Economy Profile El Salvador

Ease of Doing Business in El Salvador

ease of doing business in el salvador

Rankings on Doing Business topics – El Salvador

rankings on doing business topics el salvador

Topic Scores

topic scores el salvador

Starting a Business

This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city.

To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators.

The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

What the indicators measure

Procedures to legally start and formally operate a company (number)

  • Preregistration (for example, name verification or reservation, notarization)

  • Registration in the economy’s largest business city

  • Postregistration (for example, social security registration, company seal)

  • Obtaining approval from spouse to start a business or to leave the home to register the company

  • Obtaining any gender specific document for company registration and operation or national identification card

Time required to complete each procedure (calendar days)

  • Does not include time spent gathering information

  • Each procedure starts on a separate day (2 procedures cannot start on the same day)

  • Procedures fully completed online are recorded as ½ day

  • Procedure is considered completed once final document is received

  • No prior contact with officials

Cost required to complete each procedure (% of income per capita)

  • Official costs only, no bribes

  • No professional fees unless services required by law or commonly used in practice

Paid-in minimum capital (% of income per capita)

  • Funds deposited in a bank or with third party before registration or up to 3 months after incorporation

To make the data comparable across economies, several assumptions about the business and the procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes.

The business:

-Is a limited liability company (or its legal equivalent). If there is more than one type of limited liability company in the economy, the limited liability form most common among domestic firms is chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office.

-Operates in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

-Performs general industrial or commercial activities such as the production or sale to the public of goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily polluting production processes.

-Does not qualify for investment incentives or any special benefits.

-Is 100% domestically owned.

-Has five business owners, none of whom is a legal entity. One business owner holds 30% of the company shares, two owners have 20% of shares each, and two owners have 15% of shares each.

-Is managed by one local director.

-Has between 10 and 50 employees one month after the commencement of operations, all of them domestic nationals.

-Has start-up capital of 10 times income per capita.

-Has an estimated turnover of at least 100 times income per capita.

-Leases the commercial plant or offices and is not a proprietor of real estate.

-Has an annual lease for the office space equivalent to one income per capita.

-Is in an office space of approximately 929 square meters (10,000 square feet).

-Has a company deed that is 10 pages long.

The owners:

-Have reached the legal age of majority and are capable of making decisions as an adult. If there is no legal age of majority, they are assumed to be 30 years old.

-Are in good health and have no criminal record.

-Are married, the marriage is monogamous and registered with the authorities.

-Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population.

Starting a Business – El Salvador

starting a business el salvador

Figure – Starting a Business in El Salvador – Score

figure starting a business in el salvador score

Figure – Starting a Business in El Salvador and comparator economies – Ranking and Score

figure starting a business in el salvador and comparator economies ranking and score

Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators.

Figure – Starting a Business in El Salvador – Procedure, Time and Cost

figure starting a business in el salvador procedure time and cost

* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.

Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below.

Details – Starting a Business in El Salvador – Procedure, Time and Cost

1 Deposit the legally required initial capital in a bank and obtain a deposit evidence or a certified check

Agency : Bank

At least 5% of the initial start-up capital has to be shown and evidenced to a public notary. This capital has to be shown through a certified check payable to the name of the company, for the amount for which the company will initiate its operations. The check will be deposited in the company’s new account once the deed is duly registered at the Commercial Registry (that is, the company has been established).

2 Verify the availability of the company name

Agency : Commercial Registry

Entrepreneurs can check the uniqueness of the company name at the online platform of the Commercial Registry (https://www.miempresa.gob.sv/).

Less than one day (online procedure)

no charge

3 Notarize the articles of association

Agency : Notary

To establish a new company, Article 22 and Article 101 of the Code of Commerce require fulfillment of the following requirements:

  • Name and personal data of company shareholders (minimum of two shareholders)

  • Commercial name

  • Term, domicile, and company social purpose

  • Type of administration (board of directors or sole administrator) and appointment of legal representation person.

Capital stock

The cost to notarize the articles of incorporation ranges between USD 500 to USD 1,000.

1 day Between USD 500 and

USD 1,000

4 Pay the required registration fees at a local bank

Agency : Bank

5 Register the company and obtain the publication and legalization of books

Agency : Commercial Registry

Since 2017, it is required an online pre-registration at http://miempresa.gob.sv. It is mandatory to upload all scanned documents (including the receipt of payment) on this online platform. Even if you sent the documentation online, you need to go personally and present the hardcopy of the document for obtaining the final registration document.

3 days

see procedure details

Companies must also be registered with the Ministry of Labor, the Tax Authorities (Hacienda), and the Salvadorian Institute of Social Security, and this is done a the Registry through a registration process called “trámite integral”.

Company registration fees are established by Arts. 63, 66 and 71 of the Commercial Registry Act (Ley de Registro de Comercio).

The registration fees are the following: USD 0.57 for every USD 100 of the start-up capital (company registration fee) + USD 2.3 (for copies) + USD 17.14 (Balance Deposit fee) + USD

91.43 (Business License) + USD 0.1 per page (legalization of books, assuming 3 books, 100 pages per book) + USD 34.29 (Registration of each office).

In addition, the legal representative must fill form F-210 (USD 1.67) to obtain a Salvadoran Tax Card (Numero de Identificacion Tributaria/Tarjeta de NIT) for the company. This form can be filled at the time of registration or after registration before the Ministry of Treasury (Decreto Legislativo 227 del 12 de Diciembre de 2009 Ley del NIT).

Registration fees must be paid at a local bank. The notary can calculate the fees directly online: https://www.cnr.gob.sv/2014/aranceles/. The notary makes this calculation and pays at the commercial bank. Once the payment is done, the receipts must be presented to the Commercial Registry with the application for company registration.

1 day (simultaneous with previous procedure)

included in procedure 5

6 Legalize the company books by an auditor

Agency : Auditor

The external auditor of the company authorizes the accounting procedures and the internal books, which include the general shareholders meeting book, the board of directors' book, the registry of shareholders book, and the increase or decrease of capital stock book. Article 40 of the Code of Commerce, states that the books can be legalized either by the external auditor or by the Register of Commerce.

10 days USD 450

7 Register employees with either of the two Pension Fund Administrators

Agency : Pension Fund Administrator (Administradora de Fondos de Pensiones: AFP CRECER or AFP CONFIA)

All new businesses must register employees with any of the Pension Fund Administrators

(Administradora de Fondos de Pensiones).This obligation is procured before any of the two Pension Fund Administrators in El Salvador (AFP CRECER or AFP CONFIA).

3 days (simultaneous no charge

with previous procedure)

The following documents must be presented:

  1. a copy of the Salvadoran Identification Card of Passport of the Legal Representative

  2. a copy of the VAT card of the company

  3. a copy of the Incorporation Document

  4. a filing of the application

8 Register the company for local taxes at the Municipality

Agency : Municipality

Upon registering at the Commercial Registry, each founder must register at the Municipality and pay a local tax (Vialidad A) of about USD 10 each.

The following requirements apply:

  1. Filing of an application

  2. Fling of a notary certified copy of the registered initial balance sheet of the company

  3. Filing of a notary certified copy of the registered incorporation document of the company

  4. Filing a notary certified copy of the Identification Document of the Legal Representative of the company

  5. Payment of fees

9 Make a company seal

Agency : Sealmaker

The company must make a company seal. A company seal can be made in 1 or 2 days at a cost of about USD 15 – USD 30, depending on the size and design selected by the client.

2 days (simultaneous USD 15

with previous procedure)

A notary certified copy of he VAT card of the company coup be requested

day (simultaneous with previous procedure)

USD 10 per owner

Dealing with Construction Permits

This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more

What the indicators measure

Procedures to legally build a warehouse (number)

  • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates

  • Submitting all required notifications and receiving all necessary inspections

  • Obtaining utility connections for water and sewerage

  • Registering and selling the warehouse after its completion

Time required to complete each procedure (calendar days)

  • Does not include time spent gathering information

  • Each procedure starts on a separate day—though procedures that can be fully completed online are an exception to this rule

  • Procedure is considered completed once final document is received

  • No prior contact with officials

Cost required to complete each procedure (% of income per capita)

  • Official costs only, no bribes

Building quality control index (0-15)

  • Quality of building regulations (0-2)

  • Quality control before construction (0-1)

  • Quality control during construction (0-3)

  • Quality control after construction (0-3)

  • Liability and insurance regimes (0-2)

  • Professional certifications (0-4)

To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used.

The construction company (BuildCo):

  • Is a limited liability company (or its legal equivalent) and operates in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects or engineers. BuildCo is not assumed to have any other employees who are technical or licensed experts, such as geological or topographical experts.

  • Owns the land on which the warehouse will be built and will sell the warehouse upon its completion.

The warehouse:

  • Will be used for general storage activities, such as storage of books or stationery.

  • Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita.

  • Will have complete architectural and technical plans prepared by a licensed architect. If preparation of the plans requires such steps as obtaining further documentation or getting prior approvals from external agencies, these are counted as procedures.

  • Will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements).

    The water and sewerage connections:

  • Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be installed or built.

  • Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and a peak wastewater flow of 1,136 liters (300 gallons) a day.

  • Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection.

Dealing with Construction Permits – El Salvador

dealing with construction permits el salvador

Figure – Dealing with Construction Permits in El Salvador – Score

figure dealing with construction permits in el salvador score

Figure – Dealing with Construction Permits in El Salvador and comparator economies – Ranking and Score

DB 2020 Dealing with Construction Permits Score

figure dealing with construction permits in el salvador and comparator economies ranking and score

Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators.

Figure – Dealing with Construction Permits in El Salvador – Procedure, Time and Cost

figure dealing with construction permits in el salvador procedure time and cost

* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.

Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (>http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below.

Figure – Dealing with Construction Permits in El Salvador and comparator economies – Measure of Quality

figure dealing with construction permits in el salvador and comparator economies measure of quality

Details – Dealing with Construction Permits in El Salvador – Procedure, Time and Cost

details dealing with construction permits in el salvador procedure time and cost details dealing with construction permits in el salvador procedure time and cost details dealing with construction permits in el salvador procedure time and cost details dealing with construction permits in el salvador procedure time and cost

Details – Dealing with Construction Permits in El Salvador – Measure of Quality

details dealing with construction permits in el salvador measure of quality details dealing with construction permits in el salvador measure of quality

Getting Electricity

This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

What the indicators measure

Procedures to obtain an electricity connection (number)

  • Submitting all relevant documents and obtaining all necessary clearances and permits

  • Completing all required notifications and receiving all necessary inspections

  • Obtaining external installation works and possibly purchasing material for these works

  • Concluding any necessary supply contract and obtaining final supply

Time required to complete each procedure (calendar days)

  • Is at least 1 calendar day

  • Each procedure starts on a separate day

  • Does not include time spent gathering information

  • Reflects the time spent in practice, with little follow-up and no prior contact with officials

Cost required to complete each procedure (% of income per capita)

  • Official costs only, no bribes

  • Value added tax excluded

The reliability of supply and transparency of tariffs index (0-8)

  • Duration and frequency of power outages (0–3)

  • Tools to monitor power outages (0–1)

  • Tools to restore power supply (0–1)

  • Regulatory monitoring of utilities’ performance (0–1)

  • Financial deterrents limiting outages (0–1)

  • Transparency and accessibility of tariffs (0–1)

To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used.

The warehouse:

  • Is owned by a local entrepreneur and is used for storage of goods.

  • Is located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway.

  • Is a new construction and is being connected to electricity for the first time.

  • Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square feet). The plot of land on which it is built is 929 square meters (10,000 square feet).

The electricity connection:

  • Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW).

  • Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution network and is either overhead or underground, whichever is more common in the area where the warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.

  • Does not require work to install the internal wiring of the warehouse. This has already been completed up to and including the customer’s service panel or switchboard and the meter base.

The monthly consumption:

  • It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh.

  • If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier.

  • Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation purposes only 30 days are used.

Price of electricity (cents per kilowatt-hour)*

Price based on monthly bill for commercial warehouse in case study

Getting Electricity – El Salvador

getting electricity el salvador

Figure – Getting Electricity in El Salvador – Score

figure getting electricity in el salvador score

Figure – Getting Electricity in El Salvador and comparator economies – Ranking and Score

DB 2020 Getting Electricity Score

figure getting electricity in el salvador and comparator economies ranking and score

Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity.

Figure – Getting Electricity in El Salvador – Procedure, Time and Cost

figure getting electricity in el salvador procedure time and cost

* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.

Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures

Figure – Getting Electricity in El Salvador and comparator economies – Measure of Quality

figure getting electricity in el salvador and comparator economies measure of quality

Details – Getting Electricity in El Salvador – Procedure, Time and Cost

1 Request feasibility study from AES El Salvador and await feasibility letter

Agency : AES El Salvador

The client's electrician forwards the request for a feasibility study. The request for service must be signed by an electrician certified by the Superintendency of Electricity and Telecommunications (SIGET). The following information must be provided with the application:

7 calendar days

USD 150.27

  • Name of the owner.

  • Unique Identity Document (DUI), driver's license or passport of the owner.

  • Project's name.

  • Exact address and telephone number of the project manager or executor.

  • Sketch of project location.

  • Type of service (Commercial or industrial).

  • Number of services to connect.

  • Load to be demanded in kVA (detailing the single-phase and / or three-phase load).

  • Capacity of the substation to be installed and / or configured.

  • Qualification of the place, construction lines, road revision and zoning extended by the OPAMSS (for municipalities attached to this office) and in the other municipalities authorizations by the Municipality.

AES will send the customer a notice authorizing the feasibility of the service.

No.

Procedures

Time to Complete

Associated Costs

2 Receive site inspection by AES El Salvador for feasibility study

Agency : AES El Salvador

An external site inspection is conducted to determine the feasibility of the project and the adequate connection point. It is recommended that a representative of the applicant be present during the inspection.

7 calendar days USD 0

3 Submit formal request to obtain a connection and wait for approval and connection fees

Agency : AES El Salvador

AES El Salvador will then revise the electrical plans and send its approval in writing to the client.

21 calendar days USD 67.4

4 Install transformers and cables for external wiring

Agency : Sub-contratista

Once the customer has received the approved plans, the client can start preparing the works that fall under his responsibility. He will install the transformers and poles (if needed) and prepare the cables that the utility will later connect to the meter, etc. The time estimate for this procedure includes the wait time to obtain the relevant material.

Customers have the choice of paying for this investment themselves and getting in return a lower consumption tariff or asking the utility to bear the investment and paying a higher consumption tariff later on. Most costumers with a load of 140kVA prefer the first option of making the initial investment in return of a lower consumption tariffs later on.

7 calendar days USD 14,500

5 Submit plans for the constructed connection for approval

Agency : AES El Salvador

Once the external works are finished, the client will resubmit the plans to AES El Salvador, so that the utility can verify that the transformers and poles were properly installed.

10 calendar days USD 87.96

6 Pay for connection, sign supply agreement and await final connection

Agency : AES El Salvador

The utility installs the meter, connects it and makes a service test. Before the electricity can start flowing, the external connection works must be inspected. Then the final connection is scheduled and performed, and the electricity begins to flow.

19 calendar days USD 5,038.43

Details – Getting Electricity in El Salvador – Measure of Quality

details getting electricity in el salvador measure of quality

Note:

If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index.

If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index.

Registering Property

This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

What the indicators measure

Procedures to legally transfer title on immovable property (number)

  • Preregistration procedures (for example, checking for liens, notarizing sales agreement, paying property transfer taxes)

  • Registration procedures in the economy's largest business city.

  • Postregistration procedures (for example, filling title with municipality)

Time required to complete each procedure (calendar days)

  • Does not include time spent gathering information

  • Each procedure starts on a separate day – though procedures that can be fully completed online are an exception to this rule

  • Procedure is considered completed once final document is received

  • No prior contact with officials

Cost required to complete each procedure (% of property value)

  • Official costs only (such as administrative fees, duties and taxes).

  • Value Added Tax, Capital Gains Tax and illicit payments are excluded

    Quality of land administration index (0-30)

  • Reliability of infrastructure index (0-8)

  • Transparency of information index (0–6)

  • Geographic coverage index (0–8)

  • Land dispute resolution index (0–8)

  • Equal access to property rights index (-2–0)

To make the data comparable across economies, several assumptions about the parties to the transaction, the property and the procedures are used.

The parties (buyer and seller):

  • Are limited liability companies (or the legal equivalent).

  • Are located in the periurban (that is, on the outskirts of the city but still within its official limits) area of the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Are 100% domestically and privately owned.

  • Perform general commercial activities.

    The property (fully owned by the seller):

  • Has a value of 50 times income per capita, which equals the sale price.

  • Is fully owned by the seller.

  • Has no mortgages attached and has been under the same ownership for the past 10 years.

  • Is registered in the land registry or cadastre, or both, and is free of title disputes.

  • Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required.

  • Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, building codes and legal requirements. The property, consisting of land and building, will be transferred in its entirety.

  • Will not be subject to renovations or additional construction following the purchase.

  • Has no trees, natural water sources, natural reserves or historical monuments of any kind.

  • Will not be used for special purposes, and no special permits, such as for residential use, industrial plants, waste storage or certain types of agricultural activities, are required.

  • Has no occupants, and no other party holds a legal interest in it.

Registering Property – El Salvador

registering property el salvador

Figure – Registering Property in El Salvador – Score

figure registering property in el salvador score

Figure – Registering Property in El Salvador and comparator economies – Ranking and Score

DB 2020 Registering Property Score

figure registering property in el salvador and comparator economies ranking and score

Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators.

Figure – Registering Property in El Salvador – Procedure, Time and Cost

figure registering property in el salvador procedure time and cost

* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.

Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below.

Figure – Registering Property in El Salvador and comparator economies – Measure of Quality

figure registering property in el salvador and comparator economies measure of quality

Details – Registering Property in El Salvador – Procedure, Time and Cost

1 Obtain a Literal Certification (LC) and a Non-Lien Certification (NEC) of the property at the Register of Property

Agency : Immovable Property and Mortgages Registry (Registro de la Propiedad Raíz e Hipotecas)

These documents are requested by the buyer as due diligence in order to verify outstanding debts or liabilities of the property. Both certifications must be obtained by the seller before starting the transaction formally. Since May 2016, a new fast track service is available to request both certificates in 2 days in exchange for a premium payment (25 USD plus VAT). However, the majority of practitioners in San Salvador still use the default procedure to obtain a Literal Certification (LC) and a Non-Lien Certification (NEC) of the property.

2 Obtain tax clearance from the Municipality of San Salvador (Solvencia Municipal)

Agency : Municipality

Although it is not required by law for property transfers located in San Salvador (it might be mandatory in other municipalities), it is a common practice to request a Tax Clearance certificate from the Municipality of San Salvador (Solvencia Municipal) to ensure that all liabilities charging the property such as municipal services have been duly paid.

3 Preparation and notarization of the sale agreement

Agency : Public Notary

A notary will prepare and notarize the sale agreement. In El Salvador, only lawyers are notaries. The parties are responsible for gathering all the documentation to be presented to the notary.

The documentation shall include:

  1. Photocopy of the parties ID’s of the Limited Liability Companies (LLC)

  2. Photocopy of the Tax Identification Numbers (NIT) of the parties

  3. Photocopy of the corporate documents of the LLC’s (Articles of Incorporation, credentials, documents that can duly establish the legal representation and empowerment of the representatives of the LLC, etc)

  4. Photocopy of the Tax Identification Numbers (NIT) of the LLC’s

  5. Copy of the property title or Literal Certification (LC) (obtained in Procedure 1)

  6. Proof of payments of municipal taxes

  7. Proof that parties are tax solvent with Ministry of Finance

3 days USD 1,101.59; (0.15 –

1.0% of property price (notary’s fees))

4 Payment of registration fees and transfer tax at a commercial bank

Agency : Commercial Bank

The registration fee is 0.63% of the total value of the property agreed in the sale and purchase agreement. The Property Registry issues a payment order, which must be canceled by the applicant at any authorized bank.

The Transfer Tax of 3% on the excess of USD 28,571.43, is paid directly to the Ministry of Finance ("Hacienda") or any authorized bank, based on a request made by the Notary.

1 day USD 6,097.22; (0.63% of

property price (Registration Fee) + 3% over the excess of USD 28,571.43 of the total price (Transfer of Real Estate Tax))

5 The deed is presented to the Registry office for registration

Agency : Immovable Property and Mortgages Registry (Registro de la Propiedad Raíz e Hipotecas)

The public deed is submitted at the Immovable Property and Mortgages Registry to be recorded under the name of the buyer. The deed will be registered, if it meets all the legal requirements, in 2 – 4 weeks. The registry must check with the Ministry of Finance ("Hacienda") if the parties are Tax solvent. In addition to reforms at the registry set out by the Law on Standard Procedures of August 2004, an electronic system is currently being introduced and, once fully functional, is expected to reduce the registration time. In addition, a special service is available (mainly used by banks, law firms or companies). Since May 2016, a new fast track service is available to register property transfer in 2 days in exchange for a premium payment (40 USD plus VAT). However, most practitioners in San Salvador still use the default procedure to register property transfers.

21 days Already paid in procedure 3

6 The public deed is filed at the respective Municipality

Agency : Municipality

This is done in order to update the information at the Municipality and for calculation on municipal taxes. The title is already valid even if not filed at the Municipality. The incentive to file the public deed lies on the old owner, who will have to continue paying the taxes on the property if this is not done.

3 days

USD 100.62; (USD 0.06

for every USD 114.29 of the property value declared in the deed)

Depending on the municipality, this step can take from 1 to 5 days. In San Salvador, the municipality has offices in each district. If someone goes to district 1 to register a property that is located on district 4, the registry process can take about 5 days, because the documents of the property are in district 4, but if going directly to district 4, the registry process takes about 1 to 2

days.

Details – Registering Property in El Salvador – Measure of Quality

details registering property in el salvador measure of quality

Getting Credit

This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

What the indicators measure

Strength of legal rights index (0–12)

  • Rights of borrowers and lenders through collateral laws (0-10)

  • Protection of secured creditors’ rights through bankruptcy laws (0-2)

Depth of credit information index (0–8)

  • Scope and accessibility of credit information distributed by credit bureaus and credit registries (0-8)

Credit bureau coverage (% of adults)

  • Number of individuals and firms listed in largest credit bureau as a percentage of adult population

Credit registry coverage (% of adults)

  • Number of individuals and firms listed in credit registry as a percentage of adult population

Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit information index measures rules and practices affecting the coverage, scope and accessibility of credit information available through a credit registry or a credit bureau. The strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary secured transactions system exists. Then two case scenarios, case A and case B, are used to determine how a nonpossessory security interest is created, publicized and enforced according to the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a secured lender, BizBank.

In some economies the legal framework for secured transactions will allow only case A or case B (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral.

Several assumptions about the secured borrower (ABC) and lender (BizBank) are used:

  • ABC is a domestic limited liability company (or its legal equivalent).

  • ABC has up to 50 employees.

  • ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Both ABC and BizBank are 100% domestically owned.

The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests).

In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets.

Getting Credit – El Salvador

image

Credit registry coverage (% of adults)

30.4

14.6

24.4

100.0 (2 Economies)

Depth of credit information index (0-8) 7 5.1 6.8 8 (53 Economies)

image

Figure – Getting Credit in El Salvador – Score

image

80.0

Credit bureau coverage (% of adults) 53.2 47.6 66.7 100.0 (14 Economies)

image

Score – Getting Credit

Figure – Getting Credit in El Salvador and comparator economies – Ranking and Score

DB 2020 Getting Credit Score

image

0 100

90.0: Colombia (Rank: 11)

85.0: Costa Rica (Rank: 15)

85.0: Guatemala (Rank: 15)

80.0: Honduras (Rank: 25)

80.0: El Salvador (Rank: 25)

52.0: Regional Average (Latin America & Caribbean)

Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index.

Figure – Legal Rights in El Salvador and comparator economies

image

11

10

9

9

8

5.3

12

Index Score

10

8

6

4

2

0

El Salvador

Colombia Costa

Rica

Guatemala Honduras Latin America

& Caribbean

Details – Legal Rights in El Salvador

image

Strength of legal rights index (0-12) 9

image

Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description

of collateral?

Yes

Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents to security interests in movable assets exist in the economy?

Yes

May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the

original assets?

Yes

Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of collateral?

Yes

Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an

electronic database indexed by debtor's name?

Yes

Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement include a maximum amount for which the assets are encumbered?

Yes

Does a notice-based collateral registry exist in which all functional equivalents can be registered? Yes

Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third Yes party?

Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? No

Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? No

Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell Yes the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt?

Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it?

Figure – Credit Information in El Salvador and comparator economies

image

8

8

7

7

7

5.1

9

8

Index Score

7

6

5

4

3

2

1

0

El Salvador

Colombia Costa

Rica

Guatemala Honduras Latin America

& Caribbean

image

Details – Credit Information in El Salvador

image

Depth of credit information index (0-8)

Credit bureau

Credit registry

Score

Are data on both firms and individuals distributed?

Yes

Yes

1

image

Are data from retailers or utility companies – in addition to data from banks and

financial institutions – distributed?

Yes

No

1

Are both positive and negative credit data distributed? Yes Yes 1

image

Are data on loan amounts below 1% of income per capita distributed?

Yes

Yes

1

Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.)

No No 0

By law, do borrowers have the right to access their data in the credit bureau or credit registry?

Yes No 1

image

Can banks and financial institutions access borrowers’ credit information online (for example, through an online platform, a system-to-system connection or both)?

Yes Yes 1

image

Are bureau or registry credit scores offered as a value-added service to help banks and financial institutions assess the creditworthiness of borrowers?

Yes No 1

image

Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0.

Coverage

Credit bureau

Credit registry

Number of individuals

2,192,683

1,247,274

Number of firms

9,673

10,875

Total

2,202,356

1,258,149

Percentage of adult population

53.2

30.4

image

Protecting Minority Investors

This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

image

What the indicators measure

Case study assumptions

  • Extent of disclosure index (0–10): Disclosure, review, and approval requirements for related-party transactions

  • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for prejudicial related-party transactions; Available legal remedies (damages, disgorgement of profits, disqualification

    from managerial position(s) for one year or more, rescission of the transaction)

  • Ease of shareholder suits index (0–10): Access to internal corporate documents; Evidence obtainable during trial and allocation of legal expenses

  • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of shareholder suits indices

  • Extent of shareholder rights index (0-6): Shareholders’ rights and role in major corporate decisions

  • Extent of ownership and control index (0-7): Governance safeguards protecting shareholders from undue board control and entrenchment

  • Extent of corporate transparency index (0-7): Corporate transparency on ownership stakes, compensation, audits and financial prospects

  • Extent of shareholder governance index (0–20): Sum of the extent of shareholders rights, extent of ownership and control and extent of corporate transparency indices

  • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices

To make the data comparable across economies, a case study uses several assumptions about the business and the transaction.

The business (Buyer):

  • Is a publicly traded corporation listed on the economy’s most important stock exchange.

  • Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not specifically required by law.

  • Has a supervisory board in economies with a two-tier board system on which Mr. James appointed 60% of the shareholder-elected members.

  • Has not adopted bylaws or articles of association that go beyond the minimum requirements. Does not follow codes, principles, recommendations or guidelines that are not mandatory.

  • Is a manufacturing company with its own distribution network.

    The transaction involves the following details:

  • Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to Buyer’s five-member board.

  • Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores.

  • Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of Buyer’s assets and is higher than the market value.

  • The proposed transaction is part of the company’s principal activity and is not outside the authority of the company.

  • Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made—that is, the transaction was not entered into fraudulently.

  • The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and directors that approved the transaction.

image

Stock exchange information

Stock exchange

Bolsa de Valores de El Salvador

Protecting Minority Investors – El Salvador

image

Listed firms with equity securities

95

Stock exchange URL https://www.bolsadevalores.com.sv

image

Indicator

El Salvador

Latin America & Caribbean

OECD high income

Best Regulatory Performance

Extent of disclosure index (0-10)

3.0

4.1

6.5

10 (13 Economies)

City Covered San Salvador

image

image

Ease of shareholder suits index (0-10)

7.0

6.7

7.3

10 (Djibouti)

Extent of director liability index (0-10) 0.0 5.2 5.3 10 (3 Economies)

image

Extent of ownership and control index (0-7)

1.0

2.3

4.5

7 (9 Economies)

Extent of shareholder rights index (0-6) 4.0 3.0 4.7 6 (19 Economies)

image

Figure – Protecting Minority in El Salvador – Score

image

36.0

Extent of corporate transparency index (0-7) 3.0 2.3 5.7 7 (13 Economies)

image

Score – Protecting Minority Investors

Figure – Protecting Minority Investors in El Salvador and comparator economies – Ranking and Score

DB 2020 Protecting Minority Investors Score

image

100

80.0: Colombia (Rank: 13)

48.0: Costa Rica (Rank: 110)

47.3: Regional Average (Latin America & Caribbean) 42.0: Honduras (Rank: 120)

36.0: El Salvador (Rank: 140)

30.0: Guatemala (Rank: 153)

0

Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index.

Figure – Protecting Minority Investors in El Salvador and comparator economies – Measure of Quality

El Salvador

3 0 3 1 4 7

Colombia 5 7

Costa Rica 1 5 5

Guatemala 1 2 3 1 3

Honduras 0 8

9 7 4 8

3 2 8

5

3 1 3 6

OECD high income

Latin America & Caribbean

2.5

5.6

5.4

5.6

4.4

2.5

6.6

3.2

4.3

6.5

4.5

7.4

image

image

0 5 10 15 20 25 30 35 40 45

Sub-Indicator Score

image

image

image

image

image

image

Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10)

image

Details – Protecting Minority Investors in El Salvador – Measure of Quality

image

Answer

Score

Extent of conflict of interest regulation index (0-30)

image

Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3)

Shareholders excluding interested

parties

3.0

Extent of disclosure index (0-10) 3.0

image

Must Mr. James disclose his conflict of interest to the board of directors? (0-2)

No disclosure

obligation

0.0

Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0

image

Must Buyer immediately disclose the transaction to the public? (0-2)

No disclosure

obligation

0.0

Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) No disclosure obligation

0.0

image

Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to

Buyer? (0-1)

No

0.0

Extent of director liability index (0-10) 0.0

image

Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2)

Not liable

0.0

Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Not liable 0.0

image

Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1)

No

0.0

Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) No 0.0

image

Can a court void the transaction upon a successful claim by shareholders? (0-2)

Only in case of fraud 0.0

or bad faith

Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0

image

Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents?

(0-1)

No

0.0

Ease of shareholder suits index (0-10) 7.0

image

Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1)

Yes

1.0

Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant document

3.0

image

Is the level of proof required for civil suits lower than that of criminal cases? (0-1)

Yes

1.0

Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Preapproved questions only

1.0

image

Extent of shareholder governance index (0-20)

Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0

image

Does the sale of 51% of Buyer's assets require shareholder approval?

No

0.0

Extent of shareholder rights index (0-6) 4.0

image

Must Buyer obtain its shareholders’ approval every time it issues new shares?

Yes

1.0

Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? Yes 1.0

image

Do shareholders elect and dismiss the external auditor?

Yes

1.0

Do shareholders automatically receive preemption rights every time Buyer issues new shares? Yes 1.0

image

Extent of ownership and control index (0-7)

1.0

Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? No 0.0

Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? No 0.0

image

Must the board of directors include independent and nonexecutive board members?

No

0.0

Can shareholders remove members of the board of directors without cause before the end of their term?

Yes

1.0

Must the board of directors include a separate audit committee exclusively comprising board members?

No

0.0

Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer?

No

0.0

Must Buyer pay declared dividends within a maximum period set by law?

No

0.0

Is a subsidiary prohibited from acquiring shares issued by its parent company?

No

0.0

Extent of corporate transparency index (0-7)

3.0

Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%?

No

0.0

Must Buyer disclose information about board members’ primary employment and directorships in other companies?

No

0.0

Must Buyer disclose the compensation of individual managers?

No

0.0

Must a detailed notice of general meeting be sent 21 days before the meeting?

No

0.0

Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda?

Yes

1.0

Must Buyer's annual financial statements be audited by an external auditor?

Yes

1.0

Must Buyer disclose its audit reports to the public?

Yes

1.0

image

Paying Taxes

This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information.

image

What the indicators measure

Case study assumptions

Tax payments for a manufacturing company in 2018 (number per year adjusted for electronic and joint filing and payment)

  • Total number of taxes and contributions paid or withheld, including consumption taxes (value added tax, sales tax or goods and service tax)

  • Method and frequency of filing and payment

    Time required to comply with 3 major taxes (hours per year)

  • Collecting information, computing tax payable

  • Preparing separate tax accounting books, if required

  • Completing tax return, filing with agencies

  • Arranging payment or withholding

    Total tax and contribution rate (% of commercial profits)

  • Profit or corporate income tax

  • Social contributions, labor taxes paid by employer

  • Property and property transfer taxes

  • Dividend, capital gains, financial transactions taxes

  • Waste collection, vehicle, road and other taxes

    Postfiling Index

  • Time to comply with VAT refund (hours)

  • Time to obtain VAT refund (weeks)

  • Time to comply with a corporate income tax correction (hours)

  • Time to complete a corporate income tax correction (weeks)

Using a case scenario, Doing Business records taxes and mandatory contributions a medium size company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of filing and payments, time taken to comply with tax laws, time taken to comply with the requirements of postfiling processes and time waiting.

To make data comparable across economies, several assumptions are used:

  • TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the second year of operation (calendar year 2018). Taxes and mandatory contributions are measured at all levels of government.

    The VAT refund process:

  • In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output VAT in June 2018.

    The corporate income tax audit process:

  • An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period.

image

Indicator

El Salvador

Latin America & Caribbean

OECD high income

Best Regulatory Performance

Payments (number per year)

7

28.2

10.3

3 (2 Economies)

Paying Taxes – El Salvador

image

Total tax and contribution rate (% of profit)

36.4

47.0

39.9

26.1 (33 Economies)

Time (hours per year) 168 317.1 158.8 49 (3 Economies)

image

Figure – Paying Taxes in El Salvador – Score

Postfiling index (0-100) 49.5 47.5 86.7 None in 2018/19

image

image

93.3

image

81.6

image

85.6

image

49.5

Payments

Time

Total tax and contribution rate

Postfiling index

Figure – Paying Taxes in El Salvador and comparator economies – Ranking and Score

DB 2020 Paying Taxes Score

image

0 100

78.0: Costa Rica (Rank: 66)

77.5: El Salvador (Rank: 70)

70.3: Guatemala (Rank: 104)

60.5: Regional Average (Latin America & Caribbean)

58.6: Colombia (Rank: 148)

49.9: Honduras (Rank: 167)

Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold.

Figure – Paying Taxes in El Salvador and comparator economies – Measure of Quality

image

87.2

49.5

48.2

47.5

33.0

35.1

100

90

Index score

80

70

60

50

40

30

20

10

0

El Salvador

Colombia Costa

Rica

Guatemala Honduras Latin America

& Caribbean

Details – Paying Taxes in El Salvador

image

Tax or Payments

mandatory (number) contribution

Notes on Payments

Time (hours)

Statutory tax rate

Tax base

Total tax and contribution rate (% of profit)

Notes on TTCR

Corporate 1.0

income tax

online

56.0

25% if less than

$150,000, else 30%

taxable profit

16.13

Employer paid – 0.0

Pension fund contributions (AFP)

jointly

7.75%

gross salaries

8.74

Employer paid – 1.0

Social security contributions

online

44.0

7.5%

gross salaries

8.46

Municipal tax 1.0

various rates

total assets

1.14

Employer paid – 0.0

Training tax (INSAFORP)

jointly

1%

gross salaries

1.13

Capital gains tax 0.0

jointly

10%

capital gains

0.51

Business license 1.0 tax

fixed fee

0.16

Vehicle taxes 1.0

fixed fee

0.08

Value added tax 1.0

(VAT)

online

68.0

13%

value added

0.00

not included

Employee paid – 0.0

Pension fund contributions (AFP)

jointly

7.25%

gross salaries

0.00

withheld

Employee paid – 0.0

Social security contributions

jointly

3%

gross salaries

0.00

withheld

Fuel tax 1.0

$0.20 per gallon

fuel consumption

0.00

Totals 7

168

36.4

Details – Paying Taxes in El Salvador – Tax by Type

image

Taxes by type

Answer

Profit tax (% of profit)

16.6

Labor tax and contributions (% of profit)

18.3

Other taxes (% of profit)

1.4

image

Details – Paying Taxes in El Salvador – Measure of Quality

Answer

Score

Postfiling index (0-100)

49.5

VAT refunds

Does VAT exist?

Yes

Does a VAT refund process exist per the case study?

No

Restrictions on VAT refund process

Restricted to international traders

Percentage of cases exposed to a VAT audit (%)

Not applicable

Is there a mandatory carry forward period?

No

Time to comply with VAT refund (hours)

No VAT refund per case study scenario

0.0

Time to obtain VAT refund (weeks)

No VAT refund per case study scenario

0.0

Corporate income tax audits

Does corporate income tax exist?

Yes

Percentage of cases exposed to a corporate income tax audit (%)

0% – 24%

Time to comply with a corporate income tax correction (hours)

2.5

98.2

Time to complete a corporate income tax correction (weeks)

No tax audit per case study scenario

100

Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable.

The hours for Social Security include all the hours for labor taxes and mandatory contributions in general.

The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction.

N/A = Not applicable.

image

Trading across Borders

Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

image

What the indicators measure

Case study assumptions

Documentary compliance

  • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in origin economy

  • Obtaining, preparing and submitting documents required by destination economy and any transit economies

  • Covers all documents required by law and in practice, including electronic submissions of information

    Border compliance

  • Customs clearance and inspections

  • Inspections by other agencies (if applied to more than 20% of shipments)

  • Handling and inspections that take place at the economy’s port or border

    Domestic transport

  • Loading or unloading of the shipment at the warehouse or port/border

  • Transport between warehouse and port/border

  • Traffic delays and road police checks while shipment is en route

To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions:

Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours.

Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Contributors are private sector experts in international trade logistics and are informed about exchange rates.

Assumptions of the case study:

  • For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy.

  • It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from its natural import partner—the economy from which it imports the largest value (price times quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is the largest purchaser of this product. Shipment value is assumed to be $50,000.

  • The mode of transport is the one most widely used for the chosen export or import product and the trading partner, as is the seaport or land border crossing.

  • All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process.

  • A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy.

  • Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities.

image

Trading across Borders – El Salvador

Indicator

El Salvador

Latin America & Caribbean

OECD high income

Best Regulatory Performance

Time to export: Border compliance (hours)

24

55.3

12.7

1 (19 Economies)

Cost to export: Border compliance (USD)

128

516.3

136.8

0 (19 Economies)

Time to export: Documentary compliance (hours)

9

35.7

2.3

1 (26 Economies)

Cost to export: Documentary compliance (USD)

50

100.3

33.4

0 (20 Economies)

Time to import: Border compliance (hours)

36

55.6

8.5

1 (25 Economies)

Cost to import: Border compliance (USD)

128

628.4

98.1

0 (28 Economies)

Time to import: Documentary compliance (hours)

13

43.2

3.4

1 (30 Economies)

Cost to import: Documentary compliance (USD)

67

107.3

23.5

0 (30 Economies)

Figure – Trading across Borders in El Salvador – Score

Time

Cost

Time

Cost

Time

Cost

Time

Cost

to

to

to

to

to

to

to

to

export:

export:

export:

export:

import:

import:

import:

import:

Border

Border

Documentary

Documentary

Border

Border

Documentary

Documentary

compliance

compliance

compliance

compliance

compliance

compliance

compliance

compliance

Figure – Trading across Borders in El Salvador and comparator economies – Ranking and Score

image

85.5

image

87.9

image

95.1

image

87.5

image

87.5

image

89.3

image

94.8

image

90.5

DB 2020 Trading Across Borders Score

image

0 100

89.8: El Salvador (Rank: 46)

77.6: Costa Rica (Rank: 80)

77.2: Guatemala (Rank: 82)

69.1: Regional Average (Latin America & Caribbean)

64.3: Honduras (Rank: 130)

62.7: Colombia (Rank: 133)

Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import.

Figure – Trading across Borders in El Salvador – Time and Cost

image

128

36

128

24

67

50

13

9

image

40

35

Time (hours)

30

25

20

15

10

5

0

Export

image

Export

Time (hours) Cost (USD)

Import

Import

140

120

Cost (USD)

100

80

60

40

20

0

Border Compliance

Documentary Compliance

Border Compliance

Documentary Compliance

Details – Trading across Borders in El Salvador

image

Characteristics

Export

Import

Product

HS 61 : Articles of apparel and clothing accessories, knitted or crocheted

HS 8708: Parts and accessories of motor vehicles

Trade partner

United States

United States

Border

Anguiatú border crossing

Anguiatú border crossing

Distance (km)

124

124

Domestic transport time (hours)

4

4

Domestic transport cost (USD)

400

400

Details – Trading across Borders in El Salvador – Components of Border Compliance

Time to Complete (hours)

Associated Costs (USD)

Export: Clearance and inspections required by customs authorities

24.0

110.3

Export: Clearance and inspections required by agencies other than customs

0.0

0.0

Export: Port or border handling

20.0

18.0

Import: Clearance and inspections required by customs authorities

36.0

110.3

Import: Clearance and inspections required by agencies other than customs

0.0

0.0

Import: Port or border handling

36.0

18.0

image

Details – Trading across Borders in El Salvador – Trade Documents

image

Export

Import

Commercial invoice Commercial invoice

Packing list Packing list

Customs Export Declaration Customs Import Declaration

Certificate of origin Certificate of origin

Road Transport Document Transit Document

Transit document Bill of lading

Bill of lading Non-Intrusive Scanner Payment Receipt

Terminal handling receipt Terminal Handling receipt

Non-Intrusive Scanner Payment Receipt Road Transport Document

SOLAS certificate SOLAS certificate

image

image

Enforcing Contracts

The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information.

image

What the indicators measure

Case study assumptions

Time required to enforce a contract through the courts (calendar days)

  • Time to file and serve the case

  • Time for trial and to obtain the judgment

  • Time to enforce the judgment

    Cost required to enforce a contract through the courts (% of claim value)

  • Average attorney fees

  • Court costs

  • Enforcement costs

    Quality of judicial processes index (0-18)

  • Court structure and proceedings (-1-5)

  • Case management (0-6)

  • Court automation (0-4)

  • Alternative dispute resolution (0-3)

The dispute in the case study involves the breach of a sales contract between two domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement.

To make the data on the time and comparable across economies, several assumptions about the case are used:

  • The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of adequate quality.

  • The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater.

  • The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater.

  • The Seller requests the pretrial attachment of the defendant’s movable assets to secure the claim.

  • The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods was not adequate.

  • The judge decides in favor of the seller; there is no appeal.

  • The Seller enforces the judgment through a public sale of the Buyer’s movable assets.

image

Standardized Case

Claim value USD 7,319

Enforcing Contracts – El Salvador

image

City Covered San Salvador

Court name San Salvador Civil and Commercial Courts

image

Figure – Enforcing Contracts in El Salvador – Score

image

Indicator

El Salvador

Latin America & Caribbean

OECD high income

Best Regulatory Performance

Time (days)

816

774.2

589.6

120 (Singapore)

image

Quality of judicial processes index (0-18)

8.0

8.8

11.7

None in 2018/19

Cost (% of claim value) 28.4 32.0 21.5 0.1 (Bhutan)

image

43.0

image

68.2

image

44.4

Time

Cost

Quality of judicial processes index

Figure – Enforcing Contracts in El Salvador and comparator economies – Ranking and Score

DB 2020 Enforcing Contracts Score

image

0 100

55.2: Costa Rica (Rank: 111)

53.5: Regional Average (Latin America & Caribbean)

51.9: El Salvador (Rank: 126)

44.2: Honduras (Rank: 154)

34.5: Guatemala (Rank: 176)

34.3: Colombia (Rank: 177)

Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators.

Figure – Enforcing Contracts in El Salvador – Time and Cost

1600

1400

Time (days)

1200

1000

800

600

400

200

0

Colombia Costa

Time (days) Cost (% of claim value)

image

45.8

1402

1288

38.8

32.0

852

28.4

920

24.3

816

26.5

774.2

589.6

21.5

image

image

El Guatemala Honduras Latin

50

Cost (% of claim value)

40

30

20

10

0

OECD

Rica

Salvador

America & Caribbean

high income

Figure – Enforcing Contracts in El Salvador and comparator economies – Measure of Quality

El Salvador

Colombia

Costa Rica

Guatemala

2.5

image

2.5

2.5

2

0.5

0.5

2

1.5

3.5

3

0.5

1.5

3

0.5

3.5

image

image

3

Honduras

2.5

2 0 3

OECD high income

Latin America & Caribbean

2.5

2.4

2.2

3.2

1

2.4

3.6

3.6

0 2 4 6 8 10 12 14

Sub-Indicator Score

image

image

image

image

Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5)

Details – Enforcing Contracts in El Salvador

image

Indicator

Time (days) 816

Trial and judgment 381

Filing and service 70

Cost (% of claim value) 28.4

Enforcement of judgment 365

Court fees 3

Attorney fees 20

Quality of judicial processes index (0-18) 8.0

Enforcement fees 5.4

Case management (0-6) 2.0

Court structure and proceedings (-1-5) 3.0

image

Alternative dispute resolution (0-3) 2.5

Court automation (0-4) 0.5

image

Details – Enforcing Contracts in El Salvador – Measure of Quality

Answer

Score

Quality of judicial processes index (0-18)

8.0

Court structure and proceedings (-1-5)

3.0

1. Is there a court or division of a court dedicated solely to hearing commercial cases?

No

0.0

2. Small claims court

1.0

2.a. Is there a small claims court or a fast-track procedure for small claims?

Yes

2.b. If yes, is self-representation allowed?

No

3. Is pretrial attachment available?

Yes

1.0

4. Are new cases assigned randomly to judges?

Yes, automatic

1.0

5. Does a woman's testimony carry the same evidentiary weight in court as a man's?

Yes

0.0

Case management (0-6)

2.0

1. Time standards

1.0

1.a. Are there laws setting overall time standards for key court events in a civil case?

Yes

1.b. If yes, are the time standards set for at least three court events?

Yes

1.c. Are these time standards respected in more than 50% of cases?

Yes

2. Adjournments

0.0

2.a. Does the law regulate the maximum number of adjournments that can be granted?

No

2.b. Are adjournments limited to unforeseen and exceptional circumstances?

No

2.c. If rules on adjournments exist, are they respected in more than 50% of cases?

No

3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) clearance rate report; (iii) age of pending cases report; and (iv) single case progress report?

No

0.0

4. Is a pretrial conference among the case management techniques used before the competent court?

Yes

1.0

5. Are there any electronic case management tools in place within the competent court for use by judges?

No

0.0

6. Are there any electronic case management tools in place within the competent court for use by lawyers?

No

0.0

Court automation (0-4)

0.5

1. Can the initial complaint be filed electronically through a dedicated platform within the competent court?

No

0.0

2. Is it possible to carry out service of process electronically for claims filed before the competent court?

No

0.0

3. Can court fees be paid electronically within the competent court?

No

0.0

4. Publication of judgments

0.5

4.a Are judgments rendered in commercial cases at all levels made available to the general public through publication in official gazettes, in newspapers or on the internet or court website?

No

4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made available to the general public through publication in official gazettes, in newspapers or on the internet or court website?

Yes

Alternative dispute resolution (0-3)

2.5

1. Arbitration

1.5

1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or section of the applicable code of civil procedure encompassing substantially all its aspects?

Yes

1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— that cannot be submitted to arbitration?

No

1.c. Are valid arbitration clauses or agreements usually enforced by the courts?

Yes

2. Mediation/Conciliation 1.0

image

2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or

section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig

Yes

2.a. Is voluntary mediation or conciliation available? Yes

2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No conciliation is successful, a refund of court filing fees, income tax credits or the like)?

Resolving Insolvency

Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information.

What the indicators measure

Time required to recover debt (years)

  • Measured in calendar years

  • Appeals and requests for extension are included

Cost required to recover debt (% of debtor’s estate)

  • Measured as percentage of estate value

  • Court fees

  • Fees of insolvency administrators

  • Lawyers’ fees

  • Assessors’ and auctioneers’ fees

  • Other related fees

To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used:

  • A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties.

  • The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater.

  • The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. The hotel cannot pay back the loan, but makes enough money to operate otherwise.

In addition, Doing Business evaluates the quality of legal framework applicable to judicial liquidation and reorganization proceedings and the extent to which best insolvency practices have been implemented in each economy covered.

Outcome

  • Whether business continues operating as a going concern or business assets are sold piecemeal

Recovery rate for creditors

  • Measures the cents on the dollar recovered by secured creditors

  • Outcome for the business (survival or not) determines the maximum value that can be recovered

  • Official costs of the insolvency proceedings are deducted

  • Depreciation of furniture is taken into account

  • Present value of debt recovered

Strength of insolvency framework index (0- 16)

  • Sum of the scores of four component indices:

  • Commencement of proceedings index (0-3)

  • Management of debtor’s assets index (0-6)

  • Reorganization proceedings index (0-3)

  • Creditor participation index (0-4)

Resolving Insolvency – El Salvador

resolving insolvency el salvador

Figure – Resolving Insolvency in El Salvador – Score

figure resolving insolvency in el salvador score

Figure – Resolving Insolvency in El Salvador and comparator economies – Ranking and Score

DB 2020 Resolving Insolvency Score

figure resolving insolvency in el salvador and comparator economies ranking and score

Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index.

Figure – Resolving Insolvency in El Salvador – Time and Cost

figure resolving insolvency in el salvador time and cost

Figure – Resolving Insolvency in El Salvador and comparator economies – Measure of Quality

figure resolving insolvency in el salvador and comparator economies measure of quality

Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.”

Figure – Resolving Insolvency in El Salvador and comparator economies – Recovery Rate

figure resolving insolvency in el salvador and comparator economies recovery rate

Details – Resolving Insolvency in El Salvador

details resolving insolvency in el salvador

Details – Resolving Insolvency in El Salvador – Measure of Quality

details resolving insolvency in el salvador measure of quality

Note:

Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.”

Employing Workers

Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business.

The most recent round of data collection was completed in May 2019. See the methodology for more information.

What the indicators measure

Hiring

(i) whether fixed-term contracts are prohibited for permanent tasks; (ii) maximum cumulative duration of fixed-term contracts;

(iii) length of the maximum probationary period; (iv) minimum wage;(v) ratio of minimum wage to the average value added per worker.

Working hours

(i) maximum number of working days allowed per week; (ii) premiums for work: at night, on a weekly rest day and overtime;

(iii) whether there are restrictions on work at night, work on a weekly rest day and for overtime work; (iv) length of paid annual leave.

Redundancy rules

(i) whether redundancy can be basis for terminating workers; (ii) whether employer needs to notify and/or get approval from third party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment.

To make the data comparable across economies, several assumptions about the worker and the business are used.

The worker:

  • Is a cashier in a supermarket or grocery store, age 19, with one year of work experience.

  • Is a full-time employee.

  • Is not a member of the labor union, unless membership is mandatory.

The business:

  • Is a limited liability company (or the equivalent in the economy).

  • Operates a supermarket or grocery store in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Has 60 employees.

  • Is subject to collective bargaining agreements if such agreements cover more than 50% of the food retail sector and they apply even to firms that are not party to them.

  • Abides by every law and regulation but does not grant workers more benefits than those mandated by law, regulation or (if applicable) collective bargaining agreements.

Redundancy cost

(i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected.

Employing Workers – El Salvador

Details – Employing Workers in El Salvador

Hiring

Fixed-term contracts prohibited for permanent tasks? Yes

Maximum length of a single fixed-term contract (months) No limit

Maximum length of fixed-term contracts, including renewals (months) No limit

Minimum wage applicable to the worker assumed in the case study (US$/month) 259.2

Maximum length of probationary period (months) 1.0

Ratio of minimum wage to value added per worker 0.5

Working hours

Standard workday 8.0

Maximum number of working days per week 6.0

Premium for night work (% of hourly pay) 25.0

Premium for work on weekly rest day (% of hourly pay) 100.0

Premium for overtime work (% of hourly pay) 112.5

Restrictions on night work? Yes

Restrictions on weekly holiday? Yes

Restrictions on overtime work? No

Paid annual leave for a worker with 1 year of tenure (working days) 11.0

Paid annual leave for a worker with 5 years of tenure (working days) 11.0

Paid annual leave for a worker with 10 years of tenure (working days) 11.0

Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 11.0

Redundancy rules

Dismissal due to redundancy allowed by law? Yes

Third-party notification if one worker is dismissed? No

Third-party approval if one worker is dismissed? No

Third-party notification if nine workers are dismissed? No

Third-party approval if nine workers are dismissed? No

Retraining or reassignment obligation before redundancy? No

Priority rules for redundancies? No

Priority rules for reemployment? No

Redundancy cost

Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 0.0

Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 0.0

Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 0.0

Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 0.0

Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.3

Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 21.4

Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 42.9

Unemployment protection after one year of employment? No

Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 22.9

PEO El Salvador

El Salvador has emerged as a prominent destination for Professional Employer Organization (PEO) services, offering businesses a strategic gateway to navigate the complexities of the Salvadoran labor landscape. With its rapidly growing economy and a burgeoning workforce, El Salvador presents unique opportunities for companies seeking to expand their operations while minimizing administrative burdens. Partnering with a PEO in El Salvador allows businesses to tap into a pool of skilled talent, navigate local labor regulations, and ensure compliant employment practices. Whether entering the market or scaling up existing ventures, El Salvador’s PEO services offer a streamlined approach to workforce management, empowering companies to focus on their core objectives while leaving HR and legal complexities to the experts.

PEO services, or Professional Employer Organization services, in El Salvador offer a comprehensive solution for businesses seeking to streamline their human resources, payroll, and administrative operations. These services are particularly valuable for companies expanding or establishing their presence in the Salvadoran market, as they enable organizations to effectively manage employee-related tasks while ensuring compliance with local labor laws and regulations. PEO providers in El Salvador typically take on responsibilities such as employee onboarding, payroll processing, tax withholding, benefits administration, and even risk management. By partnering with a PEO, businesses can focus on their core activities and growth strategies, confident that their workforce-related functions are being efficiently managed by experts well-versed in the intricacies of the Salvadoran business environment. This approach not only enhances operational efficiency but also minimizes the complexities associated with employment procedures, allowing companies to thrive in a competitive landscape.

Business Reforms in El Salvador

From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by

Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008.

=Doing Business reform making it easier to do business. = Change making it more difficult to do business.

DB2020

Getting Electricity: El Salvador made getting electricity easier by accepting electrical plans at the same time as connection requests.

DB2019

Dealing with Construction Permits: El Salvador made dealing with construction permits less time-consuming by eliminating the requirement to obtain a feasibility study for rainwater drainage for land plots under 1,000 square meters.

Trading across Borders: El Salvador made exporting easier by introducing an intermediate customs post for shipments transiting through the Anguiatú land border.

DB2018

Dealing with Construction Permits: The municipal authorities of the San Salvador Metropolitan Area introduced legislation requiring phased inspections during construction, as well as experience requirements for professionals in charge of inspections. Furthermore, an online system was implemented for the payment of preliminary construction fees.

Getting Electricity: El Salvador improved the reliability of electricity by introducing new software programs allowing better outage management and maintenance planning.

Paying Taxes: El Salvador made paying taxes easier by implementing an online platform for filing and payment of taxes, and by moving to risk-based audit assessment selection system focusing more on larger companies.

Trading across Borders: El Salvador made exporting and importing easier by increasing the number of customs officers at the Anguiatú land border.

DB2017

Getting Credit: El Salvador made access to credit information more difficult by reducing the coverage of the credit bureau.

Paying Taxes: El Salvador made paying taxes easier by encouraging the use of the electronic system for filing taxes.

DB2016

Getting Credit: El Salvador improved access to credit by adopting the Law on Movable Property, which established a modern, centralized, notice-based collateral registry and allows a general description of a single category of assets granted as collateral.

Trading across Borders: El Salvador increased the border compliance time for exporting and importing by adding an extra, nonintrusive inspection at the Anguiatú border crossing with Guatemala.

DB2014

Paying Taxes: El Salvador made paying taxes more costly for companies by increasing the corporate income tax rate.

Trading across Borders: El Salvador made trading across borders easier by developing a one-stop shop for exporting and by implementing electronic data interchange systems.

DB2013

Getting Credit: El Salvador improved access to credit information through a new law regulating the management of personal credit information.

Paying Taxes: El Salvador introduced an alternative minimum tax.

DB2012

Protecting Minority Investors: El Salvador strengthened investor protections by allowing greater access to corporate information during the trial.

DB2009

Starting a Business: El Salvador made starting a business easier by reducing the minimum capital requirement, simplifying the legalization of accounting books and easing publication requirements.

Trading across Borders: El Salvador reduced the time for exporting and importing by modernizing its customs system, reducing physical inspections, improving traffic control at the port and implementing a single-window system, while improvements in the banking sector reduced the time required to obtain a letter of credit.

DB2008

DOWNLOAD

Table of Contents