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El Salvador Increases its Tax Burden on High Incomes

Article Summary:

After strong criticism from the main union of businessmen and lawyers specializing in tax law, the Government will amend certain aspects of it’s tax reform. The tax package places a minimum of 1% tax on gross income on companies, along with a tax of 10% on dividends distributed to shareholders and increased taxes on businesses monthly gross sales.

Photo Credit: El Financierorcr.com

Original Article Text From El Financierorcr.com via Google Translate :

Amended Tax Reform
The original Salvador Proyecto increased tax burden $ 130.92 per year to 18,000 taxpayers

After strong criticism from the main union of businessmen and lawyers specializing in tax law, the Government will amend certain aspects of tax reform. The document was submitted by the Executive to the Legislative Assembly on 29 November.

The original bill increases the tax burden at $ 130.92 per year to 18,000 taxpayers with wages between $ 2,500 and $ 6,000 per month. It increases revenues between $ 581.76 and $ 7,894.32 for senior executives who earn between $ 7,000 and $ 20,000 a month.

The amendment also increases from 25% to 30% of taxable income over $ 80,000 of 15,797 companies, but exempts from income tax payers to 262,000, while 232,000 others will not experience changes in what is already taxed to the treasury.

The tax package also gravel companies with a minimum of 1% tax on gross income, apply in addition to a tax of 10% on dividends distributed to shareholders and increases from 1.5% to 2% of the monthly gross sales advance payment of income tax.

These are the points that generated more controversy and discontent between employers and economic and tax analysts. Precisely on December 6, Finance Minister, Carlos Caceres, clarified that exemptions are working in as little as possible affect companies and shareholders.

Exemptions
Are exempt from 1% on gross revenue gross profit companies that derive less than 2%, said the Minister, but said it will investigate companies that report earnings of 3% or 4%. 25% or 30% increase taxable income over $ 80,000 to 15,797 companies.

In addition, income from awards, interest on savings accounts, and payments to non-resident withholding securities they have been applied to final withholding, the non-taxable income referred to in Article 4 of the Law on Income Tax, as compensation , pensions, wages and other determined by the Legislature, he said.

Other exempt income arising from activities will be subject to prices controlled or regulated by the Government, such as those made by gas stations, distributors of liquefied petroleum gas and public transport.

Are beyond the payment of 1% on gross income trust entities and publicly funded, international organizations or foreign governments. It will also pay the companies during their first three years of operation, starting from the registration of the Internal Revenue Department of the Ministry of Finance.

Subjects with tax losses for two years, or alternating, those operating in areas under a state of public calamity and disaster by the Legislative Assembly by fires, earthquakes or floods and the duration of the declaration.
Dividends

Not apply to utilities 10% of shareholders when it has been withheld and paid the taxes covered by this chapter prior distributions when they capitalize on profits for the company paying for it is a way of strengthening it, argued the Minister of
Finance.

Nor is taxed when it is shown to be reinvested by those who receive them when the subject receives either the State and its agencies (less autonomous agencies), municipalities and other public entities, associations and cooperative associations, corporations or foundations of utility public excluded under Article 6 of the Law on Income Tax.

Also not be paid in some cases proven to dividends related loans, including when the loans are granted at interest rates at or above market price when the contract was made between financial institutions regulated by the superintendent of the financial system, when is made between public or private entities engaged in the provision of credit, or when the borrower is the state, municipalities, autonomous institutions, funds or trusts created by them or as when a corporation or foundation in law or public utility Finance Minister explained.
Scare off investment

Manuel Enrique Hinds, former minister of finance and economic analyst, like Jorge Daboub, president of the National Association of Private Enterprise (ANEP), and other union leaders have insisted that the tax reform the country’s doors closed to new foreign investors and the local business stagnate.

Link to Original Article:

From El Financierorcr.com

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