By: Norma Villalobos
Recently, the Legislative Assembly, through Legislative Decree No. 969 published in the Official Gazette No. 157 of March 14, 2023, approved reforms to the Income Tax Law, which aim to reduce the tax burden for capital movements through international level with recipients located in the country and encourage national and foreign investment:
- Article 3 is modified in the sense of incorporating a paragraph that excludes from the concept of income all values received in any concept, obtained abroad or any movement of capital, remuneration or emolument, in money or kind, generated or not. for the investment of national or foreign capital, which are nominally obtained or received by natural persons, legal entities or entities without legal personality or not in the country, coming from any source abroad.
Likewise, taxable persons who obtain taxed income and at the same time any of the values contemplated in this section are excluded from the application of the mechanism for determining the proportion of costs and expenses established in Art. 28 of the Law.
- As a consequence of the reform to Art. 3, the provisions of the Law that regulated matters relating to:
- Income obtained from securities and other financial instruments abroad;
- The returns or results of securities when the risk assumed is located or located in Salvadoran territory;
- Obtaining non-taxable, exempt or non-taxable income obtained in another country, by Salvadoran taxpayers domiciled in El Salvador, for credits or financing granted to subjects located abroad;
- Obtaining income by subjects domiciled in El Salvador, from deposits in financial institutions abroad.
These reforms are now in force, 8 days after their publication in the Official Gazette.