Corporate Tax 2010 - BMR Advisors

Chapter 16
El Salvador
Arias & Muñoz
Luis Barahona
1 General: Treaties
1.1 How many income tax treaties are currently in force in El
Salvador
Recently, El Salvador ratified its first Income Tax Treaty, signed
with the Kingdom of Spain, which became effective on January 1,
2009.
1.2 Do they generally follow the OECD or another model
Yes, it does.
1.3 Do treaties have to be incorporated into domestic law
before they take effect
Yes, according to our Constitution, International Treaties must be
ratified by Congress in order for them to become effective in El
Salvador.
1.4 Do they generally incorporate anti-treaty shopping rules (or
“limitation of benefits” articles)
Not applicable.
1.5 Are treaties overridden by any rules of domestic law
(whether existing when the treaty takes effect or
introduced subsequently)
According to our Constitution, ratified International Treaties shall
always prevail over domestic laws.
2 Transaction Taxes
2.1 Are there any documentary taxes in El Salvador
No, presently there are no documentary taxes in our jurisdiction.
Tax stamps were abolished in El Salvador in 1992.
2.2 Do you have Value Added Tax (or a similar tax) If so, at
what rate or rates
Yes, there is a law denominated “Ley de Impuesto a la
Transferencia de Bienes Muebles y a la Prestacion de Servicios”
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(Value Added Tax Law). The rate is 13% over the tax generating
transfer of movable assets, rendering of services or importation of
movable assets. Exportations are not subject to this tax.
2.3 Is VAT (or any similar tax) charged on all transactions or
are there any relevant exclusions
Specific exemptions exist within the VAT Law, as follows:
Importations
a. Those made by diplomatic and consular representations of
foreign nations and its agents accredited in the country, in
accordance to the international treaties subscribed and
approved by El Salvador and subject to reciprocity condition.
b. Those made by international institutions and organisations to
which El Salvador is part and by its officers, when preceded
in accordance to the international treaties subscribed by El
Salvador.
c. Goods imported by passengers, crew members, airship and
other vehicles, when they fall under traveler’s luggage
regime and such species are exonerated of customs rights.
d. Goods donated from abroad to certain entities provided by
the Income Tax law.
e. Donations in accordance to treaties granted by El Salvador.
f. Those made by the municipalities, when the imported goods
are of a direct benefit to the respective community.
g. Machinery imported by the taxpayers duly registered in the
Tax Payers’ Registry, destined to be included in their fixed
assets, and to be used in the goods and services production.
In order to be able to enjoy this exemption, the taxpayer shall
register the specific goods to be imported, in a registry that
shall be taken by the Internal Revenue Bureau (hereinafter
referred to as the “Bureau”) at least 30 days prior to the
importation date.
The Bureau shall establish the necessary requirements,
documents and proceedings to register such goods.
The imported goods’ registered price shall be the effective
international price to the definitive importation date, which
shall be subject to investigation.
h. Buses, shuttle vans and vehicles for lease, dedicated to public
transportation. These vehicles may only be transferred after
5 years of the importation date and respective license
legalisation.
Services
The following services shall be exempt of tax payment:
a. Health services provided by public institutions and public
utility institutions qualified by the Bureau.
b. Lease, sublease or temporary assignment of use of real estate
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