Approval of the Law for the Promotion of Innovation and Technological Manufacturing

On May 4, 2023, the President of the Republic sanctioned the Law for the Promotion of Innovation and Technological Manufacturing, approved by the Legislative Assembly on April 19, 2023. The purpose of this law is to stimulate the Salvadoran economy by granting tax incentives to innovation or technological manufacturing projects such as programming, management, maintenance, consulting, analysis of computer systems or software, development and commercialization of cloud computing services and data flows, and technologies based on the manufacture of parts, materials and equipment or facilities. The law will provide the following tax incentives for a 15-year term:

• Total income tax exemption for income obtained from the incentivized activities.
• Exemption from all types of income tax withholdings for incentivized activities.
• Exemption of municipal taxes on economic activity.
• Total exemption of capital gain.
• Total exemption of VAT and import duties on assets necessary for the incentivized activities.

The Ministry of Economy and the rules of application of the law will develop the requirements to obtain the relevant qualification to enjoy the tax incentives. Publication in the Official Gazette is pending.