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Latin America Investment News on Viva Tropical

Pay Up! Foreign Investment Assets to Be Taxed

Article Summary:

Foreign investors in El Salvador might soon be paying more to conduct business in the country, as a draft bill submitted by the government of El Salvador proposes to tax assets of foreign investors at half a percentage point.

Photo Credit: El Salvador

Original Article Text From El Salvador via Google Translate:

Goes charged a premium for “give investors legal stability”

The Government plans to charge a “premium” of 0.5% of total investment assets to entrepreneurs who arrive in the country attracted by the newly proposed law legal stability, according to a draft that the Technical Secretariat of the Presidency sent to the National Association Private Enterprise (ANEP) a few months ago. The proposal will come to Congress this week.

The draft does not specify what the premium will be used and whether subsequently be returned to investors, so that the union believes that this bill will be a disincentive to invest if the bill is passed as presented to them.

The Director of Legal Affairs of the business association Waldo Jimenez said the charge is not justified, so the Secretariat sent a recommendation to be completely removed from the bill.

“The premium seems to have different objectives under the law,” said the ANEP.

Economist Rigoberto Monge, who has read the draft, also said that the collection of this premium is not justified in any part of the project. “I do not know what compensation or what services the state is establishing this charge when the State is obliged to maintain legal stability,” he said. “I do not see the button, its reason for being,” he added.

The ANEP expect the government considered comments and delete this collection because, otherwise, would be interpreted as “a bill for law enforcement”, said Jimenez.

“Imagine a $ 10 million”, as an example Monge (would have a premium of $ 50,000), adding that “it is the duty of the State to guarantee stability to businesses. There should be no charge,” he said.

More Observations
But that’s not the only point to the law. Another problem is to Proesa, attracting the investment office where all the responsibility would fall if the bill is passed as it is. This institution was created by executive order in May 2011 and therefore depends directly on the President, Mauricio Funes.

Its president is Alexander Segovia, Technical Secretary of the Presidency and Funes right hand in economic matters.

According ANEP Proesa no defined competencies. So the secretary suggested that this institution be created by law and defining their duties before the law applies legal stability. Otherwise, the law would be meaningless.

“Proesa lacks adequate institutional strength needed for this type of competition (approve or deny applications for legal stability contract),” says a document sent ANEP Technical Secretariat with their comments.

Who is the ultimate authority, he asked the chief legal officer of ANEP, Waldo Jimenez. “It is unclear”, responded immediately.

The union sent the government a bill for creating Proesa.

Under Article 13 of the draft law, “the highest authority of Proesa approve or deny requests for legal stability contracts according to the provisions of this law.”

Legal stability law also restricts investments.
Article 2 of the bill provides that will be subject to enforcement who develop the sectors of “aviation, agribusiness, aquaculture, electronics, energy, strategic infrastructure, logistics, health services, business services, tourism, manufacturing various and ‘all sectors to adopt the highest authority Proesa’ “.

But ANEP recommended that the country has legislation that leaves open the possibility that “any investor that complies with national legislation” may request the Government signed a contract stability, regardless of the economic activity. “The idea is that the law will attract investment, not restrict it,” said Jimenez.

The proposal also limits investments in accordance with the amounts. Under section 9 of the bill presented to ANEP for law guarantees legal stability must “make an investment in fixed assets greater than or equal to nine times the minimum wage in 1200 ($ 2 million).

Waldo Jimenez said that amount of investment is very high and therefore many companies that do not equal or exceed that amount will feel excluded. Is there no legal guarantee of stability for those companies, then, he asked Jimenez.

The business proposition is that the amount of the investment is reduced to $ 1 million in assets with which, more companies will want to put their money in the country.

In addition, the terms of contracts would be ten years, a period of time not all businesses meet their nature. Some companies have long recovery periods exceeding 20 years.

“Laws are not a guarantee of legal stability” he said.

Link to Original Article:

From El Salvador

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