What are the new reforms to the free trade zone law in El Salvador about?

The enormous effort that the Salvadoran State has been making to encourage investment in the country must be acknowledged. As an example of this, we can mention the recent reforms to the Law of Industrial and Commercialization Free Zones (LZFIC), which are in force since September 2023.

It is worth asking what these reforms are about and how they can promote investment in the country. For this reason, we will make a brief review of the most relevant points of these modifications to the legal regime for users of free zones and Deposits for Active Processing (DPA) in El Salvador, as follows:

  1. Incorporation of new incentivized activities

The reforms to the Law of Industrial and Commercialization Free Zones incorporate new incentivized activities, as detailed below:

    • Food industry and commercialization.

The main element to highlight of the reforms to this law is the incorporation of the food industry to the catalog of activities incentivized by the regime of the Law of Industrial Free Zones and Commercialization. In this way, the production, processing and transformation or commercialization of food and/or animal food is incorporated.

For this purpose, the same law defines food as natural or artificial products, semi-processed or unprocessed, intended for human consumption and that provide the organism with materials and energy for the development of its biological processes. For the purposes of the present law, non-alcoholic beverages, chewing gum and any other product or substance used in the elaboration, preparation or treatment of food shall be considered food.

In addition, cosmetics, tobacco, and products used as medicines are excluded from the concept of food, which does not necessarily mean that the industrial and commercialization activity of such products are necessarily excluded, but that, specifically, they are not part of this incentivized activity. Therefore, it is best to analyze in each specific case whether the action developed is benefited or not.

The law also defines animal feed as the simple or compound, semi-processed, processed, or unprocessed material used directly in animal feed, including balanced feed.

In addition, within the activity of cultivation, processing and commercialization of plant species, the processing and commercialization of unprocessed food produced under natural or artificial systems, such as greenhouses or laboratories that have the corresponding authority’s permit, is included.

Along with the incorporation of the industrial and food commercialization activity, the exclusion established for the production and commercialization of sugar, its substitutes, derivatives, and by-products were modified, indicating that its incorporation will be allowed for the production of chemical, cosmetic or pharmaceutical goods, food and animal feed. 

    • Aquaculture

Aquaculture (reproduction of fish, mollusks, and algae in fresh or salt water) is incorporated as an incentivized activity to be subjected or not to industrial transformation, such as preparations, preserves, derivatives or by-products, as well as their respective processing and commercialization.


  1. Vertical Free Trade Zones

The figure of vertical free zones is created, understood as the delimited area of the national territory formed by land and buildings that are integrated, without resident population, in which it is allowed to enter goods that are considered as if they were not in the national customs territory, with respect to import and export taxes, to be destined according to their nature, to the operations or processes allowed by the present law. In this sense, it is indicated that the free zones will have a minimum extension of 30,000 m2 for their new projects. In the case of vertical free zones, such extension may be distributed between the land and buildings to be constructed, and the developer must indicate it in its application.

  1. Changes in the regulation of waste from the incentivized activity.

The definition of waste is broadened, considering the remaining materials, substances and objects that have no direct use and are permanently discarded because they are no longer useful for the beneficiary in the development of its incentivized activity. For this purpose, waste and scrap are obsolete or damaged stationery and office furniture, as well as those materials that were part of the packaging or packing of the goods and/or that were used for their transportation, handling or storage. Likewise, waste resulting from improvements or general maintenance in infrastructure, such as doors, concrete, among others related to the subject. In addition to the destruction of waste, the possibility of recycling by managers authorized by the Ministry of Environment and Natural Resources is incorporated, which, although they are not beneficiaries of the present law, will not pay duties and taxes, except when the transfer is made for valuable consideration, in which case import taxes must be paid on the invoiced value.

  1. Definitive closing of operations

When a beneficiary of this law notifies the definitive closing of operations to the General Directorate of Customs, it must present the information and documentation that demonstrates the cancellations of the merchandise declarations for the merchandise subject to the free zone regime or temporary admission for inward processing, and the payment of the duties and taxes when its cancellation or discharge has not been demonstrated.

It should be noted that the law eliminates the indication that the closing or abandonment, without notifying the General Directorate of Customs and without making the cancellations required by the customs regime, constitutes the crime of defrauding the Customs Revenue, without prejudice of the civil and criminal liability to which it may give rise.

The above has been a brief approach to the amendments to the Industrial and Commercialization Free Zones Law. For further information on the subject, or to make any inquiries, please contact us at mailto:taxelsalvador@consortiumlegal.com.