On March 12, 2024, the Legislative Assembly of El Salvador approved an amendment to the Income Tax Law (LISR), by adding a numeral 4) to Article 3 of the Law. The amended article regulates the cases of non-taxable income, and to this effect, the new numeral establishes the following:
“Income for this Law does not include:
All amounts received in any form, obtained abroad or any capital movement, remuneration, or emolument, in cash or in kind, generated or not by the investment of national or foreign capital, nominally obtained or received by natural persons, legal entities, or entities without legal personality, domiciled or not in the country, from any kind of source abroad.”
Likewise, a final clause was added to the, excluding the income not subject to this new numeral 4) from the obligation to apply proportionality in the determination of costs and expenses established in art. 28 of the LISR.
On the other hand, the reform decree provides, in its art. 2, that, as of the entry into force of this, the following provisions are expressly repealed:
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- Sixth, seventh, and eighth paragraphs of 14-A.
- Literal c) of the fourth paragraph and fifth and seventh paragraphs of 16.
- Second, third, and fourth paragraphs of 27.
All of the aforementioned legal provisions currently regulate income obtained by subjects domiciled in El Salvador from deposits abroad, securities, financial instruments, and derivative contracts. These incomes, to date, are considered taxable incomes and, moreover, have a procedure that allows for the accreditation before the Salvadoran tax authority, of the tax paid in the country in which said incomes were obtained.
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