INDEX LEGISLATIVE DECREE No. 236
THE LEGISLATURE OF THE REPUBLIC OF EL SALVADOR, CONSIDERING
I.- by Legislative Decree No. 134, dated December 18, 1991, published in the Official Journal No. 242, Volume No. 313, 21 of the same year, the Law on Income Tax was issued.
II.- legal transactions at national and international level have evolved in such a way that national legislation on income tax is outdated as to control them, which creates possibilities for tax avoidance by taxpayers who adopt them, thereby affecting the income of state coffers.
III.- That the Tax Administration in the exercise of its powers of control and audit has detected a growing practice oriented improper deduction of costs and expenses.
IV.- That the principle of generality in taxation leads to all taxpayers with taxable capacity to participate in sustaining public expenditure, under which, modern tax systems should aim to control the tax compliance of all taxpayers, to effect the duty to contribute is concretized in subjects who have ability to pay.
V.- That for these reasons, it is necessary to introduce amendments to the Law on Income Tax, which enable control of these new ways of doing business and tax producing involvement taxpayer segments that have been using the lack of regulatory certain situations as a mode to reduce their tax participation.
in exercise of its constitutional powers and initiative of the President of the Republic, through the Minister of Finance, DECREES the following
AMENDMENTS TO THE LAW OF INCOME TAX ISSUED by Legislative Decree No. 134, DATED 18 DECEMBER 1991, PUBLISHED iN tHE OFFICIAL GAZETTE No. 242
TOMO No. 313, OF 21 OF tHE SAME MONTH AND YEAR:
Article 1. It is hereby added a final paragraph to Art . 3 as follows:
"For the purposes stated in the preceding paragraph, shall be deemed acquisition value of the various assets of money, the value that the goods had for his predecessor at the date of entry into the assets of the taxable person shall receive and the date of purchase as latter. If not possible to determine the said value, taxpayers will value it at market price, which may be verified by the Directorate General of Internal Revenue. "
Section 2. Refórmanse numbers 5), 11) 12) and 13 of Article 4 and paragraph 14 deróguese) of that article, in the order and as follows:
"5) interests, awards and other utilities that come directly from deposits with financial institutions supervised by the Superintendency of the Financial System, associations and credit union companies and their respective federations, provided that the taxpayer benefited from such income is a natural person domiciled holder of deposits and the monthly average balance of deposits is less twenty-five thousand dollars (US $ 25,000.00) of the United States of America "
" 11) interest earned on loans granted abroad by:.
a) international Organizations; development agencies or institutions of foreign governments; foreign governments; and corporations or foundations of public utility domiciled abroad duly authenticated by competent authorities of their country of origin nonprofit whose nature is observed in its constitutive act and ranked by the Central Reserve Bank.
B) investment funds, private fund managers, public or private Specialized Funds, domiciled abroad, duly authenticated by competent authorities in their country of origin and ranked by the Central Reserve Bank to cooperatives associations credit unions, corporations and foundations under public law and public utility engaged in the granting of financing to micro and small enterprises.
The Directorate General of Internal Revenue and the Central Reserve Bank, together, develop the necessary instrument, including the procedure and requirements to ensure compliance with the purpose of the exemption provided in this paragraph. "
" 12 ) the product, gain, benefit or profit earned by a natural person in the sale of his first home room and the transaction value does not exceed seven hundred twenty-three minimum wage, provided they are not ordinarily engaged in the sale or exchange of property ".
"13) The profits or dividends and shares or results for the partner, shareholder, partner or participant who receives, whether natural or legal person; provided that the taxpayer that distributes declared and paid the corresponding Income Tax, even when they come capitalization. "
". 14) Repealed"
hereby added Article 3 paragraph d) the first paragraph of Article 5 and hereby added a final paragraph to that article, in the order and as follows: || | ". d) irregular or indeed societies and the Union of People"
"for the purposes of this Act, it is understood by related subjects; countries, states or territories with preferential tax regimes with low or no taxation or tax havens, as regulated in the Tax Code "
Article 4 Intercálase between Articles 14 and 15, Article 14-A, as follows:. | || Income from securities
"Art. 14-A.- profits, dividends, awards, interests, revenues, net capital gains or other profits made by a natural person domiciled in investment securities and other financial instruments securities, will be subject to the tax provisions of this Act at a rate of ten percent, which will be settled separately from other income; if the said rents were made the respective deductions, should not be declared, constituting the amount withheld final payment of tax.
The tax is paid in the same period in which the taxpayer must file the affidavit of income tax for the relevant year or tax period, attaching itself to the declaration form calculation of capital income, which must filled with the requirements and specifications available to the Directorate General of Internal Revenue.
When income comes from the transfer or assignment of one or more securities, to determine the result, decrease the value of the transaction, the cost of such securities, subject to the following rules:
a) value of the transaction will be the price agreed by the parties, which shall not be less than the price quoted on the Stock Exchange on the date of the sale, or the carrying amount of the issuer of the security if there is no share price Bag.
B) The amounts deducted from the transaction value, will be the title acquisition cost plus expenses necessary to complete the transaction. If several titles tuvieren, the acquisition cost is determined based on weighted average by dividing the sum of the costs of acquisition of the securities by the total number of acquired titles, although only one of them is disposed of. The average will apply to securities of the same species.
C) If the result is positive will constitute capital gain, and if it is negative constitute capital loss, which can only be offset against capital gains of securities or other assets obtained in the exercise or period of taxation in the or losses that occurred in the immediate next five years, provided that the loss
LEGISLATIVE INDEX has been declared and recorded.
The rules of the preceding paragraph in respect of the capital gain of securities are also applicable to taxable persons other than natural persons.
Not be taxable dividends that fall within regulated in Art. 4 Section 13 of this Act.
Where income coming from securities and other financial instruments in foreign securities and are nominally obtained by subject Salvadoran or entities domiciled in the country, will be taxed at the tax shall be observed in this case the same rules established in Art. 27 of this law.
Capital losses generated abroad from transactions in securities, nominally be deductible from capital gains realized in the transactions involved made abroad, without prejudice to the non-deductibility rules established in this law.
If the capital loss generated abroad exceeds the capital gains obtained abroad, the balance may be used it within the next five years against future capital gains abroad, provided that they declare on the form provided for that purpose by the Directorate General of Internal Revenue.
Article 5. Intercálase between the third and fourth paragraphs of Article 16 two paragraphs, and in the order as follows:
"Are considered income obtained in El Salvador results, profits, income or interest arising from rights and obligations from securities, financial instruments and derivatives contracts occur when any of the following circumstances:
a) The entity station is a national or domiciled in El Salvador.
B) Capital are invested or placed in the country.
C) The risk assumed be located or located in the Salvadoran territory. "
" The location or location set will also be considered if the subject obtaining such results or performance is domiciled in the country or an establishment or . branch domiciled for tax purposes "Article 6
reformed the final paragraph of Article 17 as follows:
" the natural person obligated to keep accounting records, you must use for calculating their income, the system accumulation applicable to legal persons. Natural persons who are not required to keep formal accounts, may choose to use the system for calculating accumulation
of their income; for which they recorded the transactions in accounting ledgers and inform the General Directorate of Internal Revenue in the months of November and December prior exercise of the year in which taxation will be adopted. Adopted the system of accumulation can not be changed "following should be incorporated
Article 7. Article 27 as follows:. Income from deposits
Art. 27. Individuals who earn interest income, prizes and other utilities that come directly from deposits with financial institutions supervised by the Superintendency of the Financial System, cooperatives or companies credit union associations and federations in their respective domiciled in the country, they are obliged to pay ten percent of income tax; which will be settled separately from other income; if the said rents were the respective deductions made according to regulations in Article 159 of the Tax Code, shall not be declared, constituting the amount withheld final payment of tax.
Natural persons domiciled in El Salvador must declare in the Republic of El Salvador income derived from deposits in financial institutions abroad, even if they had paid income tax or other tax of a similar nature in the country, state or territory in which he obtained; of not having paid tax abroad, you must pay taxes ten percent in the Republic of El Salvador. If the rate of that tax or proportion paid abroad is less than the rate of ten percent shall apply to such income the difference in rate and pay the tax within the statutory period. Not be subject to refund, crediting or deduction of tax paid abroad in excess of the Salvadoran rate.
Taxable different Salvadoran natural persons, they must also declare the income in the Republic of El Salvador to obtain deposits in foreign financial institutions, although they had paid income tax or other tax of a similar nature in the country , state or territory in which he obtained and proceed as follows:
a) If the rate applicable abroad to income on deposits is less than the ordinary rate regulated in the Republic of El Salvador, such income shall be included in the calculation of income tax, and deducted the total or proportional tax, corresponding exclusively to them, which had been canceled, in order to pay the tax by the rate difference.
B) If the income obtained hold deposits abroad not subject quality, exempt or untaxed, the resulting net income thereof, shall be added to the net or taxable income earned in the territory of the Republic of El Salvador and pay the corresponding tax.
C) If the regulated rate abroad is less than that should be applied in the Republic of El Salvador, income from deposits will not be included in subparagraph present, for calculating the tax concerns the rent; in such a case, the income shall be declared only in the legal term and not subject income.
The Salvadoran taxpayer to check the amount of tax paid abroad, is obliged to submit to the tax authorities issued the document to him in care legislation outside the country in which he made the payment .
The Financial Investigation Unit attached to the Attorney General of the Republic, you report monthly to the Directorate General of Internal Revenue identification data of subjects and transactions originating from abroad, obtained according to regulations in Article 13 of the Law Against Money Laundering and Asset even any electronic medium.
Article 8 hereby added to Article 29 a subsection for each of the items 1), 4) and 5); intercálase between the second and third numeral 11) paragraph of that article a clause; also hereby added a final paragraph to the article in question; in order and as follows:
"They are not included in this item disbursements that are offered to customers and employees and other expenses of a similar nature, such as airline tickets, cable services, club dues, jewelry , clothing, which are not necessary for the production of income or the conservation of its source. "
" the deduction for this item will be in proportion to the time the leased assets have been used in the production of income taxed, except that their use is for seasonal activities. "
" in the case of taxable natural persons, this deduction will only be accepted up to 50% of the respective premium room when the house owned by the taxpayer is insured , and is partially used for the establishment of the company or office directly related to obtaining income. "
" to determine the cost of goods sold, the valuation method adopted in accordance with the provisions of Art should be used. 143 of the Tax Code. Stocks or inventories start and end of the year or tax period shall be commensurate with the Log entries Inventory Control and records referred to Art. 142 of the Code. Not deductible from income earned differences in cost of sales when the obligations referred to in this paragraph are breached. "
" Regarding costs and expenses mentioned in this article, incurred in the manufacture, processing, production or any activity involving the processing of raw materials into finished products, will not be deductible at the time of payment or accrual, but are accumulated pro rata according to the systems, methods and costing techniques adopted by the taxpayer, to establish the cost of production , processing, mining, construction or the like, and will be deducted to the extent that the finished products are sold, used or consumed in generating operations taxable income. What should be checked by the taxpayer. "
Refórmanse Article 9 paragraphs 3), 6), 14), 16) and 20) of Article 29-A, also adiciónanse one second paragraph to paragraph 10) two paragraphs to paragraph 18) and paragraphs 21), 22), 23) and 24) to article referenced in the order of their numbers and as follows:
"3) The amounts in respect of return on invested capital, securities,
withdrawals or advances on profits paid to:
a) Partners or shareholders of a company, their spouses or their relatives ;
B) Holders of commercial enterprise, their spouses or their relatives. Unless
check effectively the funds have been invested in the generating source of taxable income "
" 6) The amounts invested in the purchase of real estate or rental of property.; acquisition, importation or, leasing, maintenance, improvement or repair of vehicles; and the acquisition, importation or fuel, lubricants and spare parts for them, for use by the taxpayer, partners or shareholders of all types of companies, directors, representatives or agents, consultants or business of the taxpayer, or for relatives of the aforementioned subjects, provided that such goods do not fall directly at the source of income. "
" in no case will be deductible losses from acts or transactions between related subjects, or individuals or entities resident or domiciled in countries, states or territories with preferential tax regimes, low or no taxation or tax havens. "
" 14) "the interest, commissions and any other payments from financial operations, insurance or reinsurance held by the subject passive borrower in any of the following cases:
A) not made any withholding income tax or tax on the transfer of Personal Property and Provision of Services established in the Tax Code, where applicable.
B) The lender or a related subject regardless domiciled, and it will not has declared as taxable income in the year or tax period of accrual.
C) It exceeds the result of applying to loans or credits, the average lending rate on loans plus four additional points and the lender whatever a related subject or is domiciled, incorporated or located in a country, state or territory with preferential tax regime, low or no taxation or tax haven.
The average rate in the preceding paragraph refers to is that concerning credits or loans to companies applied by the Financial System and published by the Central Reserve Bank.
d) The lender or insurance or reinsurance services regardless of a related subject or is domiciled, incorporated or located in a country, state or territory with preferential tax regime, low or no taxation or tax haven and debt by credit operations, insurance or reinsurance exceed the result of multiplying three times the value of assets or average taxpayer borrower equity.
For purposes of the preceding paragraph equity or equity average is the quotient obtained by dividing by two the sum of assets or existing stockholders' equity at the beginning and end of the year the borrower.
Non-deductibility rules on indebtedness established in this subparagraph shall not apply to taxpayers who are required to comply with rules on indebtedness contained in other legislation and are subject to supervision by the Superintendency of the Financial System. Also not apply the rules relating to corporate credit union and their respective federations. "
" 16) costs or expenses related to the acquisition or use of goods or use of services which are not necessary for the production of taxable income or conservation of the source. "
" for the purposes of the preceding paragraph, the financial figures at the end of each period or year, reflected in different accounts and subaccounts of legal and auxiliary books or special registers in addition to the financial statements and their respective notes and annexes, are final and can not be changed by the taxpayer, unless such modification has been certified by a Public Accountant authorized by the Supervisory Board of the accountancy profession public and Auditing. In the case that the taxpayer is required to appoint an external auditor, the latter shall be performed by the aforementioned certification in which compliance with the principles and applicable accounting standards in El Salvador, the commercial and tax requirements consign. When the taxable person is not obliged to appoint external financial auditor, but is obliged to appoint auditor for opinion and fiscal report, such modification may be certified by the latter, who will be included in the opinion and fiscal report issued, must attach the certification report for submission modification within the period specified in Article 134 of the Tax Code. The certification shall be developed in compliance auditing standards approved by the Board of Supervision Profession of Accounting and Auditing. "
The practitioner is required to display and provide information and work papers when required by Address General Internal Revenue, in the exercise of its powers. "
" 20) penalties, fines, penalties, default interest, penalty clauses and other such penalties, which are paid through the courts, private agreement or any other means of conflict resolution. Excepted from this provision effectively compensation or refunds made to customers, in compliance with standards set by regulators, or also those compensations or refunds
that are the product of the arbitration process such regulators establish and which are inherent to their business or activity, provided that the offset values or returned have been declared as taxable income by the taxpayer that pays. "
"21) face loss resulting from the acquisition cost and the sales value of realizable assets in disrepair, maturity, expiry or the like. They are not covered by this provision, those goods with damage or malfunctions that result in the production process and subsequently are actually sold. "
" 22) expenditures by penalties or provisions of any kind not be deductible principles contained in and accounting rules or standards issued by regulatory agencies, that the present law does not expressly permitted deduction "
" 23) the procurement of goods or use of services, whose amounts are equal to or greater than twenty-five minimum monthly wages. | || i) not be made by check, bank transfer, credit card or debit
Ii) The means of payment is different from the cash and the means used in the Roman (i), and not formalizasen written contract, deed or other documents that regulates civil or commercial, such right as swaps, mutual non-cash assets, repossessions, transfers title to goods, compensation of debts or financial operations. "
" 24) deductions that are not expressly contained in this Act. "
Article 10 .- hereby added a third paragraph to paragraph 1) of Article 31 and paragraphs refórmanse first, second and third paragraph 3) and hereby added a final paragraph to the clause in question 3), and in the order as follows:
" when the legal reserve is reduced by an exercise or tax period for any reason, such as capitalization, application to loss carryforwards or distribution constitute taxable income for society, for the amount that was deducted for tax purposes income exercises or periods prior to its decline taxation liquidated separately from ordinary income, at the rate of twenty percent (25%). For such purposes the company shall keep a record of the constitution of legal reserve and the amount deducted in determining net or taxable income in each fiscal year or tax period. "
" 3) Treatment for provisioning sanitation for doubtful accounts and reserves of extraordinary assets by banks, insurance companies, Official Credit Institutions and authorized subjects according to the Law on Cooperative Banks and Savings and Credit shall be proposed by the Superintendent of Financial system to the Directorate General of Internal Revenue, leaving its final approval for tax purposes as exclusive power of the Directorate
" Any reservation shall not be deductible establish taxpayers referred to in this paragraph, which has not been proposed by the Superintendency of the Financial System and approved by the Directorate General of Internal Revenue. "|| | "in no case shall be deductible:
a) loan loss provisions for doubtful accounts and reserves of extraordinary assets, which has been deducted in previous years.
B) sanitation reserves constituted during exercise or period of taxation credits or loans classified as normal, normal and subnormal declining according to regulations of the Superintendency of the Financial System or the equivalent rating that entity set. This procedure shall be established according to the Guidance issued pursuant to Article 27 of the Tax Code. Sanitation reserves not deducted in a year or tax period shall be considered as untaxed income in the constitution following its exercise.
C) sanitation reserves constituted on contingencies.
D) extraordinary reserves assets by the amount of the amount of the reserve for doubtful accounts sanitation transferred to its constitution. "
" Banks, Insurance Companies, Official Credit Institutions and individuals authorized according to the Law on Cooperative Banks and Savings and Credit shall keep records and accounting and computer controls loans or credits to which they apply the deduction treatment booking sanitation set out in this paragraph. "| Adiciónanse || Article 11 paragraphs 5) and 6) to Article 32 as follows:
5) dues or contributions to unions, associations, foundations or unions of workers, provided the organization:
to. They are excluded from payment of tax according to the provisions of Article 6 of this Act.
B. Support the fee or contribution documents containing correlative numbering authorized by the tax authorities and had informed the values received for fees or contributions, according to the provisions of Articles 115-A and 146 of the Tax Code.
C. Fees or contributions are used exclusively for cultural well-being of workers or defend their labor rights.
6) The employer's contribution paid by individuals to the Salvadoran Social Security Institute, for the domestic worker. Likewise, the labor fee paid to that institution, on account of the worker concerned, when it is borne by the employer it is deductible.
Article 12.- reformed Article 53 as follows:
Art. 53. The quantities which have been retained to taxable persons not domiciled, is presumed to constitute taxes paid and passed to the General Fund of the Nation, therefore are not required to submit the declaration of the respective income tax.
The subjects non-residents, who have obtained income in the country, and not any deductions made them whether for breach of the agent, for existing standard that dispenses perform the respective status or absence obligation to withhold retention must show the respective declaration within the corresponding legal term liquidating such income and the corresponding tax. Article 13. Article 126 following should be incorporated as follows:
no regulations regarding deductions contained in Article 29 paragraphs 1), 4), 5), 11) and final paragraph, and Article 29-A numerals 3), 6), 16 and 20) all of this law; They are incorporated for purposes of facilitating the application of the rules and do not constitute new rules not deduction. Transitory Article 14. Financial institutions domiciled abroad that have received ratings given by the Central Bank in 2009 and the entry into force of this Decree, countries, states or territories which are domiciled do not have in their legislation with legal measures to eliminate double respective taxation or not they have signed and ratified agreements to avoid double taxation of income tax with the Republic of El Salvador, which effectively allows them to eliminate double taxation by tax paid on interest on loans in the country, either by way of tax credit or exemption; They continue to enjoy exemption from income tax and obtaining ratings from the Central Reserve Bank until countries, states or territories in which they are domiciled in the aforementioned financial institutions have in their legislation with legal measures to eliminate double annually taxation or sign and ratify agreements to avoid double taxation of income tax with the Republic of El Salvador.
Are excluded from the provisions of the preceding paragraph domiciled financial institutions located or incorporated in countries, states or territories with preferential tax regimes, low or no taxation or tax havens pursuant to the Tax Code, who are subject the payment of income tax and withholding established in the Code, from the effective date of this decree and once within the rating given by the Central Reserve Bank completed, if any enjoyed the latter.
The Ministry of Finance in order to facilitate the application of this provision shall publish on your page or Web site, in accordance with international standards, the list of countries, states or territories that have in their legislation measures to avoid double taxation or acceded to, and ratified agreements to avoid double taxation of income tax with the Republic of El Salvador.
Article 15. For purposes of the application of non-deduction of loan loss provisions for doubtful accounts set up on credits or loans classified as normal, normal and subnormal declining according to regulations of the Superintendency of the Financial System, the entry into force of this Decree, Banks, Insurance Companies, Official Credit Institutions and authorized subjects according to the Law on Cooperative Banks and Savings and Credit shall be considered as taxable income the release of loan loss provisions related to the aforementioned credits or loans, that would have been deducted from the income earned prior to the effective date of this Decree tax year. This procedure shall be established according to the Guidance issued pursuant to Article 27 of the Tax Code. Effective
Article 16.- This Decree shall enter into force from January 1 of the year two thousand and ten, following publication in the Official Journal.
GIVEN IN THE BLUE ROOM OF THE LEGISLATIVE PALACE: San Salvador, on the seventeenth day of December in the year two thousand and nine. CIRO
ZEPEDA CRUZ PEÑA, PRESIDENT.
OTHON Sigfrido Reyes Morales, GUILLERMO ANTONIO NAVARRETE GALLEGOS, FIRST VICE. SECOND VICE PRESIDENT.
MERINO JOSE FRANCISCO LOPEZ, ALBERTO ROMERO ARMANDO RODRIGUEZ, THIRD VICE. FOURTH VICE.
FRANCISCO ROBERTO DURAN LORENZANA, FIFTH VICE.
PEÑA LORENA GUADALUPE MENDOZA, CESAR GARCIA HUMBERTO AGUILERA, First Secretary. Second Secretary.
ELIZARDO LOVO GONZÁLEZ, JOSÉ ROBERTO MUNGUÍA d'Aubuisson, Third Secretary. Fourth secretary.
SALGADO SANDRA MARLENE GARCIA, LOURDES IRMA VASQUEZ PALACIOS, FIFTH Secretariat. SIXTH Secretariat.
MIGUEL ELIAS Ahues KARRA, SEVENTH SECRETARY.
PRESIDENTIAL HOUSE: San Salvador, on the twentieth day of December in the year two thousand and nine.
Published, Carlos Mauricio Funes Cartagena, President of the Republic.
Juan Ramon Caceres Carlos Enrique Chavez, Minister of Finance.
Tomo OJ No. 239 No. 385 Date: December 21, 2009.
SV / Adar. 01/12/2010