On December 23, 2025, Legislative Decree No. 493 was issued, introducing reforms to the Industrial and Commercial Free Trade Zones Law (the “Law”). The purpose of these amendments is to update the incentive regime, promote reinvestment and employment, and provide greater operational flexibility to Developers, Free Trade Zone Users, and Active Inward Processing Warehouses (“DPA”).
The most relevant aspects are highlighted below:
1. Relevant New Definitions
The definition of the San Salvador Metropolitan Area is updated, and the concept of “Free Entry” (Libre Internación) is incorporated. This refers to the introduction of goods into the national territory exempt from Import Tariffs (DAI), Value Added Tax (VAT) on goods and services, and other applicable import taxes.
2. Green Area Rules and Off-site Location Possibility for Free Trade Zones
The “green area” requirement is redefined (30% of total area), requiring at least 10% to be located within the Zone or an adjacent area, while allowing the remaining 20% to be established inside or outside the project, subject to Article 46-A. For DPAs, a 20% requirement applies, distributed as 10% within or adjacent and 10% inside or outside. These rules also apply to expansions, reductions, or relocations.
3. Extension of Incentives for Reinvestment: Developers
An additional 10-year exemption period is enabled for Developers, provided they expand the Free Trade Zone with an area equal to or greater than the original project and comply with infrastructure requirements. Regarding Income Tax (ISR), if the expansion reaches at least 100% of the initial construction, the benefit may extend to income from both the new and original investments; otherwise, a proportional scheme applies.
4. Extension of Incentives for Reinvestment: Free Trade Zone Users
Users may access an additional 10-year term upon expiration of the exemption period if they demonstrate a 100% increase in investment (adjusted for inflation). For employment-based cases, they must prove: (i) an investment equal to the initial one (minimum US$500,000), and (ii) a 100% increase in employees compared to the average of the previous three years. This extension may be requested more than once.
5. Extension of Incentives for Reinvestment: DPA
DPAs may also obtain an additional 10-year term under similar conditions: a 100% increase in investment (adjusted for inflation). For employment-based eligibility, they must demonstrate (i) an investment equivalent to the initial one (minimum US$800,000), and (ii) a 100% increase in employment over the three-year average. This extension may be requested multiple times.
6. Eligibility Rule: Prior Operation in National Customs Territory
Entities that have previously operated in the national customs territory and paid Income Tax may not benefit from this Law when applying as Developers, Users, or DPAs. This may impact reconversion or migration projects for existing operations.
7. Validity of Tax Incentives After Agreement Expiration
A 2-year grace period is granted after the expiration of the Agreement, during which beneficiaries continue to enjoy all tax benefits, including Income Tax exemptions. If required investments or adjustments are not completed within this period, the waived taxes must be paid.