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El Salvador’s Tax System – Country Profile

El Salvador’s tax system outlines a distinct framework that governs corporate, personal, and other forms of taxation within the country. This system is characterized by a territorial tax regime, where only income generated from sources within El Salvador is subject to taxation. The structure of this system includes a fixed Corporate Income Tax and a progressive Personal Income Tax, both set at a rate of up to 30%, and notably, the absence of Inheritance, Gift, and Wealth Taxes. This overview provides insight into the fundamental aspects of the tax obligations, exemptions, and international agreements that El Salvador upholds, aiming to offer clarity for individuals and corporations operating within or in connection with the Salvadoran economy.

Tax overview

Corporate Income Tax: 30%
Personal Income Tax: 30%, progr.
Inheritance Tax: None
Gift Tax: None
Wealth Tax: None

Territorial Tax Regime

El Salvador applies the tax principle of territoriality. Income tax is levied only on El Salvador source income only, and not income from foreign sources. 

Corporate Income Tax

El Salvador corporations are subject to tax on local source income at a standard rate of 30%. Capital gains are taxed at 10%.

Personal Income Taxation

Individual taxpayers are subject to tax on El Salvador source income only at progressive rates of up to 30%. Capital gains are taxed at 10%. El Salvador does not levy gift, inheritance or wealth tax on individuals.

Anti-Avoidance Rules

El Salvador does not have General Anti-Avoidance Rules (GAARs). El Salvador has Transfer Pricing Rules that require transactions with related parties and persons resident in tax havens or preferential tax regimes be made at arm’s length. El Salvador has Thin Capitalization rules, but does not have Controlled Foreign Corporation (CFC) rules.  

Tax Havens and Preferential Regimes

El Salvador guidelines (DG-02/2020) provide that payments by El Salvador residents to residents of tax havens and preferential tax regimes, defined as taxable at less than 80% of the El Salvador rate, are subject to a withholding of 25% of payments made, including dividends and profit distributions, and disallow the deductibility of expenses related to such payments, including losses, interest on loans, etc. 

Double Tax Treaties (DTTs) 

El Salvador has a DTT in force with Spain.

Foreign Investment Protection

El Salvador has agreements with a number of jurisdictions for the protection of investments that provide for international arbitration in the event of nationalization or expropriation, including with Luxembourg, Netherlands, Panama, Spain, Switzerland, United Kingdom, and Uruguay.

OECD Multilateral Convention 

El Salvador signed the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Signatories are required to exchange information on request, and authorizes exchange of information spontaneously and automatically.

Common Reporting Standard (CRS)

El Salvador has not adopted CRS for the automatic exchange of account information.  


El Salvador has not executed a FATCA Intergovernmental Agreement (IGA) with the United States, and there is no “agreement in substance” for FATCA implementation.

El Salvador’s tax framework presents a clear outline of its fiscal policies, emphasizing territorial income taxation and the absence of several common taxes. Through its regulatory guidelines and international agreements, the country seeks to foster a transparent and conducive environment for both domestic and foreign investors. The absence of GAARs, alongside specific rules for dealing with tax havens and preferential regimes, highlights El Salvador’s targeted approach to tax planning and compliance. The engagement with international tax conventions and treaties further underscores its commitment to global tax cooperation, despite its non-adherence to CRS and FATCA agreements. This concise summary encapsulates the essence of El Salvador’s tax environment, providing a fundamental understanding for stakeholders navigating its tax landscape.

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El Salvador's tax system

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