The recent changes to the Income Tax Law (LISR) aim to make El Salvador a more attractive destination for investment and capital. By implementing reforms to the LISR, the government hopes to encourage both local and foreign investors while also benefiting Salvadorans living abroad, allowing them to invest in their homeland more easily and build wealth.
One significant aspect of the reform, outlined in Article 3 of the LISR, is the introduction of exemptions from income tax for various activities, products, and profits. This means that certain transactions and earnings will not be subject to income tax, providing a financial incentive for investors and businesses.
The new exemptions cover a range of financial activities, including receiving funds from overseas, transferring capital or investments abroad, earning income from investments in securities or other financial instruments, and more. These exemptions apply to individuals and companies, whether they are based in El Salvador or not.
A key highlight of the reform is the exemption of family remittances and capital repatriation from Salvadorans living abroad who choose to invest in their home country. This not only benefits Salvadorans abroad but also encourages foreign investors to invest in Salvadoran companies, as they too will be exempt from income tax on their investments.
Salvador Gómez Góchez, the president of the Investment and Export Promotion Agency of El Salvador (Invest in El Salvador), sees these incentives as a positive signal for potential investors. According to Góchez, these reforms create a favorable environment for investment in El Salvador, whether through loans, investments, remittances, or salaries. He believes that these measures will contribute significantly to the economic and social development of the nation.
Once approved by the Legislative Assembly, the decree will be sent to President Nayib Bukele for final approval and publication in the Official Gazette, making it a law of the Republic. This step signifies the government’s commitment to creating a conducive environment for investment and economic growth in El Salvador.
