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Investment & Legal Framework
Limited corporations not residing in the country are
obliged to appoint a representative or agent before
the General Direction of Internal Revenue. If there
is no appointed representative or agent before
said entity, the legal representative of the Limited
corporations will be considered as such.
Value Added Tax (VAC)
(Legislative Decree No. 296 dated September 1,1992)
The Tax on Transference of Real Estate and Goods
and Services Rendered Tax (Value Added Tax) was
added to the tributary system in September 1992.
It started with a proportional rate of 10% on the
transference, importation, and introduction (in the
Central American area) of consumer and corporeal
goods, services rendered, importations, goods
cleared through customs and personal consumption
services. The tax was then increased 3%to its
current 13%. As an incentive for exportation, all
export operations have a 0% tax. However, taxes
are collected when producers buy goods and
required services for the manufacturing of products
or for export services. However, they have an export
benefit with a refund of 6% FOB.
A deduction and payment system has been
established for large taxpayers of 1% withholding
for (VAC) advanced payment derived from the
price of goods and services acquired by small and
medium taxpayers. Being (withholding) sells of
the big taxpayers to small and medium taxpayers
(perception), article 162 of the Tributary Code,
creates the withholder and perception figures. It also
defines big taxpayers as well as those taxpayers that
transfer or render services through credit and debit
cards, where 2% advance payment is withheld. The
issuer of the affiliated credit card is regulated under
article 162 of the Tributary Code.
Affected by Special Regulations are the Transfers
of Goods and Services to Foreign Service, exports
consisting of permanent transfer domain of corporeal
goods, services destined for use and consumption
abroad, and the rendering of services done in the
country destined to be exclusively used abroad,
or have been classified as exports by the General
Direction of Tax and Custom.
Exports are subject to zero per cent tax.
Fiscal Credit Deduction
The tax credit generated when purchasing goods
and services used for export activity, fiscal debit can
be deducted originating for taxed internal operations
that may have been carried on in the same tributary
exportation period. If the fiscal credit is superior to
the fiscal debit of said period, the remaining can be
deducted in the following tributary periods until its
total termination.
Fiscal Credit Refund
In case that the fiscal credit can not entirely be
deducted during the correspondent tributary period,
the exporter who does not have any tributary liquidity
and demands debts compensation with such a fiscal
credit, can request it to the General Direction of
Internal Tax, in cash, of such remaining sum.
If the exporter also carries out internal transfers of
goods, it can only have the right to the fiscal credit
refund equal to the percentile that represents the
value of the exports with relation to the total sales
of the tributary period corresponding to the date of
shipment of goods.
The regulation will establish: requirements,
documentation, terms, forms, procedures and
necessary guarantees to obtain an Import Tax Refund.
The Central American Uniform Tariffs Code
(CAUCA) and the National Regulation of the Central
American Uniform rates (RENCAUCA) establish the
basic customs legislation of mandatory application
of the customs activities organization for the signing
countries with the requirements of the Common
Market and the Central America Tariffs and Customs
Agreement.
Importation tax is calculated according to the Central
America Rates System common to all countries of
the region. Currently, it has had a gradual reduction
of taxes and tariffs to make the region more
competitive within the international markets.
Other Taxes
In addition to the three main State revenue sources,
there is another tax that generates 2% of El
Salvadoran revenue, for example, the Real Estate
Tax, a transfer rate of real estate when its value
exceeds ¢250,000.00 (US$28,571.43) with a fixed
rate of 3%. Since the tax is subject to a real value
that the Tributary Administration determines its
application is subject to technical evaluation criteria.
A tax also exists, which is paid every time the owner
renews the circulation permit (registration) of a
vehicle or when it is introduced from abroad that has
been recently modified.
Finally, El Salvador has specific taxes corresponding
to alcoholic beverages, 20%; Cigarettes, 39%; Soda