More than a year after enacting a bold fiscal reform that eliminated income taxes on remittances and international earnings, El Salvador is now reaping the benefits through record-breaking levels of foreign direct investment (FDI) and stronger engagement from its diaspora.
In March 2024, the Legislative Assembly approved the removal of a 30% income tax on capital entering the country from abroad, including remittances, foreign dividends, and business earnings. The reform was designed to create a more open investment environment and increase Salvadorans’ access to capital. The decision was first reported by Reuters.
“We eliminated this tax to empower Salvadorans abroad and make El Salvador more attractive to global investors,” stated a spokesperson from the Ministry of Economy. “Now we are seeing the results.”
📈 From Reform to Record-Breaking Investment
According to the Central Reserve Bank (BCR):
- El Salvador received $322.24 million in FDI during Q1 2025, the highest figure in over six years.
- This represents a 64% increase compared to the same quarter in 2024.
Meanwhile, the flow of remittances has grown steadily, with Q1 2025 surpassing $2.2 billion, a 7.4% increase year-over-year, strengthening domestic consumption and local entrepreneurship.
“The diaspora is no longer just sending money. They’re coming back to invest, start businesses, and help transform our economy,” stated a representative of the National Migration Institute.
🧮 Visual Impact: Before vs. After
| Category | Before Reform (2023) | After Reform (2025) |
|---|---|---|
| Tax on foreign earnings | 30% income tax | 0% income tax |
| FDI in Q1 | $196 million | $322.2 million |
| Remittances in Q1 | $2.05 billion | $2.2 billion |
| Registered diaspora ventures | — | +27% growth |
Sources:
- Reuters – “El Salvador removes income taxes for money from abroad”
- Central Reserve Bank of El Salvador (BCR), 2025 Reports
- Ministry of Economy of El Salvador
- National Migration Institute