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Tax and Offshore Investment in El Salvador
Tax regimes vary greatly throughout Latin America. While some countries are investor friendly, others are not so open. There are several benefits (i.e. retirement programmes, tax discounts) but also some tax obligations. In this section we provide an analysis of the different tax structure in each country where January First Real Estate lists properties. This information may be very important for you to choose you retirement destination or where to invest. Keep in mind that there are related visa and residence issues which are discussed in Visa/Residence Requirements. In case you need more information or have doubts on any of these issues, the specialised staff in January First Real Estate will be glad to answer all your questions, click here.
Real estate assets are, without doubts, one of the most secure and profitable ways of investment. There are two main reasons for this:
- Properties always tend to increase their value in the long term.
- They generate an income for their exploitation (rental/yields).
International real estate is set to be the biggest and best investment market of the next several years.
Taxes and Costs in El Salvador
Taxes and Costs
Effective Tax Rate On Rental Income
Monthly Income
US$1,500: 22.4%
US$6,000: 22.8%
US$12,000: 23.8%
Income Tax (Impuesto sobre la Renta)
Non-residents are charged 25% tax on net income, including that derived from leasing properties. Depreciation, VAT, and income-generating costs are deductible from the gross income.
VAT
Leasing real estate in El Salvador is subject to 13% VAT.
Capital Gains Tax
Non-residents are charged 25% tax on capital gains earned from selling property in El Salvador. The taxable gain is computed by deducting acquisition costs, improvement costs, and transaction costs from the transfer or sale price. 20% is withheld at source as advance payment.
Living There
During the past years, El Salvador’s Tax System has been through a process of reform in order to simplify collection and to optimize efficiency. Tax revenues from direct taxes have been reduced to two basic sources: Income Tax, and Personal Property Transfer and Service Tax.
Income Tax (Impuesto Sobre la Renta)
The Income Tax Law (Ley de Impuesto Sobre la Renta) determines that all natural persons, successions and trusteeships domiciled in the country and obtaining annual incomes above SVC 22,000 (US$ 2,409) arising from various revenues, must pay the tax progressively, thus:
Income tax
Taxable Income SVC (US$) / Marginal Tax Rate
Up to 22,000 (US$2,409) / 0%
22,000 – 80,000 (US$8,759) / 10% on band over US$2,409
80,000 – 200,000 / (US$21,897) / 20% on band over US$8,759
Over 200,000 (US$21,897) / 30% on band over US$21,897
Deductions:
- Medical expenses up to SVC5,000 (US$547)
- School expenses of taxpayer or children below 25 years old, up to SVC5,000 (US$547)
- Depreciation of vehicle
- Donations to foundations
The Personal Property and Service Tax
(Impuesto a la Transfarencia de Bienes Muebles y a la Prestacion de Servicios)
The Personal Property and Service Tax (known in various countries as Value-Added Tax) was introduced in September 1992. It is levied at 13% for the transfer, importation, and consumption of goods and services including leasing of real estate used for commercial or industrial activities only. This tax is not imposed on services for the lease of real estate as a primary housing.
El Salvador, make your dream investment come true. |
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