Income tax in El Salvador

July 26, 2018

INDIVIDUAL TAXATION

El-Salvador vacation homes

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.


ANNUAL INCOME TAX

TAXABLE INCOME, (US$) TAX RATE
Up to US$5,664.00 0%
US$5,664.00 - US$10,742.86 10% on band over US$5,664.00
US$10,742.86 - US$24,457.14 20% on band over US$10,742.86
Over US$24,457.14 30% on all income over US$24,457.14
Source: Global Property Guide

MONTHLY INCOME TAX

TAXABLE INCOME, (US$) TAX RATE
Up to US$472.00 0%
US$472.00 - US$895.24 10% on band over US$472.00
US$895.24 - US$2,038.10 20% on band over US$895.24
Over US$2,038.10 30% on all income over US$2,038.10
Source: Global Property Guide

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:

  1. Personal allowance of US$1,371.43 for resident individuals whose only income consists of salaries not exceeding US$5,714.29
  2. Medical expenses up to US$800 by the taxpayer, his spouse, parents, and dependents provided that such expenses are not covered by insurance
  3. Educational expenses up to US$800 by the taxpayer and his children less than 25 years of age
  4. 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 TAX
Capital gains are subject to capital gains tax at a flat rate of 10%. The basic cost of the asset, improvement costs over the ownership period, and transaction costs are deductible when computing for the taxable gains.

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 property taxes in El Salvador.

COPORATE TAXATION

INCOME TAX

Income and capital gains earned by companies are generally taxed at the corporate income tax rate of 30%. Companies earning income of less than US$150,000 are subject to corporate income tax rate of 25%. Income-generating expenses are deductible when calculating taxable income.

CAPITAL GAINS TAX

Capital gains are subject to capital gains tax at a flat rate of 10%. The basic cost of the asset, improvement costs over the ownership period, and transaction costs are deductible when computing for the taxable gains.

 

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