By: Norma Villalobos
1- Can foreign companies operate in El Salvador?
Foreign companies as well as foreign non-profit Associations and Foundations may operate in El Salvador as Branches.
In the case of corporations, they must be registered in the Commerce and Associations and Foundations Registry, in the Non-Profit Associations and Foundations and, Territorial Development Ministry registry.
2- Which are the requirements that foreign companies must comply with to operate in El Salvador?
For Mercantile companies:
Register the necessary capital to operate in the Republic of El Salvador at the National Investment Office (ONI) of the Economy Ministry of, being the minimum capital to register US$12,000.00.
Also, register the Branch of the foreign company in the Commerce Registry. For this process it is necessary to present the documentation that proves the following:
- The company must be legally constituted according to the laws of its origin country.
- The decision to operate in El Salvador has been validly taken, that an attorney-in-fact of the company is appointed who resides permanently in the country, and to protest the submission to the laws, courts, and authorities of the Republic in relation to the operations that it carries out in Salvadoran territory or that are to take effect in the same.
For associations and non-profit foundations
To register the foreign entity in the Associations and Non-Profit Foundations Registry of the Ministry of Government and Territorial Development.
For this registration it is necessary to present the documentation that proves:
- The entity legally constituted according to the laws of its origin country.
- The decision to operate in El Salvador must have been validly taken.
- To have enough patrimony to carry out its operations in the country.
- Commit to permanently maintain at least one representative in the Republic of El Salvador.
- The principal entity must respond inside and outside the country for the acts and contracts that are subscribed in the Republic, as well as to protest adhesion, obedience and submission to the laws, courts, and authorities of the Republic.
3- What are the rights and obligations of foreign companies registered in El Salvador as a branch?
Branches of foreign companies, as well as those of non-profit associations and foundations that are authorized to operate in the Republic of El Salvador are considered domiciled in the country and acquire the same rights and obligations of national companies once the registration process is completed.
Some of the main obligations to which foreign companies registered as branches in El Salvador are subject to are the following:
- Branches of foreign companies must comply with all corporate obligations, such as those related to the approval by the highest authority of the Parent Company, in its country of domicile and within the first 5 months of the year: the financial statements for each fiscal year and appoint the financial and tax auditors, as appropriate, and their subsequent registration in the Commercial Registry.
- Inform the Tax Administration of the appointment of the Tax Auditor within 10 working days from the date on which the appointment was made by the highest authority of the parent company.
- Annually renew its company registration and registration of its premises before the Commercial Registry to be able to continue operating legally.
The Branches of Foreign Associations and Foundations must submit to the Registry of Non-Profit Associations and Foundations, within 2 months after the closing of its fiscal year, the General Balance Sheet and Financial Statements duly audited by an Auditor for the purpose of registration.
All foreign branches must:
- Declare and pay the taxes generated by the activity to which it is dedicated, in accordance with the national tax legislation.
- Register their work establishment before the General Labor Inspection Directorate and the Regional Labor Offices and keep the information updated annually.
- To have an Internal Work Regulation approved by the General Directorate of Labor, when 10 or more permanent workers are hired.
- To register its establishment before the Municipality in which it establishes its domicile, as well as to declare and pay the municipal taxes.
- Register as an Obligated Subject before the Financial Investigation Unit (UIF) of the Attorney General’s Office of the Republic and comply with all the obligations imposed by the Anti-Money Laundering Law, its regulations, UIF instructions as well as other applicable legislation.
For more information on this and other legal issues, please contact LatinAlliance El Salvador, Abogados y Notarios, at the following e-mail address: nvillalobos@latinalliance.co