Investment Expansion Law in El Salvador
The tax credit
| Investment | Credit |
|---|---|
| USD 1,000,000 to USD 10,000,000 | 10% of the investment |
| USD 10,000,000.01 to USD 20,000,000 | 20% of the investment |
| Above USD 20,000,000 | 30% of the investment |
Source: LexLatin: El Salvador eases the investment expansion regime2
- The credit can be used for up to 10 years and extended for an equal period.
- Since the reform, it applies to the income tax above the average declared in the last four tax years, adjusted for inflation, instead of the best result of the last ten years.
- Property used for the project is exempt from the property transfer tax, as long as it stays tied to the investment for at least 5 years.
- There is no upper limit on the investment.
Source: LexLatin: El Salvador eases the investment expansion regime; LexLatin: the Investment Expansion Law in El Salvador2,1
Who qualifies
- Companies with at least 5 years of operation in El Salvador, proven with 5 years of audited financial statements (10 years before the reform).
- Business groups: companies linked by control and operating in a coordinated way can count as one economic unit. They must show the control relationships and each company share in the project, and they are jointly liable. For the 30% credit, groups must reach a joint USD 75 million, with at least USD 1 million per company.
- No pending tax or customs obligations.
- The regime cannot be combined with incompatible regimes such as the free zones.
Source: LexLatin: El Salvador eases the investment expansion regime; LexLatin: the Investment Expansion Law in El Salvador2,1
The Legislative Assembly lists textiles and clothing, agro-industry, food and beverages, auto parts, electronics, plastics, footwear, chemicals and pharmaceuticals, construction materials and paper among the sectors the law targets.3,2
Obligations after approval
- Start operations within 18 months of approval, unless there is a justified reason.
- File half-yearly reports signed by authorised auditors with the tax authority (DGII) and the Ministry of Economy.
- Keep the assets acquired under the regime in productive use.
- If the benefit is revoked, the company can lose the incentives and be required to pay the taxes it saved.
Source: LexLatin: the Investment Expansion Law in El Salvador1
Frequently Asked Questions
What is the Investment Expansion Law?
The law in force since 24 January 2026 gives established companies that invest USD 1 million or more in an expansion an income tax credit of 10%, 20% or 30% of the investment.
How large is the tax credit?
10% for investments of USD 1 million to USD 10 million, 20% up to USD 20 million and 30% above USD 20 million. The credit can be used for up to 10 years.
How long must a company have operated to qualify?
Since the September 2026 reform, at least 5 years in El Salvador, down from 10. The reform also opened the regime to business groups.
Sources
- LexLatin: the Investment Expansion Law in El Salvador (in Spanish)
- LexLatin: El Salvador eases the investment expansion regime (in Spanish)
- Legislative Assembly: approval of the Investment Expansion Law (in Spanish)
- Decree No. 498 of 14 January 2026, text (Judicial Documentation Centre, PDF, in Spanish)
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.
