How corporate tax works in El Salvador
El Salvador corporate income tax follows a territorial model. Income is generally taxable when it comes from goods located in the country, activities carried out in the country, or services rendered or used in the country, while foreign-source income is generally outside the tax base.
The standard corporate income tax rate is 30%. Companies with taxable income of USD 150,000 or less qualify for a reduced 25% rate. Companies also make a 1.75% monthly advance payment on gross revenues, which is credited against the annual CIT liability.
Dividends paid by Salvadoran companies are generally subject to 5% withholding tax, and payments to entities in tax havens can face 25%. Companies still need to model VAT, municipal taxes, payroll costs, transfer pricing and any sector-specific incentives.
Tax rates at a glance
- Corporate income tax
- 25% / 30%Progressive
- Small-company rate
- 25%
- Standard rate
- 30%
- Monthly advance
- 1.75%
- Dividend WHT
- 5%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
Operating companiesExportersService firmsInvestorsHolding structures
Watch out for
- The territorial system is source-based, not "anything foreign is ignored." Special rules can still source securities income, financial instrument returns and some services to El Salvador.
- Payments to non-residents from Salvadoran-source income are generally subject to 20% withholding, or 25% in tax-haven cases, so cross-border service and royalty flows need attention.
- In January 2026, Law 498 introduced qualifying investment-expansion incentives, including an income-tax credit equal to 10%–30% of qualifying investment and a real-estate transfer tax exemption for eligible projects; conditions and time limits apply.
- Monthly advance payments, municipal taxes and the 1% payroll tax for employers with more than ten employees can be meaningful even for companies that expect a low annual net CIT bill.
Frequently asked questions
Does El Salvador have corporate income tax?
Yes. The standard corporate income tax rate is 30%, with a 25% rate for taxable income of USD 150,000 or less.
Is foreign income taxed for Salvadoran companies?
Generally no, because El Salvador uses a territorial system. But local-source rules can still pull some receipts into the tax base.
Do companies still pay other taxes?
Yes. VAT, municipal taxes, withholding taxes, payroll costs and the 1.75% monthly advance are all relevant.