El Salvador: Incentives for export of services

A greater variety of companies, and a wide range of operations, can benefit from various incentives to the export of services, following approval last month by the Legislative Assembly of amendments to the Law of International Services, expected to take go into effect within the next few months.

Under the new rules, any company can benefit from a number of tax exemptions, regardless of whether or not it is located in a free zone, provided it complies with new requirements.

Company owners can be either Salvadoran nationals or foreigners.

Under the new rules, the Economics Ministry may authorize a company as a so-called service center, where the business consists of the provision of services to foreign clients.

In addition, call centers operating in the country may qualify for exemptions in relation to a wider range of services, including the use of various technologies, such texting, "chat" and email.

Previously, export incentives limited the way in which services could be exported, the places that could be authorized as exempt locations, and the media through which the services were provided.

Domestic companies with overseas operations also benefit from the new rules, which exempt various types of so-called Business Process Operations.

Under the new rules, a Salvadoran parent company can receive incentives, when it provides a foreign subsidiary various types of services, such as accounting, human resources and marketing.

Under the old system, only firms operating in a free zone, could receive exemptions for the export of services of this nature.

To be designated as a service center, the company must apply to the Ministry of Economy, and meet various requirements, including minimum levels of investment and job creation.

Incentives include exemption from duties or VAT on the import of various types of equipment used in providing export services, along with national income tax and municipal tax otherwise payable in relation to such operations.

For more information, please contact Dr. Diego Martin, at [email protected] or (503) 2209-1600