Foreign-Source Income in El Salvador

What the decree says

The new Article 3, numeral 4, excludes from income "all amounts received in any capacity, obtained abroad, or any movement of capital, remuneration or emolument, in cash or in kind, whether or not generated by the investment of national or foreign capital", received by individuals, legal entities or entities without legal personality, domiciled in the country or not, from any kind of foreign source.¹

What it repealed

• The tax on income from foreign securities and financial instruments received by residents (Article 14-A).
• The rules that treated certain returns on securities and derivatives, and interest on loans to borrowers abroad, as income from El Salvador (Article 16).
• The tax on interest from deposits in foreign banks received by residents (Article 27).

Source: Legislative Assembly: Decree No. 969 of 12 March 2024 (PDF, in Spanish)¹

What stays taxable

• Income from El Salvador is still taxed: goods located in the country, activities carried out there, and services provided or used in El Salvador.
• Interest on loans to residents of El Salvador is income from El Salvador; the payer withholds 10%, or 20% between related parties.
• Securities issued by an entity domiciled in El Salvador produce income from El Salvador.

Source: PwC Worldwide Tax Summaries: El Salvador, income determination; PwC Worldwide Tax Summaries: El Salvador, taxes on corporate income^3,4

Where a business earns both taxable and excluded income, the decree removes it from the cost-apportionment rule in the final paragraph of Article 28. Ask an adviser how this applies to your case, especially for residency or remote work arrangements.¹