LEGAL CONNECTION - TAX
LEGAL CONNECTION - TAX
Tax Implications of the Minimum Wage Increase
On May 22, 2025, the Executive Branch, through the Ministry of Labor and Social Welfare, issued Executive Decree No. 11, updating the minimum wage rates across various economic sectors in El Salvador.
One of the most significant changes is the increase in the minimum wage for the commerce and services sector, which rises from USD 365.00 to USD 408.80 per month.
Tax Implications
This adjustment has direct tax implications, as several thresholds and penalties established in the Tax Code are defined based on the monthly minimum wage in the commerce sector.
Article 228 of the Tax Code states that, for tax purposes, the minimum wage shall be understood as the equivalent of 30 days of the minimum daily wage for a standard daytime work schedule, as set by executive decree for workers in the commerce sector.
Under the new Executive Decree No. 11, the daily wage is USD 13.44, which means the monthly minimum wage for tax purposes is calculated as follows:
13.44 × 30 days = USD 403.20
Tax Obligations Affected by the New Minimum Wage
| Obligation | Threshold in Minimum Wages | New Threshold in USD |
|---|---|---|
| Submission of F-987 Report (Art. 125 TC) | 2,753 | 1,110,009.60 |
| Income threshold for mandatory appointment of tax auditor (Art. 131 TC) | 4,817 | 1,942,214.40 |
| Submission of F-983 Report (Art. 142 TC) | 2,753 | 1,110,009.60 |
| Exemption on lottery prize winnings (Art. 160 TC) | 30 | 12,096.00 |
It is important to note that, as previously mentioned, many of the penalties outlined in the Tax Code are calculated based on a specific number of monthly minimum wages. Therefore, the increase in the minimum wage may result in higher fines in the event of tax violations.
Although this adjustment originates from labor policy, it requires taxpayers—especially those operating near the thresholds mentioned above—to conduct an internal review of their tax obligations and processes. Ensuring compliance based on the updated amounts will help avoid formal errors and future contingencies.
Need Tax Advice?
Jhonny Flores, Tax Partner – BDO El Salvador
Email: correo@bdo.com.sv