Innovation and Technology Manufacturing Law in El Salvador
Qualifying activities
- Programming, management, maintenance, consulting and analysis of computer systems or software.
- Development and sale of cloud computing and data streaming, artificial intelligence, big data analytics, distributed ledger technology, cybersecurity and quantum computing.
- Manufacturing and assembly plants for hardware, semiconductors, communications technology, robotics, nanotechnology, aircraft and unmanned vehicles.
- Systems engineering to integrate industrial technologies into global production chains.
- New sources of energy generation and storage not yet present in the national energy matrix, with the usual authorisations and concessions.
- Research and development of new technologies.
Source: INVEST: Law for the Promotion of Innovation and the Manufacture of Technologies, English translation1
The exemptions
| Tax | Benefit |
|---|---|
| Income tax (ISR) | Total exemption on the incentivised activities |
| Income tax withholding | Exemption from all withholding on the incentivised activities |
| Municipal taxes | Total exemption on the declared net assets |
| Capital gains | Total exemption under articles 14 and 42 of the Income Tax Law |
| Import duties and taxes | Total exemption on goods, inputs, machinery, equipment and tools needed for the activity |
Source: INVEST: Law for the Promotion of Innovation and the Manufacture of Technologies, English translation1
Imports must be essential to the activity, identified as used only for it and in proportion to installed capacity. Firearms, goods for the personal use of directors, partners or staff, and current assets are excluded.1
Who qualifies
- Salvadoran or foreign individuals or companies making a new investment in El Salvador in one of the activities above.
- Registration with the tax authority (NIT) and a valid qualification agreement from the Ministry of Economy.
- Excluded: investments made before the law came into force, investments tied to operations already established in El Salvador, and capital increases from mergers, spin-offs or restructurings.
- Not combinable: companies already using another special regime, including free zones and the International Services Law, cannot also use this law.
- The law sets no minimum investment and no minimum number of jobs.
Source: INVEST: Law for the Promotion of Innovation and the Manufacture of Technologies, English translation1
Obligations and sanctions
- Keep separate accounting for the incentivised activity and keep the supporting documents for the period set by the Tax Code.
- Allocate at least 5% of the operating budget to research, development and innovation.
- Provide information to the Ministry of Economy, which may ask for reports certified by auditors.
- Fines range from 2 to 20 minimum monthly wages of the commerce and services sector, depending on the infraction. Repeated very serious infractions cancel the agreement.
- Benefits are revoked if operations stop for three months in a row, except for force majeure.
Source: INVEST: Law for the Promotion of Innovation and the Manufacture of Technologies, English translation1
Frequently Asked Questions
What does the innovation and technology law exempt?
New investments in technology activities receive a 15-year exemption from income tax, withholding, municipal taxes on net assets, capital gains and import duties.
Which activities qualify?
Qualifying activities include software and computer systems, cloud computing, artificial intelligence, big data, distributed ledger technology, cybersecurity, quantum computing and the manufacture of hardware, semiconductors and robotics.
How much must a beneficiary spend on research?
At least 5% of the operating budget must go to research, development and innovation.
Sources
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.
