In May of this year, the Legislative Assembly of El Salvador unanimously approved a measure to reduce the income tax on foreign investments and remittances to 0%, with no effective limits on the amount or additional requirements. This significant policy change represents a positive shift for the entry of foreign currency into this Central American country, now free of tax burdens.

Previously, income exceeding US$150,000 was subject to a 30% tax upon entering the country. The new measure, therefore, marks a substantial improvement for foreign investors and expatriates sending money home.

This latest adjustment to the tax code comes after El Salvador’s decision in April 2023 to eliminate all taxes related to technological innovation. This measure is part of the government’s ongoing efforts to attract foreign investors to the country.

El Salvador has seen an exceptional increase in Foreign Direct Investment (FDI), with a year-on-year increase of more than 77%. FDI went from $170.9 million to $759.7 million during 2023. This measure seeks to consolidate this trend, especially to promote investment in the tourism sector, which is where the majority is located.

The government’s proactive approach to fostering a favorable business environment is expected to further boost El Salvador’s appeal as an investment destination. The elimination of income tax on foreign investments and remittances is just one of the many steps being taken to achieve this goal.

If you have operations in El Salvador, are going to open a subsidiary in El Salvador, or in any of the more than 50 countries where Auxadi provides its accounting, tax, and payroll services, do not hesitate to contact us. We have 45 years of experience and have made life easier for 1500 clients. Let us help you!

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