El Salvador Corporate Tax Guide 2026

Overview — Corporate Tax in El Salvador

Corporate tax in El Salvador is governed by the Ley de Impuesto sobre la Renta (Income Tax Law) and administered by the Dirección General de Impuestos Internos (DGII). A company is considered resident if it is incorporated under Salvadoran law or has its place of effective management in El Salvador. Following the territorial principle, only income sourced within El Salvador is subject to corporate tax. Companies must register with the DGII, obtain a Número de Identificación Tributaria (NIT), and maintain proper accounting records. The tax year is the calendar year, and companies may apply for a different fiscal year with DGII approval. Annual returns are due by 30 April of the following year, with quarterly estimated tax payments.

Standard CIT Rate — 30%

The standard CIT rate for resident companies is 30% of net taxable profit. Non-resident companies with a permanent establishment in El Salvador are also taxed at 30% on Salvadoran-source income. Taxable profit is computed as gross revenue less allowable deductions, including operating expenses, cost of goods sold, depreciation, interest expenses (subject to thin capitalisation rules), and operating losses carried forward. Losses may be carried forward for up to 6 years. There is no group taxation or consolidation; each company files separately. Capital gains are included in ordinary income and taxed at the standard CIT rate.

Small Taxpayer Rate — 25%

A reduced CIT rate of 25% applies to small taxpayers (pequeños contribuyentes) whose annual gross revenue does not exceed USD 150,000. To qualify, the company must meet simplified tax compliance requirements and maintain basic accounting records. The small taxpayer regime is designed to reduce the compliance burden and effective tax rate for micro, small, and medium enterprises (MSMEs), which form the backbone of the Salvadoran economy. Small taxpayers may also have simplified VAT and filing obligations. If a company's revenue exceeds USD 150,000 in any tax year, it must revert to the standard 30% rate from the following year.

Branches of Foreign Companies

Foreign companies operating through a branch or permanent establishment in El Salvador are taxed at 30% on Salvadoran-source income. Branch profits remitted to the head office are subject to a 5% branch remittance tax (Impuesto sobre la Distribución de Utilidades), making the effective combined rate approximately 33.5% for repatriated profits. Foreign companies may alternatively establish a Salvadoran subsidiary, which is treated as a resident company and subject to the same CIT rates. Dividends paid by a subsidiary to its foreign parent are subject to a 5% withholding tax. The choice between branch and subsidiary depends on legal, commercial, and tax considerations.

Transfer Pricing & Thin Capitalisation

El Salvador has transfer pricing rules that follow OECD guidelines. Related-party transactions must be conducted at arm's length, and taxpayers must maintain transfer pricing documentation. The thin capitalisation rule limits interest deductions to a 3:1 debt-to-equity ratio for related-party debt. Interest exceeding this threshold is recharacterised as a dividend and subject to withholding tax. The DGII may apply general anti-avoidance rules. Advance Pricing Agreements (APAs) are available for qualifying taxpayers. El Salvador is a member of the OECD's Inclusive Framework on BEPS and has implemented country-by-country reporting for multinational groups with consolidated revenue above USD 750 million.

Capital Allowances & Depreciation

El Salvador allows depreciation deductions for fixed assets using the straight-line method over the asset's useful life as specified by tax law:

• Buildings and structures — 5% per annum (20-year life)
• Machinery and equipment — 10–20% per annum (5–10 year life)
• Motor vehicles — 20% per annum (5-year life)
• Computer equipment and software — 33.3% per annum (3-year life)
• Furniture and fixtures — 10% per annum (10-year life)

Intangible assets may be amortised over their useful life, not exceeding 10 years. Goodwill is not amortisable for tax purposes but may be impaired. The cost of acquiring patents, trademarks, and other intellectual property may be amortised over 5 years.

FAQs

What is the penalty for late filing of corporate tax returns?

Late filing penalties range from USD 100 to USD 5,000 depending on the company's revenue and the length of delay. Interest on unpaid tax accrues at 1.5% per month. Severe non-compliance may result in business registration suspension.

Do foreign companies pay tax on Salvadoran-source income?

Yes, non-resident companies with a permanent establishment in El Salvador pay 30% on Salvadoran-source income. Non-residents without a PE are subject to withholding tax at source (dividends 5%, interest and royalties 10–20%).

Is there a minimum tax in El Salvador?

Yes, El Salvador imposes a minimum tax (Impuesto Mínimo) equivalent to 1% of gross assets or 30% of net income whichever is higher, applicable to companies that report consistent losses. This prevents companies from indefinitely avoiding CIT through loss reporting.

Disclaimer

This guide provides general information about Salvadoran corporate tax for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Salvadoran tax advisor or the Dirección General de Impuestos Internos for advice specific to your situation. InvestmentKit does not provide tax advice.