The recently approved Law for the Promotion of Technological Innovation and Manufacturing will enable El Salvador to attract foreign investment and drive the development of small and large local technology businesses.
Once the Law for the Promotion of Technological Innovation and Manufacturing comes into effect, El Salvador will have the ideal conditions for technology companies to look towards the country as a destination for investment.
The legal framework is an initiative of the President of the Republic, Nayib Bukele, which was approved by the Legislative Assembly with 69 votes last Tuesday. The main objective of this law is to make the country capable of manufacturing both hardware and software, as well as generating more jobs for those who are qualified in the technology field.
The legislation includes five tax incentives for a period of 15 years to the technology industry. These incentives include full exemption from income tax for the incentivized activities, exemption from any type of income tax withholdings, total exemption from municipal taxes on the net asset declared by beneficiaries, exemption from capital payment gain, and total exemption from tariff duties.
According to the lawmakers of Nuevas Ideas, the law will contribute to positioning El Salvador as a leader in the development of advanced technological manufacturing in the Latin American region. With this new legal framework, the country seeks to create the ideal scenario to attract companies that specialize in producing pieces, materials, equipment, or technological installations, as well as assembling and producing software, hardware, semiconductors, robotics, nanotechnology, unmanned aircraft, and vehicles.
The law is comprehensive and will be applied equally to both natural persons who want to venture into the field and foreign investors, as explained by the Minister of Economy, María Luisa Hayem, during her participation in one of the work sessions of the Legislative Assembly’s Economy Committee, where the bill was studied before its approval.
From now on, any company engaged in programming, management, maintenance, consulting, analysis of computer systems or software, development, and marketing of cloud computing services and data flows, technologies based on the manufacturing of pieces, materials, equipment, or installations can benefit from the law, provided that it is registered with the Salvadoran tax authority and receives the current qualification agreement from the Ministry of Economy.