El Salvador Rental Income Guide 2026

Overview — Rental Income Tax

Rental income from immovable property (real estate) located in El Salvador is considered Salvadoran-source income and is subject to ISR. The rental income is added to the landlord's other income (salary, business profits, capital gains) and taxed at the marginal ISR rate. For individuals, the rate ranges from 0% to 30% depending on total taxable income. For companies, the rate is 30% (25% for small taxpayers). Rental income from properties outside El Salvador is foreign-source income and is not taxable under the territorial system. The DGII requires landlords to declare rental income in their annual tax returns and maintain proper records of income and expenses.

Tax Treatment — Individual Landlords

For individual landlords, net rental income (gross rent minus allowable deductions) is added to other taxable income and taxed at the progressive ISR rates. This means the effective tax rate on rental income depends on the landlord's total income level. A landlord earning USD 15,000 from employment and USD 5,000 from rental income has total income of USD 20,000. After the personal exemption of USD 4,064, taxable income is USD 15,936. The ISR on USD 15,936 would be approximately: (USD 10,000 − 4,064) × 10% + (USD 15,936 − 10,000) × 20% = USD 593.60 + USD 1,187.20 = USD 1,780.80. The effective rate on rental income depends on the marginal bracket the income falls into.

Allowable Deductions

Landlords may deduct the following expenses from gross rental income to arrive at net taxable rental income:

• Mortgage interest — interest on loans used to acquire or improve the rental property
• Property taxes — municipal property taxes paid
• Insurance — building and liability insurance premiums
• Repairs and maintenance — ordinary repairs (not capital improvements)
• Property management fees — fees paid to licensed property managers
• Utilities — if paid by the landlord
• Depreciation — 5% per annum on the building value (straight-line, not including land)
• Legal and accounting fees — related to the rental activity

Expenses must be properly documented with receipts and invoices. Capital improvements (additions, major renovations) are not immediately deductible but may be depreciated over their useful life.

Commercial Rent — 5% Withholding

Tenants of commercial property are required to withhold 5% of the gross rent and remit it to the DGII as provisional ISR. The withheld amount is a credit against the landlord's final ISR liability. The tenant must issue a withholding certificate to the landlord. This withholding applies to all commercial leases (office, retail, industrial) regardless of whether the landlord is an individual or a company. Residential tenants are not required to withhold. The 5% withholding is in addition to any IVA (13%) that may apply to commercial rent. Landlords who are VAT-registered must charge IVA on commercial rent and issue FEL electronic invoices.

Short-Term Rentals (Airbnb, Vacation)

Short-term rental income (e.g., Airbnb, Booking.com, vacation rentals) is taxable as rental income in the same way as long-term rentals. The same rules apply: net income is added to other income and taxed at marginal ISR rates. Short-term rental platforms operating in El Salvador may be required to report payments to the DGII. Landlords operating short-term rentals should:

• Register for IVA if annual turnover exceeds USD 100,000
• Issue FEL electronic invoices for each booking
• Deduct platform fees, cleaning costs, utilities, and other expenses
• Declare all rental income in the annual tax return

Short-term rental income from foreign properties (e.g., a Salvadoran resident renting a property abroad) is not taxable in El Salvador under the territorial system, but may be taxable in the country where the property is located.

FAQs

Do I have to pay tax on rental income if I only rent one property?

Yes, all rental income from Salvadoran property is taxable regardless of the number of properties. The first USD 4,064 of total income (including salary and rent combined) is tax-free, but all rental income must be declared.

Can I deduct mortgage interest on my rental property?

Yes, mortgage interest on loans used to acquire, build, or improve the rental property is fully deductible against rental income. Interest on loans for personal residences is not deductible in the same way.

What happens if my tenant does not withhold the 5% on commercial rent?

The tenant is responsible for the withholding. If the tenant fails to withhold, the DGII may assess the tax on the tenant. The landlord remains ultimately liable for the ISR on the rental income and should include the full rent in their tax return.

Disclaimer

This guide provides general information about Salvadoran rental income 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.