Free Zones Law in El Salvador
Who can benefit
- Developers (desarrollistas): companies that build and run a free zone.
- Users: Salvadoran or foreign companies in a free zone engaged in production, assembly, manufacturing, processing or trading of goods, or in services linked to international or regional trade such as packaging, cargo consolidation and distribution.
- Inward processing warehouses (DPA), also called bonded warehouses: companies that use the regime at their own premises.
- Since the 2025 reform, free zone users may also locate in a service park (new article 54-I), although Consortium Legal notes that no service parks were operating in El Salvador when the reform was published.
Source: PwC Worldwide Tax Summaries: El Salvador, tax credits and incentives; BLP: Key reforms to the Free Trade Zones Law and new reinvestment incentives in El Salvador; Consortium Legal: Reforms to the International Services Law and the Free Trade Zones Law in El Salvador1,2,3
The exemptions
- Income tax (ISR).
- Municipal taxes.
- Free entry: no import duties (DAI), VAT or other import taxes on machinery, equipment, raw materials and inputs needed for the activity.
- Property transfer tax on land bought for the productive activity.
- VAT.
Source: PwC Worldwide Tax Summaries: El Salvador, tax credits and incentives; BLP: Key reforms to the Free Trade Zones Law and new reinvestment incentives in El Salvador1,2
Sales to the Salvadoran market are allowed, but on those sales the company pays the import duties, income tax, VAT and municipal taxes that a local business would pay.1
The December 2025 reform
| Change | What it means |
|---|---|
| Additional income tax period | A new 10-year period of income tax exemption for developers who expand by at least the original area of the zone (covering old and new income if construction doubles, otherwise in proportion), and for users or DPAs that increase their investment by 100%, adjusted for inflation |
| Employment route | An investment at least equal to the initial one, with a minimum of USD 500,000 for users or USD 800,000 for DPAs, plus 100% employment growth over the average of the last 3 years |
| Repeatable | The additional period can be requested again for each new qualifying expansion |
| Grace period | 2 years after the agreement expires, with all benefits kept; taxes waived must be paid if the required investment is not completed |
| Green areas | 30% of the total area of a zone, with at least 10% inside or next to it; 20% for DPAs |
| Exclusion | Companies that previously operated in the national customs territory and paid income tax there cannot move into the regime to obtain the benefits |
Source: BLP: Key reforms to the Free Trade Zones Law and new reinvestment incentives in El Salvador2
Consortium Legal reports that the additional period is now 10 years, five more than before the reform.3
How to apply
Check the application route and the current forms with the free zone operator or with INVEST before you commit to a location. The individual zones, their operators and the space on offer are covered in the Free Zones section.
Frequently Asked Questions
What does the Free Zones Law exempt?
Companies operating in a free zone or an inward processing warehouse (DPA) are exempt from income tax, municipal taxes and import duties on the goods they need.
What changed in the December 2025 reform?
Legislative Decree No. 493 of 23 December 2025 rewards reinvestment with a new 10-year income tax period and added a 2-year grace period after the agreement expires.
Who can benefit from the Free Zones Law?
Free zone developers, users that produce, assemble, process or trade goods or provide services linked to international trade, and inward processing warehouses at their own premises.
Sources
- PwC Worldwide Tax Summaries: El Salvador, tax credits and incentives
- BLP: Key reforms to the Free Trade Zones Law and new reinvestment incentives in El Salvador
- Consortium Legal: Reforms to the International Services Law and the Free Trade Zones Law in El Salvador
Figures checked 8 November 2026. Prepared by InvestSalvador.com for general information. It is not investment, tax or legal advice; please confirm details with a qualified adviser before acting.
