Fiscal Radar: Withholding Requirements for Foreign Agents

Withholding Requirements for Foreign Agents

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.

Among the provisions established by this Law is a 30% tax on fund transfers received by foreign agents. This tax must be withheld and paid by financial institutions, acting as withholding agents.

To comply with this, the Ministry of Finance has announced that starting October 1, withholding agents for this tax must:

• Pay the withheld amount within the first 10 business days of the following month through the Monthly Declaration of Advance Payments and Withheld Income Tax for Foreign Agents (Form F14 V16).
• Report the withholdings made via the Monthly Report on Withholding for Foreign Agents (Form F-935).

It is important to note that the Law provides a mechanism for requesting exemption from its obligations for those subject to it, provided certain requirements and conditions established in the regulation are met. Therefore, it is essential that withholding agents establish control processes to identify when the tax withholding should be applied.