Why are Businesses Choosing to Incorporate in El Salvador?

Despite being the smallest Central American country, El Salvador is a top choice for foreign investors, offering unique opportunities for savvy entrepreneurs looking for a Latin America commercial base. In fact, the country’s FDI inward flow catapulted from US$397 million in 2015 to US$792 million in 2017, demonstrating the dramatic growth in business activity in the country.

As an entrepreneur, you should consider incorporating a business in El Salvador, either as a startup or an extension of your existing business in order to take advantage of the country’s unique market landscape.

Below, we explore El Salvador’s strong economy, trade links, low taxes, and offer guidance on how to maximize your investment in the country in 2019.

Why Incorporate in El Salvador? Significant Trade Opportunities

One of the most obvious reasons why you should consider an expansion into El Salvador is because of the significant trade opportunities available.

Perhaps one of the most obvious reasons why you should consider an expansion into El Salvador is because of the significant trade opportunities that will be made available to you. From the trade investment opportunities between El Salvador and India right through to the free trade agreements such as the Central American Common Market and Latin American and Caribbean Economic System (SELA), establishing a business in the country not only allows you access to the El Salvadorian market but to markets across Latin America.

El Salvador is also a member of the Central American Integration System (SICA), the Association of Caribbean States (ACS), and the CAFTA-DR, which offers access into some highly lucrative markets such as the United States, the Dominican Republic, and Costa Rica.

When you take into consideration that El Salvador’s economy relies heavily on imports and exports (64% of its GDP), it’s clear that setting up an organization in the country makes a lot of sense. As well as its strong ties with other nations, the country’s government is pro-export and pro-trade, meaning there are various government incentives to trade in El Salvador. On top of that, the country’s low labor costs and experienced manufacturing sectors mean that you can import raw materials into the country to add value, then sell onto foreign markets in other territories. At a time when expanding into Latin America has never been simpler, utilizing El Salvador’s export-friendly infrastructure and free trade is a smart commercial move.

El Salvador has a Simple Incorporation Process

Once you have found a gap in the market for your products, the next step is to company incorporation in El Salvador. Indeed, without prior knowledge of the country’s language and laws, you may struggle to get started, but the truth is that incorporation is a simple and straightforward process, designed to encourage investors into the country.

Once you have registered the company you can obtain a local tax ID and begin operations. Foreign ownership is allowed in El Salvador, there are no capital controls and you can sponsor the visas of foreign employees. As always, it pays to work with an experienced local back-office service provider or lawyer to ensure your business is incorporated correctly, as doing it on your own can be costly and time-consuming – especially if you make a mistake with the filing of documentation.

Global Economic Challenges

As some western economies struggle through political uncertainty, incorporating into new markets such as El Salvador makes more and more sense. Globalization is no longer exclusive just to million-dollar organizations – businesses of all shapes and sizes can take advantage of the opportunities that growing and emerging economies can offer. El Salvador is one of those.

The United States’ ongoing tensions with China, Mexico, Russia, and Korea has changed the way some businesses trade, for example, whilst the UK’s decision to leave the EU in 2019 has unlocked new dialogues between England and Latin American markets, with free trade agreements no doubt on the way in the coming months. Rather than viewing these political challenges as a bad thing, many businesses are using them to their advantage and taking the jump into new economies, risks that they perhaps would not have taken ten years ago…

Low Tax Rates in El Salvador 

Another reason to expand your business into El Salvador is the country’s low taxation. When compared with other Latin American territories, El Salvador’s’ VAT and corporation tax is low. Value Added Tax (VAT) stands at just 13%, whilst corporate tax is between 25% and 30%, depending on company takings. On top of that, taxes on dividends are also low at just 10%, meaning that you can trade with countries outside of El Salvador without heavy penalties.

Geographic Position great for Doing Buisness

el salvador incorporate a business
El Salvador is in a strong geographical position, offering easy access to both South and North American markets.

El Salvador is in a strong geographical position, wedged between Honduras and Guatemala, offering easy access to both Southern and Northern American markets through air, road, and ocean. As a country that relies heavily on exports, El Salvador boasts strong infrastructures across its air and cargo ports, and travel to destinations such as the United States, Mexico, Colombia, and Brazil is accessible and affordable for entrepreneurs who want to network on a global scale and sell their products and services across multiple Latin American markets.

Incorporate in El Salvador with Biz Latin Hub

El Salvador offers a wide range of opportunities for entrepreneurs and investors who are looking to diversify and expand their international businesses. Whether you want to enter into manufacturing, healthcare, chemicals, food processing, or consumer goods, you’ll no doubt be able to find a gap in the market and take advantage of its booming economy.

To learn more about the Salvadoran economy, the business opportunities to form a company in Salvador and how you might take advantage of these political shifts, please contact us today.

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