, transformation, or commercialisation of goods and services and/or rendering of services linked to international or regional trade, such as gathering, packaging and repackaging, cargo consolidation, distribution of merchandise, and other activities connected or complementary to them.

The Law of International Services No. 431, dated 11 October 2007, grants the same benefits as the Free Zone Law, but the beneficiaries are companies operating in Service Centres specially created according to this law and dedicated to international services as defined therein.

The Renewable Energy Incentives Law provides customs duties exemption on imports of machinery, equipment, and materials for up to ten years, income tax exemption for a period of five to ten years, and total tax exemption on revenues from the sale of Certified Emission Reductions, when certain requirements are met.

The Tourism Law indicates that, with a minimum investment of USD 25,000, a company can qualify as a tourist project of national interest and obtain benefits such as total exemption from real estate transfer tax for the acquisition of property destined for the development of the project, exemption from customs duties on the importation of assets, total exemption from income tax for up to ten years, and partial exemption of municipal taxes for a period of five years.

Foreign tax credit

There is no foreign tax credit available in El Salvador.