The legislative body of El Salvador has approved the fiscal reforms promoted by the Executive, with 66 votes in favor and 17 against.
The major changes include increasing income tax for businesses, which will raise to 30%, except for companies with revenue of less than $150,000, who will continue to pay 25%. Additionally, a minimum tax of 1% was put in place for companies that pretend to be unprofitable, and payment on account was increased to 1.75%, previously being 1.5%.
Another relevant modification is the tax on dividends paid to shareholders, which will drop from 10% to 5%.
In terms of employees, charges for those receiving wages lower than $503 per month were eliminated and the tax for those earning more than $6,200 increased to 30% from 25%.
More on this topic
January 2012
Lawyers and auditors are contending that tax reforms in El Salvador have violated the principle of "those who earn more, pay more" and are preparing legal remedies.
Many companies are preparing to file law suits citing unconstitutionality over some of the amendments to the Law on income tax (ISR) which came into force on January 1st , because they believe that the approved taxes are "confiscatory" and makes them less competitive to the point of having to close down their businesses.
November 2011
The FMLN's proposed reforms include, among other things, raising the limit of exempted income.
Representatives from a faction of the FMLN have presented a series of reforms to income tax law, with which they aim to reduce the burden on those earning less and increase the burden on those earning more.
December 2011
The Salvadoran Corporation of Exporters (Coexport) considers that "the most harmful part of the proposed reform is the new taxes."
A press release from the Exporters Corporation of El Salvador reads:
Besides the reform partially affecting or eliminating financial incentives for foreign and local investors granted by the laws of free trade zones and international services, the most harmful part is the new taxes, according to the president of the Salvadoran Corporation of Exporters (Coexport) , Francisco Bolaños.
January 2012
From 1st January reforms to the current income tax have come into force, affecting declarations filed in 2013, which correspond to 2012 revenues.
Reporters Daniel Trujillo and Velasco Sury writing for the newspaper El Mundo, explain the main changes introduced by the reform.
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