As the economies of Central America begin to grow, unexplored business opportunities present themselves; this is true for El Salvador. Since the Salvadoran Civil War finished in 1992, the country has experienced great advances socially, politically and economically. This has had a positive impact on FDI in the region.
When foreigners being commercial operations, specifically the incorporation of a company in El Salvador, they have (2) options.
- Formation of a local legal entity (i.e a local El Salvadorian company)
- The establishment of a branch office company
Both of these options are attractive depending on your business needs in the region.
Usually, the incorporation of a Company in El Salvador is not difficult, but for Branch Offices, the incorporation process is slightly more complicated. This is even more true for foreigners who try to complete all process related to the incorporation without the support of a local company.
Keep reading and learn the process involved with the registration of a Branch Office of a Foreign Company in El Salvador
APPOINT A LOCAL LEGAL REPRESENTATIVE
The first step in the incorporation process is to appoint a legal representative for the Branch Office. This person must be a permanent residence in El Salvador; it could be a Salvadoran citizen or a foreign person with residence in the country. This person must have the sufficient faculties to perform every necessary procedure related to the incorporation of the Branch Office, including:
- Act on behalf of the company before all local authorities
- Register the company capital with the Ministry of Economy
- Provide guidance on current in-country regulations
- Assist with renewals of registrations
- Sign documents on behalf of the company
The appointing of the legal representative must be by done through a resolution made by the Board of Directors of the Head Office that indicates the decision to establish a Branch Office in El Salvador and the selection of the person who will act on behalf of this company. The appointing of the Legal Representative can be made through a Power of Attorney (POA). Such document must be duly legalized, apostilled and presented in the Registry of Commerce.
REGISTRATION OF THE FOREIGN CAPITAL
The second step in the incorporation of a Branch Office is the registration of the foreign capital. This must be done by transfer to a local bank in El Salvador. Please note that only the Head Office Company can make this transfer and the capital cannot be less than USD$12,000. It is recommendable that the capital should be higher than this amount given fees related to bank commissions and the issuing of the certification of initial foreign capital by the bank.
The legal representative will complete all the procedures in the bank. Once you have the certificate of the capital you should find a local public accountant for the elaboration of the initial company financial statements.
REGISTRATION OF THE FOREIGN INVESTMENT
The third step of the incorporation process, once you have your legal representative and company financial statements registered in El Salvador, is to register the foreign investment as an initial capital of the Branch Office; the procedure is made in the Ministry of Economy, with the National Office being responsible for its final approval.
Once the foreign investment is duly registered, the Ministry of Economy will provide you with documentation that highlights the approval of the company capital.
REGISTRATION OF THE BRANCH OFFICE
The fourth and final step is completed through the Registry of Commerce. Here, the documents obtained in the previous steps and the incorporation deed of the Head Office (Headquarters) will be presented. This authority will provide you with the following:
- Documentation certifying the approval of the Branch Office Company
- Documentation certifying the foreign capital
- The License of Commerce (allowing you to conduct commercial activities)
With the process finished now, you can duly perform business activities in El Salvador.
INTERESTED IN BEGINNING COMMERCIAL OPERATIONS IN EL SALVADOR?
The incorporation of a Branch Office Company in El Salvador can be a problematic process, for this reason, it is recommended to work with a local partner. At Biz Latin Hub, our group of local professionals can provide you with tailored market-entry and back-office services to assist you to enter and establish operations in El Salvador.
For more personalised information, get in contact with Biz Latin Hub. Reach out to Diego at [email protected] and see how we can support you and your business.
Do you need accounting, taxation and financial support in Latin America? Watch the presentation below to see how we can assist.