New incentives for foreign investment: Reforms to the International Services Law and Free Trade Zones in El Salvador

El Salvador continues to strengthen its legal framework to position itself as a competitive destination in the region. Recently, the Reforms to the International Services Law and to the Industrial Free Trade Zones and Marketing Law (LZFIC) have been implemented. These modifications have the primary objective of promoting economic and social development by facilitating tax incentives and encouraging new investments.

reformas ley de servicios internacionales

As expert attorneys in El Salvador, at Legal Spot we analyze the most significant changes that directly impact investors:

Benefits of the International Services Law reforms

The International Services Law reforms are designed to expand opportunities for natural or legal persons, both national and foreign, operating under this regime.

  • Plurality of activities: Beneficiaries can now carry out one or more incentivized activities simultaneously, provided they meet the most demanding investment and employment requirements among the requested activities.
  • Flexibilidad en la fase inicial: Se han ajustado los artículos 23 y 24-A para otorgar un mayor margen de operación durante los primeros meses de inversión.
    • Para servicios de procesos empresariales, la inversión mínima es de USD 150,000.00 en Parques de Servicios y USD 250,000.00 en Centros de Servicios.
    • Para servicios médico-hospitalarios, la inversión mínima oscila entre USD 1,000,000.00 y USD 2,000,000.00, debiendo realizarse desde el primer año de operaciones según el caso.
  • Green area management: A more flexible distribution of green areas (30% of the total) is introduced, allowing a portion to be located outside the Service Park under compensation schemes.

Free Trade Zones Law (LZFIC): Extension of tax benefits

For the industrial and manufacturing sectors, the LZFIC presents attractive changes that seek to consolidate existing investments and attract new capital.

  • Extension of the exemption period: One of the most relevant developments is the possibility of requesting an additional 10-year period of full tax exemption once the initial period has expired, representing a 5-year increase compared to the previous law.
  • Requisitos para la extensión:
    • Los desarrollistas deben haber invertido en una ampliación de la superficie total de la zona franca.
    • Los usuarios y Depósitos de Perfeccionamiento Activo (DPA) deben comprobar un aumento del 100% de su inversión inicial o cumplir con requisitos específicos de empleabilidad (con inversiones no menores a USD 500,000.00 o USD 800,000.00 respectivamente).
  • Grace period: A 2-year grace period is established after the expiration of the original agreement for companies to make the necessary adjustments and investments to continue enjoying the benefits.

Mobility and Strategy: DPA and Service Parks

The reform also introduces greater operational versatility:

  • Regime change: It is now possible to request a change of beneficiary type from Free Trade Zone User to DPA and vice versa.
  • Cross-installation: Free trade zone users are allowed to operate in service parks, receiving the same legal treatment as if they were in a free trade zone.

The versatility offered by these International Services Law reforms allows companies greater strategic mobility between tax regimes.

Contact us at legalspotsv and discover how your company can benefit from these International Services Law reforms.

Navigating the tax incentive regimes in El Salvador requires precise legal advisory to ensure compliance with the investment and employment requirements demanded by the Ministry of Economy.

At Legal Spot, we ensure that your company takes full advantage of the competitive benefits of the new International Services Law reforms in El Salvador.

Contact us at legalspotsv and discover how your company can benefit from these International Services Law reforms.