Special Provisions for the Promotion and Granting of Tax Incentives to Support the Development of High-rise Real Estate Projects
Ana Mercedes López and Laura Hernández, lawyers at ARIAS El Salvador and experts in Commercial and Tax Law, share insights on how these new provisions are intended to encourage investments and economic activities in real estate development projects with 35 floors or more.
The Legislative Assembly approved new special provisions aimed primarily at promoting investments in high-rise real estate, defined as new constructions or buildings that have 35 floors or levels or more.
These provisions grant tax incentives related to Income Tax to all natural persons and legal entities, as well as Unions of Persons domiciled within or outside the national territory who hold new investments in construction or development projects of high-rise real estate and engage in commercial activities with them, in any of the following cases:
- They conduct the first sale and purchase of high-rise properties, whether of the entire building or partial sales, such as apartments or office spaces.
- They rent high-rise properties for tourism or commercial purposes, provided they are the initial owner.
- They rent spaces and provide hospitality services, if the provider is the same entity who owns the project.
- They provide construction services for high-rise properties.
Beneficiaries will enjoy an exemption from Income Tax on all profits and revenues generated by new high-rise real estate development projects for a period of 15 years. This exemption applies only to income obtained exclusively from the mentioned activities, which will also not be subject to Capital Gains taxation, nor to the payment or advance payments of the referred tax for said items.
In the case of legal entities and Unions of Persons, the exemption will apply to both the entity holding the project and to the partners, shareholders, or members individually considered, solely regarding the profits or dividends arising from the incentivized activities.
The General Directorate of Internal Taxes will be the authority responsible for granting the incentives, for which the beneficiaries must notify at least 30 days in advance about the construction of the project and the information regarding its development.
The mentioned provisions are pending publication in the Official Gazette and will come into effect 8 days after this publication.
The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.