Renewable Energy Incentives in El Salvador
Power plants (Decree 462)
- Who: holders of new investments in new plants, or in expansions of existing plants, that generate electricity from hydro, geothermal, wind, solar, marine, biogas or biomass sources, or other sources later identified as renewable.
- Import duties: total exemption for the first 10 years on machinery, equipment, materials and inputs used only for pre-investment and construction, including the substation and the line to the grid.
- Income tax: total exemption on income from renewable generation for 5 years for projects above 10 MW and 10 years for projects of 10 MW or less, from the tax year in which that income starts.
- Carbon credits: total exemption from all taxes on income from the sale of Certified Emission Reductions under the Clean Development Mechanism or similar carbon markets.
Source: Reform of the Renewable Energy Tax Incentives Law, current wording of articles 1 and 3 (Legislative Assembly, PDF, in Spanish); PwC Worldwide Tax Summaries: El Salvador, tax credits and incentives; UNEP Law and Environment Assistance Platform: Legislative Decree No. 148 of 2015 reforming the law1,2,5
The benefits apply only to the investment costs and expenses of the qualified project. The project documents are certified by the electricity and telecommunications regulator, SIGET.1,4
Systems for end users (Decree 436)
| Who | Benefit |
|---|---|
| Suppliers with a SIGET qualification agreement | Total income tax exemption and no withholding on the incentivised activities |
| Suppliers with a SIGET qualification agreement | VAT exemption on local sales and services covered by the law |
| Suppliers with a SIGET qualification agreement | Exemption from import duties (DAI) and import VAT on machinery, equipment, parts and materials needed to sell, supply or install the systems |
| End users who buy from a qualified supplier | VAT exemption on the purchase, installation and maintenance |
| End users who buy from a qualified supplier | Deduction of the purchase and installation cost from taxable income in the year it is paid |
Source: Decree No. 436 of 21 October 2025, Law for the Promotion of the Use of Renewable Energy (Judicial Documentation Centre, PDF, in Spanish)3
- The incentivised activities are importing and selling renewable generation systems, buying and installing them for self-consumption, and maintaining them.
- Suppliers must have a NIT, be registered for VAT with a related activity and be up to date with their taxes.
- End users may feed surplus electricity into the grid, under rules and a tariff set by SIGET.
- The incentives last 10 years from the date the law came into force.
Source: Decree No. 436 of 21 October 2025, Law for the Promotion of the Use of Renewable Energy (Judicial Documentation Centre, PDF, in Spanish)3
Frequently Asked Questions
What incentives exist for renewable power plants?
Under Decree 462, new renewable plants are exempt from import duties on machinery and materials for the first 10 years, and from income tax for 5 years above 10 MW or 10 years for 10 MW or less.
Are there incentives for rooftop solar suppliers?
Yes. The Law for the Promotion of the Use of Renewable Energy of October 2025 covers suppliers and installers of systems for end users, with incentives for 10 years.
Which energy sources qualify?
Hydro, geothermal, wind, solar, marine, biogas and biomass, and other sources later identified as renewable.
Sources
- Reform of the Renewable Energy Tax Incentives Law, current wording of articles 1 and 3 (Legislative Assembly, PDF, in Spanish)
- PwC Worldwide Tax Summaries: El Salvador, tax credits and incentives
- Decree No. 436 of 21 October 2025, Law for the Promotion of the Use of Renewable Energy (Judicial Documentation Centre, PDF, in Spanish)
- Decree No. 462 of 8 November 2007, original text (OAS, PDF, in Spanish)
- UNEP Law and Environment Assistance Platform: Legislative Decree No. 148 of 2015 reforming the law
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.
