Income tax in El Salvador is territorial: you owe it on money earned inside the country and generally nothing on income from abroad. Individuals pay on a progressive scale from 0% to 30%, corporations pay 25% or 30% depending on size, and everyone files a single annual return by April 30 in U.S. dollars through the Ministry of Finance’s online portal. The system is run by the General Directorate of Internal Taxes (DGII) under the Ministry of Finance (Ministerio de Hacienda).
Who Owes Salvadoran Income Tax
The territorial principle decides almost everything. Income sourced inside El Salvador is taxable; income earned abroad is not. A 2024 reform to the Income Tax Law reclassified all foreign-sourced income as “excluded income” for both domiciled and non-domiciled taxpayers. Before that change, residents still owed Salvadoran tax on certain foreign investment income, including interest and gains from selling foreign securities. That exception is gone.
You become a Salvadoran tax resident by meeting either of two tests. The common one is spending more than 200 consecutive days in the country during a single calendar year. The alternative is having your main source of income or your center of vital interests in El Salvador. Either test is enough to put your Salvadoran-source income inside the local tax base.
For expatriates and remote workers, the practical result is simple. Live in El Salvador but earn everything from foreign clients or investments, and that foreign income sits outside the Salvadoran tax base. A non-resident who collects rent on a Salvadoran property or sells services consumed in the country still owes Salvadoran tax on that income.
Individual Rates and Brackets
The individual scale runs from 0% to 30%. The annual tax-exempt threshold is $6,600, so anyone earning $550 a month or less owes no income tax at all. Above that, each bracket uses a fixed-fee-plus-marginal-rate formula:
- $6,600.01 to $9,142.86: $212.12 plus 10% of the amount over $4,064.00
- $9,142.87 to $22,857.14: $720.00 plus 20% of the amount over $9,142.86
- Over $22,857.14: $3,462.86 plus 30% of the amount over $22,857.14
The fixed fee in each row already includes the tax from the lower tiers, so you only run the formula for your own bracket. Taxable income covers wages, professional fees, rent from Salvadoran property, and business profits earned in the country.
Deductions for Individuals
Salaried workers earning up to $9,100 a year get a flat $1,600 personal deduction built directly into their withholding. These workers do not need to file an annual return. The employer’s withholding settles the obligation.
Earn more than $9,100 and the flat deduction disappears. In its place, you can deduct documented medical expenses and education costs, each capped at $800 per year. Both require formal receipts meeting Salvadoran invoicing requirements, or the deduction will not hold up.
Capital Gains
Gains on sales of assets are taxed at a flat 10% on the net profit. Timing is the trap. Sell within 12 months of buying, and the gain is treated as ordinary income and taxed at your progressive rate, which can reach 30%. Capital losses only offset capital gains, never ordinary income, and unused losses carry forward for up to five years.
Gains on stocks and other securities registered with the Superintendence of Securities and traded on legally authorized exchanges are exempt.
Bitcoin changed in 2025. The original 2021 Bitcoin Law had created a capital gains exemption for Bitcoin tied to its legal-tender status. In early 2025, the Legislative Assembly amended the law, removing Bitcoin’s status as a currency and prohibiting its use for tax payments or government obligations. Bitcoin can still be used in private transactions on a voluntary basis, but the blanket capital-gains exemption no longer applies.
Corporate Income Tax
Corporations are taxed on net profits sourced within El Salvador. The rate depends on the size of taxable income:
- $150,000 or less: 25%
- Over $150,000: 30%
Corporate capital gains work the same way they do for individuals: 10% on net profit, or ordinary rates if the asset was held for less than 12 months.
Every corporation must make monthly advance payments of 1.75% of gross revenues. These credit against the final annual bill. If the advances exceed the liability, the overpayment turns into a credit usable in future periods.
Deductible costs must be related, proportional, and necessary for generating taxable income. Costs tied to exempt or excluded income are not deductible and have to be separated from the deductible side of the ledger. Depreciation of tangible fixed assets must use the straight-line method unless the DGII specifically approves another approach. Accounting must be on the accrual basis for tax purposes.
Dividends and Payments to Non-Residents
Dividends paid to shareholders carry a 5% withholding tax. That rate rises to 25% when the recipient sits in a jurisdiction the Salvadoran tax administration classifies as a tax haven.
When a Salvadoran payer sends money to a non-resident for services, interest, royalties, or commissions tied to Salvadoran-source income, 20% must be withheld from the gross amount. The rate climbs to 25% for recipients in jurisdictions on the tax-haven list. The DGII publishes that list, so verify the payee’s domicile before releasing funds.
Filing and Paying
The annual return is due by April 30 of the year after the tax period. The fiscal year is the calendar year, so a 2025 return is due April 30, 2026. Individuals file Form F-210; corporations file Form F-11. Both require your tax identification number (NIT) and must be completed in U.S. dollars.
Returns are filed electronically through the Ministry of Finance’s “Online Services of the DGII” portal. Individuals log in with their DUI, entities with their NIT. The system generates a confirmation voucher after submission; keep it. Any tax owed is paid at the same time, through a payment order the portal generates for online banking or any authorized financial institution. Corporations should check that every monthly 1.75% advance has been recorded and credited before submitting.
Salaried individuals earning $9,100 or less generally do not need to file. Employer withholding, including the $1,600 personal deduction, closes out the obligation.
Penalties for Filing Late
Missing April 30 triggers fines that escalate with time:
- Up to one month late: 5% of the tax owed
- One to two months late: 10%
- Two to three months late: 15%
- More than three months late: 20%
None of these fines can be less than two times the minimum monthly wage. If the return shows no tax due, the floor drops to one minimum monthly wage. Not filing at all carries a stiffer penalty of 40% of the determined tax, with a floor of one minimum monthly wage, which was $365 as of early 2025.
Unpaid tax also accrues interest. For the first half of 2025, the annual rate on overdue tax was 7.99%. If the balance is not regularized within 60 days of the due date, the rate steps up to 11.99% per year. The Ministry of Finance updates these rates periodically.
What U.S. Citizens in El Salvador Still Owe the IRS
Moving to El Salvador does not end a U.S. filing obligation. American citizens and permanent residents owe federal income tax on worldwide income no matter where they live, and there is no bilateral tax treaty between the United States and El Salvador to soften the overlap. A few U.S. provisions still help.
The foreign earned income exclusion lets qualifying taxpayers exclude up to $132,900 of foreign earned income from U.S. tax for 2026. You need a tax home in El Salvador and must meet either the bona fide residence test (a full calendar year of residence) or the physical presence test (330 full days outside the U.S. in any 12-month period). A foreign housing exclusion adds up to $39,870 in deductible housing costs for 2026, with the exact cap varying by location.1Internal Revenue Service. Figuring the Foreign Earned Income Exclusion
Account reporting is separate from the tax return and often catches people out. If the combined balance of your Salvadoran financial accounts exceeds $10,000 at any point in the year, you must file an FBAR with FinCEN by April 15, with an automatic extension to October 15.2Financial Crimes Enforcement Network. Report Foreign Bank and Financial Accounts
FATCA is a different requirement. Americans abroad filing individually must file IRS Form 8938 if specified foreign financial assets exceed $200,000 on the last day of the tax year or $300,000 at any time during the year. For married couples filing jointly, the thresholds are $400,000 and $600,000.3Internal Revenue Service. Summary of FATCA Reporting for US Taxpayers FBAR and FATCA go to different agencies, use different forms, and have different thresholds. Most Americans with Salvadoran accounts hit the FBAR line well before FATCA. Penalties for missing either can apply even when no tax is owed, so plan for both from the moment you open a local account.