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El Salvador: Living There - Tax Issues

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Living There

INDIVIDUAL TAXATION

Residents are taxed only on their Salvadorian-sourced income. Married couples are assessed and taxed separately.

INCOME TAX (Impuesto Sobre la Renta)

There is no classification of income into different categories. Income from all sources are aggregated and taxed at progressive rates.

For individuals, taxable income is computed as net income (gross income less income-generating expenses) less certain deductions. Resident individuals are entitled to the following allowances and deductions:

• Personal allowance of SVC12,000 (US$1,371) for resident individuals whose only income consists of salaries not exceeding SVC50,000 (US$5,714)
• Medical expenses up to SVC5,000 (US$571) by the taxpayer, his spouse, parents, and dependents provided that such expenses are not covered by insurance
• Educational expenses up to SVC5,000 (US$571) by the taxpayer and his children less than 25 years of age
• Social security contributions

RENTAL INCOME
Rental income is considered as ordinary income and taxed at standard income tax rates. Income-generating expenses are deductible when computing for the taxable income.

CAPITAL GAINS
Capital gains realized by resident individuals from habitual transactions are taxed at the standard income tax rates. The basic cost of the asset, improvement costs over the ownership period, and transaction costs are deductible when computing for the taxable gains.

Capital gains realized from non-habitual transactions are taxed at a special rate of 10%. However, if the property has been in possession of the seller for less than twelve months before he sold the property, the capital gains will be taxed at the standard progressive income tax rates.

VALUE ADDED TAX
(Impuesto a la Transfarencia de Bienes Muebles y a la Prestacion de Servicios)

Value Added Tax (VAT) levied at 13% for the transfer, importation, and consumption of goods and services including leasing of real estate used for commercial or industrial activities. Leasing of residential properties, unless it is effectively connected to a business, is not liable for this tax.

PROPERTY TAX

There are no real property taxes in El Salvador.

El Salvador - more data and information

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