The Legislative Assembly approved reforms that reduce the length of service required to qualify for tax benefits, include business groups, and modify the calculation of the income tax credit.
On September 9, 2026, the Legislative Assembly approved, by a vote of 57, an amendment to the Law for the Promotion of Investment Expansion. The law, which has been in effect since January of this year, aims to encourage companies already operating in El Salvador to expand their production capacity.
What will change for businesses?
Less experience required. The minimum period of operations or investments in the country required to qualify for the benefits is reduced from ten to five years. This opens up the possibility for companies that previously did not meet that requirement to take advantage of the program.
Access for business groups. Companies that operate in a coordinated manner within the same production chain may consider their investments collectively. To qualify for the 30 % tax credit, the group must invest at least US$75 million, and each participating company must contribute at least US$1 million.
New calculation of the tax credit. The reform replaces the reference to the results of the last ten years with the average of the last four years, adjusted for inflation. This change may affect the amount of the credit that a company can apply against its income tax.
More flexible exclusion rules. Companies that have received incentives that have already expired or one-time, non-recurring benefits will also be eligible for these benefits, subject to other legal requirements.
The reform continues to focus on productive activities in sectors such as textiles and apparel, agribusiness, food and beverages, auto parts, electronics, plastics, footwear, the chemical and pharmaceutical industry, construction products, and paper manufacturing.
What should interested companies look into?
Before structuring an expansion project, it is advisable to evaluate the length of time the operations have been in place, the amount and destination of the investment, the relationship between the participating companies, and the specific effect of the tax credit. Companies that have already obtained a classification for their investor profile and their expansion project should also review the provision that would allow them to apply the new calculation for fiscal year 2026.
Legislative approval alone does not mean that the reform will take effect: It will take effect eight days after its publication in the Official Gazette. The published decree will need to be reviewed to confirm its final text and apply it to each project.
At Legal Spot We advise companies and investors on the legal evaluation of their expansion projects and on structuring their operations in El Salvador.
