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El Salvador’s New Tax Will Affect Large Companies

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El Salvador’s New Tax Will Affect Large Companies

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A new tax directed to companies was approved late last month by the Congress of El Salvador. The “Special Contribution to Large Tax Payers” taxes a 5% rate over the net profit of large-sized enterprises.

On 29 October the Congress of El Salvador approved a new 5% tax for companies, domiciled or not, that obtained a net profit above or equal to US$500,000. This tax – and another one of 5% also directed to telecommunications industry– is intended to raise funds for the improvement of domestic security.

This law on high taxpayers does not include exemptions so companies granted tax benefits such as the Free Trade Zone law will still have to pay tax on profits above the threshold. The tax applies to legal entities, unions of persons and irregular or ‘de facto’ companies. It does not affect individuals.

When entering a new market, companies must ensure a complete understanding of local laws and regulations - otherwise they could face risks to their reputation, fiscal penalties, loss of business opportunities and legal action. TMF Group helps companies keep compliant with local regulations and filings and set up in El Salvador with speed, safety and efficiency.

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