The regulation will apply to all 44 municipalities in the country and will allow individuals and legal entities to settle outstanding municipal obligations, with a waiver of fines and late-payment interest and access to payment plans.
On September 17, 2026, the Legislative Assembly of El Salvador passed the Special Transitional Law Granting Incentives for the Voluntary Compliance with Substantive and Formal Obligations Regarding Municipal Taxes, which establishes an exceptional and temporary regime for taxpayers who have outstanding obligations to municipalities throughout the country.
The measure is particularly important for companies, entrepreneurs, and individuals engaged in economic activities, as it will allow certain municipal tax obligations to be settled under more favorable terms and make it easier to obtain the creditworthiness required for various procedures and transactions.
What does the benefit consist of?
The law provides for the possibility of waive the fines and late payment interest resulting from outstanding municipal tax obligations.
This means that the profit does not eliminate the tax originally owed. The taxpayer must pay the corresponding principal amount, but may do so without incurring certain late-payment penalties, provided that he or she complies with the conditions set forth in the regulations.
In addition to the waiver of fines and interest, the program provides for payment options and plans, which will allow the outstanding obligation to be fulfilled in installments that, depending on the case, may be as long as 24 months.
Implementation in El Salvador's 44 municipalities
One of the key aspects of the regulation is its nationwide reach.
The regulations will apply in the 44 municipalities in El Salvador, so businesses and taxpayers must apply for the benefit through the municipality where their tax obligations are registered.
Each municipality must establish the necessary procedures to receive the corresponding applications and payments, either through its service centers or through the banking channels it designates.
Which obligations are eligible?
According to official information released by the Legislative Assembly, the corresponding outstanding municipal tax obligations may be covered under the program, no later than fiscal year 2025.
The benefit covers, among other cases:
- Outstanding municipal taxes that have resulted in fines and late-payment interest.
- Outstanding municipal tax returns.
- Certain breaches of formal obligations.
- Taxpayers who need to bring their municipal tax status into compliance through the options provided by law.
To qualify for the exemption, the taxpayer must first make a payment equal to no less than 30 % of the outstanding tax, in accordance with the conditions set forth in the regulations.
Payment Plans
The law also provides for the possibility of requesting 12-, 18-, or even 24-month payment plans, as applicable.
This option may be particularly relevant for companies that have accumulated obligations spanning several fiscal years and that, even though they have the capacity to resolve their situation, need to spread out the financial impact of the payment.
However, enrolling in a plan means committing to comply with its terms. Failure to pay an installment may result in the loss of the benefit, allowing the municipality to demand payment of the corresponding obligation and initiate the appropriate collection actions.
For this reason, before requesting a payment plan, it is advisable to analyze both the actual amount of the debt and the company's financial capacity to meet the agreed-upon installments.
Who is excluded?
The regulations establish certain restrictions on eligibility for the program.
According to information published by the Legislative Assembly, Certain taxpayers who have been penalized through ex officio tax assessment proceedings, or against whom the municipality has already initiated legal proceedings to collect the debt, will not be eligible for this benefit..
Therefore, it is not enough simply to determine that a municipal debt exists. It is necessary to first review the Legal and Administrative Status of the Obligation, since the stage of the case may determine whether or not this special provision can be applied.
An opportunity for companies to bring their municipal tax status into compliance
For businesses, failing to pay outstanding municipal obligations can have consequences that go beyond the amount owed.
A lack of municipal solvency can create difficulties in completing certain administrative, registration, commercial, or business-related procedures. In that regard, this extraordinary period may present an opportunity to review municipal accounts, resolve outstanding obligations, and develop a strategy for regularization before the special regime ends.
It may also be advisable to verify whether the balances recorded by the municipality actually match the company’s obligations, especially when there are discrepancies regarding time periods, reported assets, business closures, corporate changes, or information that has not been updated with the municipal administration.
When does it take effect?
The law must be published in the Official Gazette and, upon its entry into force, a period of 120 consecutive days during which eligible taxpayers may take advantage of the program.
Since this is a temporary benefit, we recommend that companies with outstanding municipal obligations review their situation in advance and prepare the necessary documentation to submit their application once the regulations take effect.
How can Legal Spot help?
At Legal Spot We can assist companies, entrepreneurs, and individuals throughout the process of bringing their municipal obligations into compliance in any municipality in the country.
Our team can assist, among other things, with reviewing municipal tax statements and taxpayer records; analyzing eligibility for the program; reviewing and resolving tax obligations; preparing and filing applications; negotiating payment plans and arrangements with the municipality; assisting with administrative proceedings; and monitoring the process until the municipal tax situation is brought into compliance.
Each case must be analyzed individually, especially when there is a history of audits, tax assessments, discrepancies in the amounts owed, or collection proceedings.
If your company has outstanding municipal obligations, this may be a good time to review your situation and determine the best strategy for resolving it.
