The corporate income tax (CIT) rate is 30%, and this rate is applicable on the total amount of the company’s revenues. There is a reduced CIT rate of 25% for companies that obtain taxable income equal to or less than 150,000 United States dollars (USD) in the fiscal year.
CIT is based on the principle of territoriality, and, by general rule, taxes are paid on goods located, activities realised, and capital invested in El Salvador as well as on services rendered or utilised in the country. Nevertheless, there is a special rule regarding securities and financial instruments, since such income is considered to be obtained in El Salvador if the issuing entity is domiciled in El Salvador.
Taxable income is equal to gross income net of costs and expenses considered necessary for generating and maintaining the related source of income and other deductions allowed by law. Gross income is comprised of income or profits collected or accrued, either in cash or in kind, from any sources in El Salvador.
Corporations are required to follow the accrual method of accounting.
Minimum payment of income tax
Minimum payment of income tax was declared unconstitutional in April 2015 and in May 2018.
Income tax advance payment
A 1.75% tax is applied to gross revenues accrued. This tax is paid monthly as an advance payment that is applied against the CIT at the end of the year.
Local income taxes
There is a municipal tax related to taxpayers' income. This tax depends on the location of the operations where the taxpayer performs its activity.