The Legislative Assembly approved the Special “Quincena 25” Law, a measure aimed at strengthening workers’ income and stimulating economic activity during the month of January. For companies, its application is not automatic and requires a strategic assessment.
What does the law establish?
The Special “Quincena 25” Law creates a supplementary payment equivalent to 50% of the monthly salary, applicable to employees earning up to US $1,500.
This payment doesn’t replace regular salary, isn’t subject to income tax, doesn’t generate ISSS or AFP contributions, and can’t be subject to garnishment.
Example: An employee earning US $1,200 would receive an additional US $600 in January, with no deductions.
Is it mandatory for the private sector?
- Public sector: mandatory as of January 2026.
- Private sector: voluntary in 2025. Each company may decide whether or not to grant the benefit this year, without creating vested rights for employees.
Tax incentive: how to take advantage of it
Companies that grant this benefit may deduct 100% of the amount paid as an income tax expense. Accordingly, amounts paid under Quincena 25 during fiscal year 2026 (reported in 2027) will be treated as a credit against the income tax payable for that fiscal year.
If the payment is made during fiscal year 2027, the amounts will be treated as deductible expenses and must be reflected as such in the income tax return for fiscal year 2027, filed in 2028.
Risks to prevent:
The main risk is treating this payment as a permanent salary adjustment. Without clear documentation, it may result in:
- Future labor claims.
- Tax contingencies.
- Payroll distortions.
Recommendations for employers
- Analyze the cash flow impact in January.
- Coordinate the decision with legal and accounting teams.
- Clearly communicate to employees the scope and nature of the Benefit.
Our team is available to assist you in evaluating the applicability of the Special “Quincena 25” Law to your company, analyzing its legal and tax implications, and supporting you in a compliant and strategic implementation of this measure.
