Opinión legal: Ley para el fomento de la expansión de las inversiones (Decreto NO. 489, El Salvador)

Objective: The law aims to incentivize the expansion of existing investments in El Salvador through tax benefitsseeking to strengthen strategic productive sectors and boost the national economy.

 

Beneficiaries: Natural or legal persons, whether national or foreign who have operated in El Salvador for at least 10 years, and perform real expansion of their investmen, rather than simple asset replacements.

 

Strategic Sectors Included: Textiles and apparel, Agro-industry, food and beverages, auto parts and electronics, plastics, footwear and paper, chemical-pharmaceutical, and construction products.

 

Types of Expansion: New production lines, new plants or production centers, logistics and distribution infrastructure, purchase of machinery, equipment or fleets, R&D centers (Research, Development, and Innovation), and increase in production capacity.

Reduction of previous operations or simulated expansions are strictly prohibited.

 

Exclusions:Companies already enjoying or that have enjoyed other special tax regimes. Companies whose partners have lost tax benefits due to previous non-compliance.

 

MAIN TAX INCENTIVES

Income Tax Credit (ISR)

Based on the amount of the expansion investment:

• • US$1 to US$10 million → 10% tax credit.
  • US$10 to US$20 million → 20% tax credit.
  • Over US$20 million → 30% tax credit.

The credit may be used over a 10-year period, It applies to the surplus of the historical Income Tax adjusted for inflation. It is non-refundable, non-transferable, and non-deductible as an expense.

 

Real Estate Transfer Tax Exemption

• • Total exemption on the purchase of real estate intended for the expansion.
  • The property must be maintained and used for a minimum of 5 years.
  • Applies withi 10 years following the qualification.

 

Qualification Procedure: The investor must: Qualify before INVEST, be current with tax obligations (Tax Solvency), submit an application to the Ministry of Economy including technical, financial, and legal project information. The Ministry of Economy, with the opinion of the Ministry of Finance, issues the Qualification Agreement.

 

Beneficiary Obligations: Comply with all legal, labor, environmental, and tax regulations, maintain separate accounting for the project, submit audited semi-annual reports, Allow inspections and request authorization for any modifications to the approved project.

 

Revocation: Failure to comply with the law may result in:

• • Revocation of the qualification.
  • Loss of benefits.
  • Retroactive payment of taxes and potential administrative or criminal penalties.

 

Validity: Effective as of January 2026. This law is of a special nature, prevailing over any regulations that contradict it.

 

En Sanchez & Partners podemos ayudarte a aprovechar estos beneficios y asegurar que tu proyecto de expansión cumpla con todos los requisitos legales y técnicos para maximizar tu retorno de inversión. Nuestro equipo está listo para asesorarte en cada etapa del proceso de calificación.