Corporate Tax 2010 - BMR Advisors

Arias & Muñoz
El Salvador
following the finalisation of the fiscal year, which ends on
December 31.
4.3 What is the tax base for that tax (profits pursuant to
commercial accounts subject to adjustments; other tax
base)
The base to calculate such tax is the taxable income, which is
determined by deducting the costs and expenses necessary for the
production of such income, from the gross income, in a fiscal year.
4.4 If it otherwise differs from the profit shown in commercial
accounts, what are the main other differences
No, for these effects, this type of differentiation does not exist in our
legislation.
4.5 Are there any tax grouping rules Do these allow for relief
in El Salvador for losses of overseas subsidiaries
5.3 Is there a participation exemption
The Tax Laws do not contemplate any type of participation
exemption.
5.4 Is there any special relief for reinvestment
The Tax Laws do not contemplate any type of special relief for
reinvestment.
6 Branch or Subsidiary
6.1 What taxes (e.g. capital duty) would be imposed upon the
formation of a subsidiary
The application of taxes for a subsidiary or affiliated company in
the country has the same fiscal treatment as a domiciled company,
with all its rights and duties granted by the tax laws.
El Salvador
There are no taxes grouping rules.
4.6 Is tax imposed at a different rate upon distributed, as
opposed to retained, profits
A different rate is not imposed upon distributed as opposed to
retained profits.
4.7 What other national taxes (excluding those dealt with in
“Transaction Taxes”, above) are there - e.g. property taxes,
etc.
6.2 Are there any other significant taxes or fees that would be
incurred by a locally formed subsidiary but not by a
branch of a non-resident company
There are no other significant taxes or fees.
6.3 How would the taxable profits of a local branch be
determined
They are determined just as they are determined for the income of
local subsidiaries.
There are no other national taxes, apart from that mentioned above.
4.8 Are there any local taxes not dealt with in answers to
other questions
6.4 Would such a branch be subject to a branch profits tax (or
other tax limited to branches of non-resident companies)
A branch is not subjected to a branch profits tax.
All municipal taxes, since every one of the 262 different municipal
districts have different taxes, rates and conditions. Every single
municipal district has its own tax laws, ordinances and municipal
services tax rates.
5 Capital Gains
5.1 Is there a special set of rules for taxing capital gains and
losses
Yes, our Income Tax Law establishes special rules that must be
applied by persons or companies that obtain income through capital
gains.
5.2 If so, is the rate of tax imposed upon capital gains
different from the rate imposed upon business profits
In accordance to what is dictated in the Income Tax Law, the
percentage to be taxed for Capital Gains is 10%, any time the
sale/transfer takes place 12 months after having acquired the good.
6.5 Would a branch benefit from tax treaty provisions, or some
of them
This is not applicable since they receive the same treatment as local
companies.
6.6 Would any withholding tax or other tax be imposed as the
result of a remittance of profits by the branch
Yes, according to Salvadoran Income Tax Law, when the branch
makes any remittance of profits, it shall retain 20% of such payment
as withholding tax (Article 158 Tax Code).
7 Anti-avoidance
7.1 How does El Salvador address the issue of preventing tax
avoidance For example, is there a general anti-avoidance
rule or a disclosure rule imposing a requirement to
disclose avoidance schemes in advance of the company’s
tax return being submitted
There is not a general anti-avoidance rule; however, every year, the
Tax Authority executes inspection plans to avoid the tax evasion.
ICLG TO: CORPORATE TAX 2010
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