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Amendments to the Tax Code of El Salvador

The Legislative Assembly of El Salvador has approved significant reforms to the Tax Code aimed at simplifying the requirements for identifying buyers and service recipients. These modifications seek to facilitate the process for both individuals and legal entities, whether domestic or foreign. 

One of the most noteworthy reforms states that individuals will not need to provide their name when purchasing goods or services valued at less than USD 25,000, provided that they do not require an invoice to deduct the expense on their tax return. However, when the amount exceeds this threshold, they will be required to present their name and other identifying documents, such as the Tax Identification Number (NIT) or passport number. 

For legal entities, the regulations continue to require that the company name is always provided. The reforms also emphasize the importance of electronic invoices, mandating that, in cases where expense deductions are required, both individuals and legal entities must submit the corresponding documentation for transactions exceeding USD 25,000. This includes not only the name or business name but also the NIT or passport number, as applicable. For amounts below this figure, the regulations stipulate that if an invoice is needed to justify an expense, the necessary identifying information must also be provided. 

Additionally, penalties have been introduced for those who fail to comply with these provisions. If identification of the purchaser is demanded without a legal obligation, a fine of 30% of the transaction amount will be imposed, with a minimum of two monthly minimum wages: USD 730 per operation. 

The decree will take effect 8 days after its publication in the Official Gazette. 

Mauricio Orellana 
mauricio.orellana@garciabodan.com
Socio
García & Bodán
El Salvador

 

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