Fiscal Radar: Regulatory Changes in Tax Matters
Fiscal Radar: Regulatory Changes in Tax Matters
Regulatory Changes in Tax Matters
In recent months, several reforms and decrees have been approved with direct impact on the fiscal landscape, including legislative provisions, executive decrees, and announcements from the Ministry of Finance. These measures must be carefully considered by taxpayers, as they directly affect compliance with tax obligations. Below is a summary of the main changes:
1. Income Tax
On April 30, 2025, the Legislative Assembly approved a reform to Article 37 of the Income Tax Law, modifying brackets I and II of the tax table applicable to individuals, estates, and trusts. As of this reform:
- Bracket I exempts income up to $6,600.00 annually.
- Bracket II starts from $6,600.01 onwards.
On the same day, Executive Decree No. 10 was issued, updating the Income Tax Withholding Tables applicable to employees, reflecting the new values in brackets I and II for all withholding modalities (monthly, biweekly, weekly, and recalculations in June and December).
It is important to note that these new tables do not consider the fixed deduction of $1,600 established in Article 29 of the Law, which may result in differences between the withholding and the final tax settlement. Therefore, the same Executive Decree recommends considering this element when determining applicable payroll income tax withholdings.
2. Foreign Agents Law
On May 20, 2025, the Foreign Agents Law was approved. It applies to individuals or legal entities, whether national or foreign, whose activities within Salvadoran territory respond to interests or are financed, directly or indirectly, by a foreign person.
For those subject to this Law, several compliance requirements are established, including:
- Registration in the Foreign Agents Registry (RAEX).
- Compliance with the provisions of the Anti-Money Laundering Law.
- Channeling of received financial resources or assets through the Salvadoran banking system.
One of the most significant aspects of this regulation is the introduction of a 30% tax on fund transfers received by foreign agents. This tax must be withheld and paid by financial institutions, acting as withholding agents.
The Law also provides the possibility of requesting an exemption from its application, provided certain requirements and conditions established in the regulation are met.
To support its implementation, Executive Decree No. 12 has been issued, containing the Regulation of the Foreign Agents Law, offering greater clarity on applicable procedures and obligations.
3. Tax Reports (F-987)
The Ministry of Finance has announced that starting July 15, 2025, the suggested version of the F-987 Report (Suppliers, Clients, Creditors, and Debtors) for the period January to June 2025 will be available. This version will be generated based on the information provided by the taxpayer in the VAT returns for that period.
In case of inconsistencies, the Ministry has indicated that the corresponding VAT declarations must be modified, as the report must reflect the actual purchase and sales transactions.
Additionally, the file upload modality for the categories of Principals, Creditors, and Debtors remains unchanged.
Final Considerations
Given the impact these changes may have on taxpayers' fiscal compliance, it is essential to conduct a detailed analysis of each measure and assess its application within the specific context of each operation. Timely adoption of necessary corrective or adjustment actions will ensure proper compliance with tax obligations and help avoid future contingencies.
Need Tax Advice?
Jhonny Flores, Tax Partner – BDO El Salvador
Email: Jhonny.Flores@bdo.com.sv