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A Guide for El Salvador 2 | Doing Business 2020 a Guide for El Salvador 3 Doing Business 2020 A guide for El Salvador www.pwc.com/interamericas 2 | Doing Business 2020 A guide for El Salvador 3 Preface Foreword Central America is a region brimming with opportunities to As part of the added value that PwC Interamericas offers to learn and innovate. The strategic commercial advantages all of its clients and the business community who want to do include cheaper manufacturing costs and labor, as well as a business in the Central America and the Dominican Republic great deal of arable lands. It is a region with a continuously reegion, it is a great honor to publish the sixth edition of the growing economy, which year after year receives increasing amounts of investment and tourism, which helps it to business guide called Doing Business 2020, containing interconnect with the world. important information, which allows us to understand cultural aspects, the climate for investment, and the most important On the other hand, the Dominican Republic has a promising things to consider on legal, commercial and fiscal matters and rapidly growing economy. Despite the fact that it does not belong to Central America, its proximity to the region on the region, that we have complemented with international and the fact that we share the same language and culture, standards and the best world practices. makes it a key contributor for the region. It’s very close Current business opportunities place Central America and commercial relationship with the United States in regard to tourism, the remittances, and exportations, help keep its the Dominican Republic as a highly attractive region for economy more stable. investors from all over the world. The GDP growth rate for Marisol the last three years has been greater than the average for Edgar Mendoza The Doing Business provides the necessary information Territory Senior Partner the entire Latin America and the Caribbean, inflation has Partner and Regional TLS Leader and orientation about compliance, and the aspects to keep in mind to open a new company, a new branch of a multi- been moderate, favored by the dynamism of the credits national company or any other type of investment in the for the private sector. Likewise, the geographic location is region. With this publication, our purpose is to provide you advantageous, due to the ease of access to the United States with readily available information that can help you take of America, which is still the biggest economy in the world, decisions about investments in our region. and with which there is still a high volume of commercial This publication is only for general orientation purposes and activity, as well as with Europe and Asia. shall not be interpreted as a professional advice. Should you need more information, our advisors are ready to help you PwC Interamericas operates in six countries of Central individually. America and in the Dominican Republic. It offers a single contact to facilitate business and offers customized world class service, which recognize us as the first option for trusted advisors in most of the negotiations that take place in our region and in the world. It should be noted that this document was prepared as a general guideline and that its content is subject to constant changes due to the legal and economic environment of the different countries, and due to the complexity of some of the specific topics, we recommend that you are adequately supported by professionals in our team who specialize in tax, legal and regulatory matters, and who would gladly help you, taking into account the specific circumstances and situations of the subject matter. 4 | Doing Business 2020 A guide for El Salvador 5 El Salvador República Dominicana El Salvador is the former site of the ancient Pipil civilization and was conquered in 1524 by Spain, La isla fue descubierta el 5 de diciembre de 1492 por under whose rule Diego de Holguín and Gonzalo de Cristóbal Colón, quien la llamó La Española. Los indios Alvarado founded the capital city of San Salvador in taínos, los pueblos indígenas, se vieron esclavizados 1525. El Salvador declared independence from Spain on y eventualmente aniquilados por las enfermedades September 15, 1821. introducidas por los españoles y por los abusos de la Elesclavitud. Salvador Bartolomé, achieved notablehermano political de Cristóbal stability Colón, and fue economicnombrado gobernadorgrowth in the y en1990’s. 1496 fundóThe political Santo Domingo, system is basedla ciudad on capital. a party La democracy, isla de La Española in which permaneciódifferent thoughts andbajo ideologiesel dominio españolconverge, hasta electing 1697, thecuando main la officials parte throughoccidental the de free la isla and se equal convirtió suffrage en una of posesión its citizens. francesa. En 1804 se convirtió en la República de Haití, y en 1809 la parte oriental de la isla regresó al dominio español. En 1821, las poblaciones españolas declararon un estado independiente, pero sólo unas semanas más tarde, las fuerzas haitianas invadieron la región oriental y se incorporaron Santo Domingo, conocido entonces como Saint Domingue. Para los próximos 22 años, toda la isla estuvo bajo el control de Haití. El 27 de febrero de 1844, la parte oriental de la isla declaró su independencia como la “República Dominicana”. Los próximos 70 años se caracterizaron por la inestabilidad política y la guerra civil, principalmente debido a las luchas de poder entre los dominicanos más fuertes por el control del gobierno. 6 | Doing Business 2020 A guide for El Salvador 7 El Salvador Chapter content 8 Overview of the country 19 Banking system Brief history. Central bank. Climate. Commercial banks. Population, form of government, language, currency. List of banks. Education. 21 Labor and social security Political and legal system Labor supply. 10 Labor law requirements. Legal framework. Social security. Main political parties. Accounting and audit requirements and practices The Economy 25 11 Accounting. Inflation. Statutory audit requirements. Books and records. Accounting profession. Auditing standards. 12 Doing business Renewable Energy Incentives Government views toward Law. foreign investment. Public Private Partnerships Free Trade Agreement and Law. 27 Tax System other agreements. Law of Legal Stability for Other tax regime. Other free trade zone Investments. Corporate deduction. agreements currently in Investment Funds Law. Tax incentives. effect. Investment Law. Transfer pricing ruling. Foreign investment. Electronic Signature Law. Corporate tax compliance. Establishing a business. Construction Projects Individual taxation summary. Free Zones Law. Procedure Streamlining Law. Individual deduction. Tourism Law. Individual tax compliance. 8 | Doing Business 2020 A guide for El Salvador 9 The Ministry of Education regulates all educational institutions and runs the public school system. There is a wide range of private education institutions which are also regulated and must meet certain requirements set by the Ministry of Education. There are approximately 50 public and private higher education institutions, of which 25 are universities, technological institutes and specialized institutes. Most of these institutions offer graduates courses and master’s degrees, as well as information technology courses which continue to add new professionals to the country’s existing skilled labor pool every year. Area 21,041 km² Population 6,642,767 millions of inhabitants (2018) Population per km2 316 inhabitants for km² Population growth 0.25 % (2018) Urban population 61.7% (2018) Political system Republican Democracy and Representatives Form of government Presidencial Language Spanish Currency United States dollar (US$) Administrative Division 262 municipalities grouped into 14 departments Religion Catholic Capital Ciy San Salvador Fuente: Dirección General de Estadística y Censos, www.digestyc.gob.sv Overview of the country Climate El Salvador has a tropical climate with two distinct seasons: the rainy season (May to October) and the dry season (November to April). Education The Salvadoran public education system consists of the following levels: • Initial level (for children up to 6 years old). • Basic level – Elementary (starts after initial level is finished and lasts 9 years). • Middle level – High school/Certificate of completion of the grade (starts after basic level is finished and lasts 2 - 3 years). • Superior level – University or College (starts after the middle level is finished and last 5 years). Education through high school is officially free. The school year begins at the end of January and ends in Mid November. 10 | Doing Business 2020 A guide for El Salvador 11 Political and Legal System Legal framework The legal structure of El Salvador is composed of three main powers – Legislative, Executive and Judicial – organized as follows: Political and legal framework Executive Legislative Judicial Exercised The President Congress Supreme Court of Justice by the: The Economy Single Chamber (84 El Salvador has one of the most stable integrated economies in Latin America. Its attractive Congressmen) Chosen and dynamic business environment is the result of a policy-driven strategy that has focused The President Composed by direct vote for a three The Supreme Court of Justice is on building sound macroeconomic fundamentals and strong institutions, promoting and the Ministries of: year period, with the composed of 15 magistrates council competition and international integration, and creating a fair, more equitable society in which possibility of reelection for all citizens benefit from economic development. a second term 2015 2016 2017 2018 The President and Elected by the Congress for a period GDP Elected or Vice-President are The Deputies are elected of 9 years. Nominal GDP (US$ m) 23,438.24 24.154.11 24,927.97 26,056.94 appointed elected by direct by direct vote every 3 The Chief Magistrate is also President by: Real GDP growth (%) 2.3% 2.4% 2.3% 2.5% vote every 5 years years of the Constitutional Court Prices and financial indicators Exchange rate SVC US$ (end-period) 8.75 8.75 8.75 8.75 The legal system is based on Napoleonic Code.
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