El Salvador - Indirect Tax Guide

El Salvador - Indirect Tax Guide

Explore the requirements and rules that apply to Indirect Taxes in El Salvador.

Explore the requirements and rules that apply to Indirect Taxes in El Salvador.

Trees clouds covering a mountain El Salvador


Types of indirect taxes (VAT/GST and other indirect taxes).


Are there other indirect taxes?

Not applicable.

What supplies are subject to VAT?

The Salvadoran value-added tax (VAT) is a tax-based on the value-added method. The VAT applies on the price or remuneration agreed for the transfer of goods or provision of services, or the import customs value.

VAT is due on:

  • the sale by VAT taxpayers of movable goods located in El Salvador
  • services specified in the law, provided they are performed in El Salvador
  • the final importation of chattels
  • the use or exploitation in El Salvador of services supplied by non-residents (i.e. import of services).

For VAT purposes, the concept of taxable ‘sale’ includes:

  • sales and other transfers for consideration of movable goods located in El Salvador; (payment in kind, allocation of property on the liquidation of a company, auctions, cession of goods)
  • the removal of movable goods by the owner for personal use or consumption
  • reimbursements of expenses regarded as similar to a provision of services.

Under the VAT system, tax is levied at each stage on a non-cumulative basis. The accumulation of tax is avoided through the deduction of VAT invoiced to the entity. The entity pays VAT on the total amount invoiced in each monthly tax period but is entitled to recover the input VAT invoiced to the entity during the same period. If, in any tax period, the credit for input VAT is higher than the amount of VAT due on output, the entity is not entitled to a refund (unless the refund is related to exports); rather, the excess is credited against future VAT liabilities.

What are the standard or other rates (i.e. reduced rate) for VAT/GST and other indirect taxes? 

13 percent standard rate and 0 percent for exports.

VAT/GST registration

Who is required to register for VAT/GST and other indirect taxes?

Anyone who supplies goods or renders services, no matter if taxed or not, except for companies with turnover below USD5,714.28 and total assets below USD2,285.71 in the previous 12 months. This also applies to permanent establishments of overseas companies.

Is voluntary registration for VAT/GST and other indirect taxes possible for an overseas company (e.g. if the annual turnover is below the relevant VAT/GST and other indirect taxes registration threshold)?

No, under Salvadorian VAT legislation, it is not possible for a non-resident entity to voluntarily register in El Salvador and act as an established entity.

Are there any simplifications that could avoid the need for an overseas company to register for VAT?

VAT registration is not possible without a permanent establishment in El Salvador. If the company (permanent establishment) performs activities in the country, VAT registration is mandatory.

Does an overseas company need to appoint a fiscal representative? 

Only in a few cases, such as international transport, in order to apply for a VAT refund.

Which forms and supporting documentation does an overseas company need to submit for VAT/GST and other indirect tax registrations? 

Not applicable.

Is grouping* for VAT/GST and other indirect taxes possible? 


VAT/GST compliance

How frequently are VAT/GST and other indirect tax returns submitted?


What are the exchange rate rules in your country?


International Supplies of Goods and Services

Exports – Goods

How are exports of goods treated?

Exports of goods and services are included in the scope of VAT but are taxable at a zero rate. This means that VAT is not levied on the output, but VAT paid on inputs may be recovered through tax refunds, which the taxpayer may request after shipping the goods.

Goods supplied and services provided abroad are not taxable.

Exports – Services

How are exports of services treated for VAT/GST purposes?

Exports of services are included in the scope of VAT but are taxable at a zero rate. This means that VAT is not levied on the output.

Imports – Goods

How are goods dealt with on importation?

When goods are imported into El Salvador, import VAT and customs duties must be paid before the goods are released from customs’ control. The import is a responsibility of the buyer.

Imports – Services

How are services brought in from abroad treated for VAT purposes?

Services provided and loans granted from abroad which are utilized in El Salvador (import of services) by Salvadorian VAT payers are taxable in El Salvador.

In such cases, the local taxpayer must self-assess the VAT payment in the month immediately after the taxable event is completed and will compute the VAT credit in the following month. This will be a pass-through cost for the local company so long as it is registered for local VAT purposes.

VAT/GST recovery

Can an overseas company recover VAT/GST and other indirect taxes if not registered for VAT/GST locally?

It is not possible for a company not registered for VAT to recover VAT. VAT is part of the cost of the products for non-registered companies.

Are there any exemptions with the right to recover or deduct input VAT?

Exporters can deduct VAT based on the percentage of zero-rated sales.

Are there any restrictions to the deduction of input VAT?

Yes, there are certain restrictions for VAT recovery, such as exempt supplies where VAT relates to both taxable and exempt supplies. In those cases, an apportionment (pro rata rule) needs to be made.

Tax points

When is VAT/GST due on a supply of goods or services?

The tax point is triggered on the issue of an invoice.


Is a business required to issue tax invoices?


Is it possible/mandatory to issue invoices electronically?

Yes, it is possible. The Tributary Code states some requirements before giving permission to issue electronic invoices.

Is it possible for the vendor to issue an invoice, (i.e. self-billing)?

Self-billing is only possible for the consumption of goods by the taxpayer, such as inventory shortages or destruction, promotions or gifts not included in the customer’s bill.

Record-Keeping Requirements

How long must records and invoices be retained?

The books, accounting records and invoices shall be retained for 10 years.

Can the invoices be stored abroad?



Do tax audits take place on a regular basis?

The Ministry of Finance (Ministerio de Hacienda) is the authority that performs tax audits. However, every year the taxpayer with assets greater than USD1,142,857 and sales greater than USD571,428 will appoint an independent auditor to express an opinion related to the applicable provisions tax compliance and will file its report to the Ministry of Finance for each fiscal year.

Are audits done electronically in your country (e-audit)? If so, what system is in use?

The tax office does not perform audits electronically except for the cross-checking of certain information regarding taxpayers involved in an operation, in order to match figures.

What penalties can arise from non-compliance?

There are certain penalties for failing to fulfill formal obligations. The minimum fine or penalty is:

  • for underpayment of the VAT, the fine or penalty is 40 percent of the determined tax
  • for late filings of a VAT return and late payment of VAT, the fine or penalty is between 5 and 20 percent on the extemporal tax payment
  • for incorrect returns, there is a fine or penalty of 20 percent on the unpaid tax
  • for returns with arithmetic errors, there is a fine or penalty of 10 percent on the difference of the unpaid tax.

Special Indirect tax rules

Are there any special rules for the sale of a company by one taxpayer to another where VAT is not due on the sale?

There is no transfer of a business as a going concern (TOGC) relief but VAT is only due on the movable assets transferred.

Are there unique specific indirect tax rules that you would not expect to find in ‘standard’ VAT jurisdictions?


Does a reverse charge mechanism apply for goods or services?

Yes, local recipients of services rendered by non-resident suppliers must withhold and pay the VAT to the state. The withheld tax can be offset at a later stage.

Are there indirect tax incentives available (e.g. reduced rates, tax holidays)?

There is a Free Trade Zone Law and an International Services Law that excludes certain companies and their stakeholders from paying corporate tax.


Are rulings and decisions issued by the tax authorities publicly available?

Some resolutions and information are available at Ministerio de Hacienda.

For further information please contact

Flor de María Jaime
Tax Director
KPMG in El Salvador
T: +503 2213 8415
E: fjaime@kpmg.com


*By ‘grouping’ we mean: either a consolidation mechanism between taxpayers belonging to the same group (payment and refund are compensated but taxpayers remain distinct) or a fiscal unity for VAT/GST purposes (several taxpayers are regarded as a single taxpayer).

Connect with us