Want to start a company in El Salvador? El Salvador, strategically located in the heart of Central America, offers unique tax incentives and business opportunities for entrepreneurs. If you want to start a company in El Salvador, it is essential to understand the types of business structures available and the key steps to register your business successfully.
Registering a business in El Salvador ensures access to a strong legal framework that protects both local and foreign investments. Below, we provide a comprehensive guide on how to start a business in El Salvador, including legal procedures, tax incentives, and the benefits of setting up your company in this dynamic business environment.
The most common types of companies in El Salvador are:
a) General Partnership or Collective companies (Sociedad en Nombre Colectivo – SNC)):
A company in El Salvador established under a corporate name, in the name of one or more partners. The partners are jointly liable for the obligations, participate in management, and may appoint a legal representative. Capital is composed of shares or equity interests, which may be unequal. (Articles 73 to 92 of the Commercial Code of El Salvador)
2. Limited Liability Company (Sociedad de Responsabilidad Limitada or S.R.L):
This type of company is similar to a corporation, in that it may be formed by other entities or individuals or a combination of both. However, in this type of company, the capital is not represented by shares, but rather by membership interests. A Limited Liability Company (LLC) in El Salvador is ideal for small businesses with a limited number of partners. This structure protects personal assets from business liabilities and requires a designated trade name followed by “Limitada” or “Ltda.”
(Articles 73 to 92 of the Commercial Code of El Salvador)
1. Corporation (Sociedad Anonima or S.A):
It is a company in El Salvador established under a single name, immediately followed by “Sociedad Anónima” or “SA.” Shareholders’ liability is limited to the value of their contributions. Ideal for medium- or large-sized companies in El Salvador seeking to raise capital through the sale of shares. (Articles 191 to 295 of the Commercial Code of El Salvador)
Simplified Stock Corporation S.A.S. (Sociedad por Acciones Simplificadas or S.A.S):
These types of companies can be formed with a single natural or legal person (single-member), unlike corporations or other types of companies that require the participation of two or more partners or shareholders.
Registrar una empresa en El Salvador
Starting a business in El Salvador offers multiple advantages, including: strategic location with access to international markets through free trade agreements (FTAs), tax incentives to promote business growth and foreign investment, monetary stability, as the US dollar (USD) is the official currency, skilled and young workforce, ideal for business expansion.
When starting a business, choosing the right type of company is crucial. This choice is based on multiple factors, including the size of the business, the initial capital required, the number of partners, and the desired business structure. However, both public limited companies and limited liability companies adapt to different business needs.
Therefore, if you want to start a business in El Salvador, it’s essential to ensure you have professional advice to select the most suitable business structure, in strict compliance with all legal requirements. You should also take advantage of the investment incentives and programs offered in El Salvador.
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What are the main investment incentives ands programs for starting a business in El Salvador?
Fund for the promotion of innovation and competitiveness (FIIC):
It is a program dedicated to providing non-reimbursable co-financing to companies to boost the digital services, biosecurity, and environmental sectors, and to promote innovative entrepreneurship in El Salvador.
Business Development Services (BDS) Program:
This program is aimed at new businesses in El Salvador, especially for projects related to technological innovation, market development, franchise expansion, and tourism.
National Trade Facilitation Strategy (ENFC)
It is a program that aims to promote agile, easy, and modern business development, generating greater competitiveness in companies, especially micro, small, and medium-sized enterprises (MSMEs) in El Salvador.
Tax Benefits and Incentives for companies:
These are benefits that can be applied thanks to different laws such as:
Trade Facilitation Agreement (TFA):
It boosts the competitiveness and fluidity of the international market. Thanks to its proactive approach to supply chain integration and improved productivity, this agreement fosters greater economic dynamism and a business environment conducive to sustainable growth in El Salvador.
For those who want to start a business in El Salvador or make new investments that meet legal requirements in El Salvador, it is important to consider that not all companies may be eligible for these incentives, which are subject to change according to current laws and regulations. Therefore, when starting a business in El Salvador, it is advisable to consult with legal advisors in El Salvador to obtain the most up-to-date information on the tax incentives available in El Salvador.
Steps to Register a Business in El Salvador this website
Company Registration:
To register your business, you must select your business type and complete the registration process with the National Registration Center (CNR).
Obtaining the Tax Identification Number (TIN) and the Value Added Tax (VAT) Taxpayer Registration Number
Every company must obtain a Tax Identification Number (NIT) and a Value Added Tax (VAT) Taxpayer Registration Number from the General Directorate of Internal Revenue (DGII) of the Ministry of Finance .
Opening a bank account:
Opening a bank account for your business is crucial for conducting financial transactions and complying with tax obligations in El Salvador.}
Obtaining permits and licenses:
Obtaining permits and licenses in El Salvador may be necessary depending on the type of business you are establishing. For example, if you are starting a food business, you will need a health permit from the Ministry of Health; if you are a healthcare company, you will need import/export licenses for your products, or the necessary permits to be marketed in El Salvador.
Registration with the National Investment Office (ONI):
Foreign investors can register their investments with the National Institute of National Identity (ONI), which will issue a resolution granting the holder foreign investor status, indicating the registered investment. In some cases, this procedure is essential, for example, for registering branches of foreign companies in El Salvador.
Registration with the Financial Investigation Unit (FIU):
Every company, whether domestic or foreign, according to Article 2 of the Anti-Money Laundering Law, must register with the El Salvador Financial Intelligence Unit (UIF). This is the institution responsible for collecting financial information to prevent and combat the crime of money laundering.}
Registration in the Commercial Registry:
Every investor must register with the Commercial Registry in El Salvador. This will certify the existence of their company through its registration in the public registry. It will also issue the Business Registration and Establishment Registration. These must be renewed annually in the month of the company’s incorporation, and this will certify the company to carry out its business activities.
Inscripción en Ministerio de Trabajo y Previsión Social (MTPS):
El empleador debe registrar su empresa y formalizar los acuerdos laborales al contratar personal. El propósito es asegurar el cumplimiento de las regulaciones laborales en las empresas.
Registration with Social Security:
Every company established in El Salvador must register with the Salvadoran Social Security Institute (ISSS). This allows for registration as an employer and for its employees, guaranteeing social security against occupational hazards.
Legalization of accounting systems:
The term “Accounting System” refers to the development and authorization by a Salvadoran Auditor of accounting policies, a chart of accounts, and the corresponding application manual. Every company must have a system to record its transactions in El Salvador’s accounting records.
Previously, we only mentioned some of the essential steps for starting a business in El Salvador. Depending on the type of business you want to establish and the industry in which you operate, you may need to comply with additional requirements and documents. To start a business in El Salvador, it is recommended that you seek professional and legal advice before beginning the process of forming a business in El Salvador.
Here, we detail the requirements and steps to start a company in El Salvador.
- Personal Identification Document: A valid identification document, such as the Unique Identity Document (DUI) or a valid passport, is required for the legal representative.
- Articles of Incorporation: The company’s incorporation document must be drafted and certified by a notary public in El Salvador before submission to the CNR.
- Registration Fees: Payment of the applicable fees is required for the company’s registration with the CNR.
It is important to note that some requirements may vary depending on the type of business in El Salvador. Seeking professional guidance is recommended to ensure compliance with legal and tax obligations.
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- Company Registration in El Salvador: Businesses must register with the National Registry Center (CNR) and obtain a Taxpayer Identification Number (NIT).
- ISSS Registration Form: The ISSS registration form must be completed and signed by the legal representative or attorney, including company details, employee information, and required supporting documents.
- Required Documents:
- Certified copy of the NIT and Articles of Incorporation.
- Certified copy of the DUI and NIT of the legal representative.
- Employee payroll.
Since labor regulations in El Salvador may change, it is advisable to seek legal consultation to ensure successful compliance with all business registration requirements.
To register a company with the Ministry of Labor in El Salvador, businesses must follow these steps:
- Company Registration in El Salvador: Register with the National Registry Center (CNR) and obtain a Taxpayer Identification Number (NIT).
- Business Registration Form: This document includes administrative, legal, and financial information, company contact details, employee information, Occupational Health and Safety Committee (CSSO) details, internal labor regulations, and employment contracts.
- Required Documents:
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- Company NIT in El Salvador
- Articles of Incorporation
- Latest valid credential of the legal representative
- DUI of the legal representative
- DUI of the employer representative
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Due to possible changes in business laws in El Salvador, staying informed about requirements is crucial. We recommend seeking legal advisory for company formation in El Salvador.
Social Security Contributions and Rates in El Salvador
What are the social security payments required for companies in El Salvador?
All companies in El Salvador must contribute to social security on behalf of their employees. Contributions include:
Taxation for Companies in El Salvador
What types of taxes apply to businesses in El Salvador?
Preguntas Frecuentes al registrar una empresa en El Salvador
- How long does it take to register a company in El Salvador?The complete process usually takes 7 to 14 business days, depending on the business type and specific requirements.
- Is hiring a notary mandatory to register a company in El Salvador?Yes, the Articles of Incorporation must be prepared by an authorized notary in El Salvador..
Types of taxes for businesses in El Salvador and their corresponding rates
Income Tax (ISR – Impuesto Sobre la Renta)
Income tax is the tax levied on net profits for the fiscal year ending and is paid in the first four months of the following year.
The annual income tax rate is 25% for income under $150,000.00 and 30% for income of $150,000.01 or more. In addition, a monthly payment declaration is filed for the Account and Withholding Tax, in which 1.75% of monthly income is paid as an advance payment on the Annual Income Tax.
Value Added Tax (IVA – Impuesto al Valor Agregado)
The Value Added Tax (VAT) refers to the tax added to goods or services at all stages of production, distribution, and sale; that is, it is specifically imposed on those involved in the production, distribution, and marketing process. Sales tax in El Salvador is 13%, billed monthly, and declared within the first 10 business days of the following month.
