Yesterday, on the 29th of October of 2015, the Congress of El Salvador approved two new taxes on a national scale; below you may find an overview of both taxes.

1) One of said taxes is directed to large companies. The name of this tax is “Special Contribution to Large Tax Payers” and it taxes a 5% rate over the net profit of large companies, whether domiciled or not, that obtained a net profit above or equal to US$500,000.

The tax applies to legal entities, unions of persons and irregular or ‘de facto’ companies. It does not affect individuals.

In that regard, large companies in addition to the Income Tax paid on profits at a rate of 30% and the Tax on Dividends at a rate of 5% (if the shareholder is not established, domiciled or resident of a state of low or no taxation or tax haven) or 25% (if the holding company is constituted, domiciled or resident of a jurisdiction with low or no taxation or tax haven), they will be taxed with an additional 5% rate on net profits when these are equal to or greater than US$500,000.00. It must be pointed out that the law approved does not consider any tax exemption; hence it will apply also to taxpayers that are under a preferential fiscal regime.

This tax was approved with 45 votes in favor.

2) The other approved tax is on telecommunications services users called “Special Contribution for Citizen Security”. It taxes with a 5% rate the consumption of telecommunications services whether fixed and mobile telephony, Internet, cable television, and the acquisition and importation of devices necessary to make use of such telecommunication services.

This tax applies to telephone users.

This tax was approved with 48 votes in favor.