On January 14 of this year, the Legislative Assembly approved the Special Law Quincena 25, through Legislative Decree No. 499 and published in the Official Gazette No. 8, Volume 450, on the same day. This law came into effect on the same day it was published, as a new economic benefit aimed at strengthening the purchasing power of workers in the public, municipal, and private sectors. The measure is intended to support employees and maintain financial balance for employers, incorporating special tax mechanisms to facilitate its implementation.
This benefit consists of a special supplementary income, independent of the ordinary salary and all employment benefits, which must be paid without any type of deduction. It will be paid each year between January 15 and 25, starting mandatorily in 2027. The income is equivalent to 50% of the nominal monthly salary of the worker at the time the payment is made and only applies to employees whose salary is equal to or less than USD 1,500 per month. This payment applies to all workers, regardless of their industry and the size of the company. However, for the private sector, for the year 2026, the payment of the Quincena 25 will be voluntary.
To receive the benefit, workers must meet the requirements that apply to the bonus or additional cash compensation, i.e., they must meet the following requirements:
- Have been employed by the company for one year or more on the date of payment (January 25), in which case 100% of the value of the benefit will be paid, i.e., 50% of the nominal monthly salary.
- If they have been with the company for less than one year, the benefit will be paid in proportion to the time worked at the company, with no minimum requirement; therefore, even if the worker joined the company a few days before the payment date (January 25), they will be entitled to the respective proportion of the time spent at the company.
I- Tax treatment
For workers who receive this benefit, the Quincena 25 will be considered non-taxable income and, therefore, will not be subject to income tax withholding. Similarly, due to its nature and social purpose, it is unattachable.
However, for employers, the amount paid is a deductible expense, provided that it is properly documented and has actually been paid.
II- Special tax incentive for the 2026 tax year
Due to the voluntary nature of this incentive for the private sector during the 2026 tax year, employers who decide to grant it will be entitled, in addition to the benefits already recognized by current laws, to a tax credit equivalent to 100% of the amount paid, which can be credited against the income tax payment for that tax year.
In this regard, based on the wording, we consider that among the benefits already recognized is the possibility of deducting from the income obtained the amounts paid in connection with Quincena 25, in accordance with the provisions of Article 28, number 2) of the Income Tax Law, in which case there is the possibility of obtaining a double benefit, which would consist of deducting it as a deductible expense and also using it as a tax credit.
However, our recommendation is to wait for the issuance of the corresponding Guide or Instructions by the Tax Authorities in order to know the applicable procedure and ensure its correct implementation, thus avoiding contingencies.
Considering that the most conservative approach would be to use the benefit as a tax credit, the following relevant aspects should be taken into account:
- If the Tax Credit exceeds the balance, it may be applied to other substantive obligations related to Income Tax.
- In the particular case of companies under the Free Trade Zone, Inward Processing Warehouse, or International Services regimes, the credit may be negotiated or transferred, backed by a Tax Credit Certificate issued by the Ministry of Finance.
- Similarly, this benefit also applies to contractors who use outsourcing services, provided that the amount is transferred in full to the workers and is properly documented.
We must be attentive to the issuance of the corresponding Guide or Instructions by the Tax Authorities in order to know the applicable procedure and ensure its correct implementation.
If, in 2026, this benefit is used as a Tax Credit, this will represent a tax saving for employers of 100% of the payment made under the concept of Quincena 25.
In this regard, employers should analyze their financial situation and decide whether or not to pay the benefit for 2026 or whether to do so on a mandatory basis for 2027. However, if they decide to pay it, they must do so between January 15 and 25, 2026, and properly document the payment made.
For any additional questions, please contact our team at the following email addresses: crodriguez@consortiumlegal.com; and/or taxelsalvador@consortiumlegal.com.