El Salvador taxes on a territorial basis: only El Salvador-source income is taxed, for both individuals and companies. El Salvador has no Controlled Foreign Company regime. El Salvador operates a self-assessment system, with the Ministerio de Hacienda conducting post-filing review.
The Salvadoran tax year is the calendar year. The corporate filing deadline is 30 April of the following year.
El Salvador's headline corporate income tax (CIT) rate is 30%.
The headline personal income tax (PIT) rate is 30%.
The standard VAT/GST (or equivalent consumption tax) rate is 13%.
An individual is tax resident in El Salvador if they are present in the country for more than 200 days (consecutive or not) in a tax year, or if El Salvador is the main seat of their economic activity (for example, an employee whose work is mainly carried out in El Salvador, or a professional whose office is based there). A company is resident if incorporated in El Salvador under its incorporation document; branches of foreign companies and permanent establishments operating in El Salvador are also treated as resident entities for tax purposes. Resident individuals are taxed on El Salvador-source income plus certain specific categories of foreign-source investment income (interest on cash deposits held abroad, and gains on the sale of foreign securities, financial instruments, and derivatives), with foreign tax paid on that foreign-source income creditable under specific rules. Non-resident individuals and non-resident companies are taxed only on El Salvador-source income. Note that some residency-by-investment marketing sources describe El Salvador as fully territorial with zero tax on any foreign-source income; PwC's more granular breakdown of the specific foreign-source investment income carve-in is the more precise picture and is used here.
A non-Salvadoran entity has an El Salvador permanent establishment through a fixed place of business or a dependent agent habitually concluding contracts in El Salvador on the entity's behalf, following the OECD Model Treaty definition as applied under Salvadoran domestic law and any applicable tax treaty.
El Salvador has no CFC regime. El Salvador instead relies on transfer pricing rules requiring related-party and tax-haven transactions to be priced at arm's length, plus a targeted anti-abuse mechanism (DGII guideline DG-02/2020) imposing a 25% withholding on payments - including dividends and profit distributions - to residents of jurisdictions taxed at less than 80% of the El Salvador rate. El Salvador has no general anti-avoidance rule (GAAR).
El Salvador has a thin capitalization rule targeted specifically at related-party and tax-haven lending rather than a general debt-to-equity cap on all borrowing: interest, commissions, and other payments on financing, insurance, or reinsurance transactions are non-deductible where the lender is a related party or is domiciled in a low-or-zero-tax or tax-haven jurisdiction, and the underlying debt exceeds three times the value of the borrower's assets or average equity.
El Salvador does not use an elective check-the-box classification system; entity classification generally follows the entity's actual legal characteristics. El Salvador does not have a comprehensive ATAD2-style anti-hybrid regime.
No foreign bank account or foreign financial asset reporting regime exists requiring residents to separately disclose foreign accounts; consistent with El Salvador's territorial system, foreign-source income falls outside the El Salvador tax base entirely and is not reported on the annual tax return at all.
El Salvador's territorial system already excludes foreign-source income from the domestic tax base entirely, functioning as a broader substitute for a conventional participation exemption.
El Salvador's territorial tax system limits the practical role of a foreign tax credit, since foreign-source income is generally outside the Salvadoran tax base to begin with.
Very limited: El Salvador has only one comprehensive double tax treaty in force, with Spain. There is no US-El Salvador income tax treaty and no UK-El Salvador treaty. El Salvador does maintain bilateral investment-protection agreements (covering expropriation/nationalization disputes via international arbitration, not double taxation) with several countries including Luxembourg, the Netherlands, Panama, Switzerland, the United Kingdom, and Uruguay, and participates in the Central American mutual assistance and technical cooperation convention with Costa Rica, Guatemala, Honduras, and Nicaragua.