Although the purpose of the law reform is to modernize the free zones scheme and meet the requirements established by the World Trade Organization, companies currently operating under the scheme would be affected.
One of the proposed changes is the elimination of unlimited tax exemptions based on export performance, which up until now has applied to all companies in free zones.
To avoid negative effects on company’s performance, if the reform is approved, the aforementioned elimination of exemptions, among other changes, will be applied five years after the expiration of the current model, in 2020.
An article in Elsalvador.com states: "although a date for presenting the draft to the Legislative Assembly has not yet been set, Roberto Bonilla, president of the Chamber of the Textile Clothing and Free Zones (CAMTEX), urged members to approve the bill as soon as they have in their hands, in order to provide legal certainty to investors based in the country and potential investors.
CAMTEX has estimated that once approved, during the first five years 50,000 more jobs could be generated in the sector, bringing the total number of workers in free trade zones to 290,000."
Source: elsalvador.com
More on this topic
November 2011
New investments in the sector are pending the approval of El Salvador's new tax-free zone law.
According to the Salvadoran chamber of textile manufacturers (CAMTEX in Spanish), the reforms being considered by the government comply with all the demands made by the World Trade Organization (WTO).
August 2011
There is a growing demand for textiles and clothes manufacturing, but a new Law on Free Zones is needed in order to bring fresh investments to this sector.
The World Trade Organization (WTO) has determined, after two extensions, the country should, in 2015, replace the law that has been in force since 1998, which grants tax benefits such as a total and permanent exemption from taxes, among others.
April 2009
With the reform to the Law on Free Zones, the country is adapting its legislation to WTO rules.
On Tuesday, the Executive Branch presented draft amendments of the Law on the Free Trade Zone Regimen (7210), which amends five items in the current law, to the Legislative Assembly.
March 2010
The Economy Ministry announced that the ‘Drawback’, a 6% incentive to exporters, will not be paid anymore in 2011.
Exporting companies are working with the government to devise a gradual elimination plan, to be executed this year.
Economy Minister Hector Dada explained that by the end of 2010 the 6% subsidy must be eliminated, because the government assumed the commitment committed to do so in the past.
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