Tax system in El Salvador
El Salvador taxes Salvadoran-source income, not worldwide income. That territorial approach now matters even more after the 2024 reform that excluded foreign-source income from the concept of income, so foreign dividends, foreign capital gains and other overseas passive income are generally outside Salvadoran income tax when the source is abroad.
Individuals still face a progressive personal income tax system, and companies generally face 30% corporate income tax, or 25% where taxable income is USD 150,000 or less. The country also keeps a 13% VAT, monthly CIT advance payments, municipal taxes and payroll costs such as ISSS, AFP and, for larger employers, INCAF.
El Salvador does not levy a net wealth tax or inheritance tax. The planning work is usually around source rules, withholding tax, filing deadlines, real estate transfer tax, securities rules and whether a transaction falls into a special exemption or incentive regime.
Tax rates at a glance
- Income tax
- 0% - 30%Progressive
- Wealth tax
- 0%
- Inheritance tax
- 0%
- Capital gains tax
- 10%
- Corporate tax
- 25% / 30%
- Dividend tax
- 5%
- VAT
- 13%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
FoundersEmployeesInvestorsExportersE-commerce operators
Watch out for
- Foreign-source income is generally excluded, but source classification matters. Salvadoran-source services, local securities and activities performed in the country can still be taxed even when paid offshore.
- Payroll costs are not trivial. ISSS, AFP and INSAFORP can materially change employee and employer economics, and employees with salary income often still need to consider the annual filing threshold and return deadline of 30 April.
- Real estate transfers can trigger a 3% transfer tax above the statutory exemption, so property deals need separate tax modelling even though there is no wealth tax.
- In April 2026, lawmakers approved removing the 3% withholding on capital income and returns from investment in securities, so securities-income rules are moving and should be checked before filing.
Frequently asked questions
Is El Salvador a territorial tax country?
Yes. El Salvador generally taxes Salvadoran-source income and, after the 2024 reform, excludes foreign-source income from the concept of income.
Does El Salvador have wealth tax or inheritance tax?
No. El Salvador does not levy a net wealth tax, inheritance tax or gift tax.
What are the main taxes to watch in El Salvador?
The main taxes are personal income tax, corporate income tax, VAT, dividend withholding tax, capital gains tax, real estate transfer tax and payroll contributions such as ISSS, AFP and INSAFORP.