Free zones El Salvador, tax incentives for companies

As we have learned in previous articles, El Salvador is an attractive destination for foreign investment. Many foreign companies have been attracted by their favorable climate for business, their qualified workforce and their strategic location, this country has implemented a set of tax incentives designed to boost economic growth and promote job creation.

In this article, we will learn about the tax incentives panorama in El Salvador, providing clarity the tangible benefits it offers to companies looking to expand and thrive in this dynamic market. We will know in detail the different types of incentives available, the requirements to access them and the economic sectors that benefit the most from these favorable policies.

Tax exemptions for companies in free zones of El Salvador:

1. Income Tax (ISR):

• Total or partial exemption: Companies covered by tax incentive regimes may be exempt from paying ISR for a specified period, usually for several years.
• Simplified Single Tax Regime (RIUS): This regime offers a reduced ISR rate to companies that meet certain size and income requirements.

2. Value Added Tax (VAT):

• Exemption: Certain goods and services are exempt from the payment of VAT, such as the export of products, the provision of tourist services and the sale of some basic products.
• Credit return regime: Companies can request a refund of the VAT paid for the acquisition of goods and services used in their productive activities.

3. Municipal Taxes:

• Reduction or exemption: Some municipalities offer reductions or exemptions in municipal taxes such as the real estate tax or the garbage extraction fee to companies that invest in their territory.

4. Import taxes:

• Suspension: The temporary suspension of the payment of import taxes applies to the introduction of raw materials, supplies and machinery necessary for the production of exportable goods.
• Temporary admission: It allows the temporary importation of goods without the payment of taxes, with the commitment to re-export them later.

5. Export taxes:

• Exemption: Certain products and services are exempt from the payment of export taxes, such as agricultural products, textiles and software.
• Drawback regimen: This regime allows companies to recover indirect taxes paid in the production chain when exporting their products.

6. consular rights:

• Reduction or exemption: In some cases, reductions or exemptions may be applied in the consular rights associated with the processing of documents and permits for companies that invest in the country.

Free Zones El Salvador: Requirements to enjoy the benefits 

To be entitled to the attractive tax incentives and benefits offered by the Free Zone Regime in El Salvador, companies must meet certain general requirements such as the following:

• Strategic location 

The company must be established within a Authorized Free Zone by the competent authorities. These free zones have modern infrastructure, support services and a favorable legal framework for the development of commercial and industrial activities.

• Eligible activities 

The company must be dedicated to Eligible activities within the current legal framework. These activities may include the production, manufacturing, processing, transformation or marketing of goods for export, as well as the provision of services linked to international trade.

• LEGAL COMPLIANCE

The company must meet all the requirements established in the Free Zone Law Industrial and marketing (LZFIC). This law regulates the operation of the free zones, the rights and obligations of the companies covered by the regime, and the procedures for obtaining tax and customs benefits.

It is important to note that These are just the general requirements to access incentives in free zones of El Salvador. The specific conditions for each company may vary depending on their sector of activity, the size of the investment and other characteristics.

International Free Zones

In short, El Salvador stands as a strategic alternative for companies that seek to expand their presence, diversify their operations and achieve success in a dynamic and constantly growing market. The Salvadoran government, through its investment promotion policies, demonstrates a firm commitment to creating a favorable environment for business development and the attraction of foreign capital. Aristos has been the strategic partner that has contributed to the development of several of these companies, through flexibility and specific solutions according to their industry.