Summary
The Foreign Agents Law establishes a new legal and tax regime for individuals and entities financed or directed from abroad. From a tax perspective, it imposes a 30% tax on financial transactions from abroad and donations received within the country. Financial institutions or other entities managing such funds must act as Special Withholding Agents for external transfers, while Foreign Agents must pay the tax directly on local donations. They are also required to register with the Registry of Foreign Agents (RAEX) and submit monthly reports to the Internal Revenue Service.
I- Foreign Agents Law. Purpose and obligated parties
- Purpose of the law
On May 20, 2025, the Legislative Assembly of El Salvador approved the Foreign Agents Law, which establishes the legal regime applicable to natural or legal persons, whether national or foreign, whose activities in El Salvador respond to interests or are financed directly or indirectly by a foreign person. The purpose of this regulation is to promote transparency in the operation of such entities and their influence within the national territory, ensuring that citizens are aware of foreign agents seeking to influence public opinion, as well as safeguarding the security, national sovereignty, and social and political stability of the country.
- Obligated parties
Those persons who carry out activities within the national territory that respond to interests, or are controlled or financed, directly or indirectly, by a Foreign Principal or Director, are obliged to comply with this law as Foreign Agents. Those determined as such by the RAEX, based on the purpose and parameters of this law, including non-profit associations and foundations, shall also be considered obligatory parties.
For this law, Foreign Principal or Director shall be understood to mean foreign persons, representatives of foreign governments or political parties, organizations, corporations, or any foreign legal entity, or with business headquarters abroad, as well as those people whom the Register of Foreign Agents (RAEX) qualifies as such.
Among the main obligations of Foreign Agents is to register with the RAEX within a maximum period of 90 days from the entry into force of the law (transitional regime). In the event of non-compliance, they may not carry out activities or mobilize financial resources, assets, or material goods.
- Excluded subjects
An application may be made to the RAEX for exemption from the obligations set forth in the aforementioned law, which may be granted for renewable annual periods or for each project, as appropriate. However, it is strictly prohibited to grant financing, donations, money, or assets, under any title, when these are intended for activities prohibited by this law.
II- Tax on financial transactions carried out in favor of Foreign Agents
- Financial transactions from abroad
Financial transactions carried out by Foreign Principals in favor of their Foreign Agents shall generate the obligation to pay a tax of 30%, applicable to each financial transaction, disbursement, transfer, import in kind, or goods of any kind, provided that they come from the funds of the Foreign Principal. In the case of imports of tangible goods, the taxable event shall occur when so determined by the RAEX.
- Special Withholding Agent
This tax will be withheld by institutions in the Financial System, as well as by any other entity involved in the receipt, channeling, or transfer of funds from abroad in favor of non-profit organizations, regardless of whether or not they are subject to supervision by the Superintendency of the Financial System.
The withholding shall be made at the time the respective transactions are carried out, or when the funds are made available to the Foreign Agent in the accounts of the entities that administer or manage them (Special Withholding Agent). Withholdings shall be paid to the General Treasury Directorate (DGT) within ten business days of the month following the month in which they were made.
- Donations made within the national territory
Donations received by Foreign Agents within the national territory shall be taxed at a rate of 30%. To this end, the tax must be paid by the Foreign Agent within ten business days following the end of the monthly period in which the donation was received.
- Formal reporting obligation of Foreign Agents
Foreign Agents who have been subject to tax withholdings or who have paid the tax corresponding to donations received must submit a report to the Internal Revenue Service within fifteen business days following the month in which such withholdings or payments were made.
Finally, failure to comply with the tax obligations established in this law, both by the Foreign Agent and the Special Withholding Agent, will be punished in accordance with the provisions of the Tax Code.
For any additional questions, please contact our team at taxelsalvador@consortiumlegal.com.