El Salvador ICT Innovation Law
On May 4th, 2023 the President of El Salvador approved the Law for the Promotion of Innovation and Manufacture of Technology, which will promote innovation and technology manufacturing in El Salvador by eliminating tariffs and taxes for 15 years. This will include the elimination of the income tax and any withholding on income tax, capital gains, municipal taxes on net company assets, customs duties, and transportation taxes, as well as the elimination of taxes on the importation of goods, inputs, machinery, equipment, and tools necessary for the new technology related investments.
The law applies to new investments by national or international companies registered in El Salvador and excludes those operating under El Salvador’s free trade zone law or any other preferential tax regime.
Commercial and productive activities specifically included in the bill:
- Programming, management, maintenance, consulting, and analysis of computer systems or software.
- Development and commercialization of cloud computing services and data flow services, artificial intelligence, data analysis, distributed ledger technology, cybersecurity solutions, and quantum computing.
- Technologies based on the manufacture of parts, materials and equipment or installations, assembly, including manufacturing plants for technological equipment or hardware, semiconductors, communications technology, robotics, nanotechnology, aircraft, and unmanned vehicles.
- Engineering and system technologies necessary to integrate basic industrial technologies into global production chains.
- New sources of energy generation and storage, that do not currently exist within the national energy matrix, which will be subject to authorizations and concessions corresponding to each case.
- Research and development of new technologies.
The Ministry of Economy will implement the law and issue investment qualification agreements to companies to receive benefits. In coordination with the Secretariat of Innovation, it will also foster and implement public policy to facilitate industrial innovation technology. The Ministry of Finance will monitor and control the fiscal and customs regime and will conduct inspections and controls to verify compliance.
In terms of international cooperation, the new law enables the President or the Ministry of Foreign Affairs to sign bilateral agreements to promote joint programs and investments in technology, innovation, or manufacturing. They can also enter into cooperation agreements with multinational companies to implement joint investment in research and industrial development that is approved or recommended by the Ministry of Economy.
A copy of the Law for the Promotion of Innovation and Manufacture of Technology was published in El Salvador’s Official Gazette on May 4th, 2023 . It will enter into force 30 days after Diario Oficial.
For more information, contact the U.S. Commercial Service Office in San Salvador at office.sansalvador@trade.gov.