On December 23, 2025, El Salvador’s Legislative Assembly approved a Legislative Decree introducing significant amendments to the Free Trade Zones, Industrial and Commercialization Law, published in Official Gazette No. 243, Volume 449.
The objective is clear: to attract domestic and foreign investment, enhance the country’s competitiveness, and adapt the regime to the evolving dynamics of international trade.
For companies, corporate groups, and decision-makers, these reforms go beyond regulatory adjustments. They directly affect project structuring, access to tax incentives, and regulatory risk management.
New territorial and operational definitions: impact on planning and expansion
One of the most relevant changes is the formal definition of the Metropolitan Area of San Salvador, aligned with the Law on Territorial Development and Land-Use Planning and its regulations.
This provides greater legal certainty for industrial, logistics, and service projects assessing location, expansion, or relocation of operations.
In addition, the concept of “Free Entry” is introduced, allowing goods to be brought into the national territory exempt from import duties (DAI) and VAT, provided legal requirements are met.
For CFOs and supply chain teams, this change may translate into cost optimization and improved operational efficiency, if properly structured from the outset.
Green areas and permits: urban planning compliance as an operational risk
The reforms redefine obligations related to green areas, requiring them to represent 20% of the project’s total area, with specific rules governing their distribution inside or outside the Free Trade Zone or DPA.
At the same time, the role of authorities such as the Territorial Planning Authority (DOT) and the San Salvador Metropolitan Area Planning Office (OPAMSS) is reinforced with respect to construction permits.
As a result, urban planning non-compliance is no longer a minor issue, but a factor that may affect project timelines, costs, and the continuity of tax benefits.
Expanded tax incentives, conditioned on real investment
The amendments allow for an additional period of up to ten years of tax incentives, provided that both the initial investment and employment levels are doubled.
For projects that previously met requirements other than investment thresholds, the law establishes new minimum investment levels to access the extension:
- Free Trade Zones: minimum investment of US $500,000.
- Active Processing Depots (DPA): minimum investment of US $800,000.
With respect to employment, the increase must be assessed based on the average number of active jobs over the previous three years.
These incentives may be requested more than once, provided all legal requirements are met.
From a strategic perspective, this opens opportunities to structure phased growth plans, but requires robust documentation, traceability, and disciplined financial planning.
Increased regulatory oversight: authorizations, changes, and exclusions
Companies must obtain prior authorization from the Ministry of Economy for material changes, including expansions, relocation, changes in beneficiary status, or the closure of operations. In the case of Free Trade Zones, users must also notify the zone administrators.
A critical risk point is Article 54-B, which excludes from the regime any individuals or legal entities that previously operated within the national customs territory and paid income tax prior to applying for qualification under the regime.
This provision requires careful analysis in M&A transactions, corporate reorganizations, and operational migrations.
Grace period and consequences of non-compliance
Developers, Free Trade Zone users, and DPAs will benefit from a two-year grace period following the expiration of their respective agreements, during which all benefits will remain in force, including income tax exemptions.
However, if the committed investment is not completed by the end of the grace period, companies will be required to pay the taxes and duties that would have applied in the absence of the incentives, potentially resulting in a significant financial impact.
Key takeaway for businesses
These reforms reinforce the attractiveness of El Salvador’s Free Trade Zone regime, while simultaneously raising the bar for compliance, planning, and internal controls.
For companies considering investment, expansion, or acquisitions under this framework, the opportunity is real, but the margin for error is narrower.
A prior strategic assessment, legal, tax, and operational, will be critical to securing the benefits while avoiding regulatory or tax contingencies.
