The Legislative Assembly of El Salvador has approved new regulations that offer up to 15 years of income tax exemption to encourage vertical construction projects of over 35 floors.
These regulations, titled “Special Provisions for the Promotion and Granting of Tax Incentives for the Development of High-Rise Real Estate Projects,” grant exemptions to individuals, corporations, and legal partnerships, whether or not they are domiciled in the country, who hold new investments in construction or development projects.
Eligible Projects for Exemption
The following projects can benefit from the tax exemption:
- Construction of New High-Rise Buildings: Developments initiated after the law comes into effect that meet the requirement of having 35 floors or more, measured from street level in front of the building, will be eligible.
- Beneficiaries of the Tax Incentive: Both individuals and corporations, as well as partnerships, regardless of their domicile, can access the benefits of this decree as long as they hold new investments in high-rise building projects, as previously established.
These investments must be associated with commercialization in one of the following sectors or under specific conditions:
- Construction of New Buildings: Developments that begin after the law takes effect and meet the height requirement will be considered.
- First Sale of Properties: The exemption will apply to the first total sale of the building or the first sale of specific areas, such as apartments or offices. .
- Commercial or Tourist Rentals: Owners who are the initial investors and rent high-rise properties can benefit from the exemption.
- Provision of Hospitality Services: If the service provider is the project holder, the exemption will also apply.
- Reconversion of Activities: If holders decide to repurpose their buildings, such as transforming an office condominium into a hotel, they can continue to enjoy the incentives.
The decree will take effect eight days after its publication in the Official Gazette.
mauricio.orellana@garciabodan.com
Partner
García & Bodán
El Salvador