If you want to do business in El Salvador, reading this will help you becoming knowlegeable on the specific tax laws and rates for a LLC which is the most common legal entity in El Salvador.

El Salvador has a territorial tax system. This means that usually income accrued abroad, from our research, but seek professional advice, is not subject to taxation. Certain income accrued abroad such as those from securities and other financing operations may be taxable. Corporate Income Tax standard rate is 30%. This ranks El Salvador as 136th overall with regards to CIT globally.

The valued added tax rate in El Salvador is 13.00%, which ranks the country as 73th overall with regards to VAT globally. In terms of other taxation, an employer will contribute 14.25% to the equivalent of a social security fund and an employee will contribute 9.25%. The overall complexity of the tax system is medium. This is measured by average time to comply with a country's labor tax requirements is as it is 96hours. Contributing to this is the number of yearly labor tax payments, which is 8 in SV.

Thin cap mandates are officially enacted. This refers to any type of requirements on given company with respect todebt-to-asset ratios. Dividends received from a resident company may be included in taxable income. Dividends from foreign entities are deemed to be foreign-source and therefore not subject to taxation. Dividends are distributions of a company earnings, voted by the board, to a particular class of shareholders. Dividends can be issued as stock, cash, or property. Capital Gains are subject to a Capital Gains Tax of 10%. Except when gains are obtained within 12 months following the purchase date, in which case they are taxed as business income. A capital gains tax is levied on the profits that a corporation or natural person realizes when he or she sells sells a capital asset for a price that is higher than the purchase price.

The interest withholding tax rate is estimated at 20%. This means that the tax authorities expects companies to automatically withhold 20% of interests remitted abroad. The dividends withholding tax rate is 5%.Which means that the relevant tax authorities expects companies to pay tax on 5% of dividends paid to non-residents. The royalties withholding tax rate is 20% This means that the relevant tax authorities expects LLC's to pay tax on 20% of royalties remitted abroad. A withholding tax rate of 25% may apply to payments on dividends, interests and royalties if recipient is resident of a considered tax haven.

There is a tax on net wealth in El Salvador. There are no inheritance and real property taxes. There is a transfer tax. There are no widely used credits for innovation spend that include breaks on taxation in this country.

The above is not tax or legal advice for your company situation. We are able to refer you to a tax advisor in El Salvador who can give you the proper advice. Ready to get started? Click incorporate now if you are in a hurry, or press the free consultation button above.