Tips to Do Business in El Salvador Under COVID-19 Restrictions

The COVID-19 pandemic has given nations around the world a strong blow. Latin American jurisdictions and businesses are beginning to evaluate what measures are most suitable to manage health, economic, and social uncertainties. While you do business in El Salvador under COVID-19 restrictions, there are some tips to consider for your business.

Here we outline 5 useful tips that you can apply to your company in El Salvador.

1. Negotiating company costs and expenses

Businessman using his computer to search information about how to do business in El salvador.
One of the best ways to mitigate the effects of the pandemic is to reduce your expenses.

One of the best ways to mitigate the effects of the pandemic as you do business in El Salvador is to reduce your expenses.

Negotiate contracts with your suppliers. These can include rental contracts, printers, cleaning services, and other expenses the company has that is not currently using or benefitting from. When doing business in El Salvador, it would be reasonable to negotiate between 10% to 30% of your expenses and costs. You may also consider completely suspending the contracts that aren’t in use. 

Given that El Salvador’s official language is Spanish, we recommend you properly review contracts with a bilingual lawyer. This is to avoid possible legal claims for breaches of any clause on a contract.

2. Employee payroll management

Employees are one of the most essential assets of a company. Due to the restrictions from the government, many private companies continue operations without needing to work in a physical establishment. In most cases, employees are now working remotely from home.

However, working remotely from home isn’t a viable option for some businesses. To cope, companies are reducing their payroll. Normally it is proportional to the company’s level of reduced sales. Likewise, some businesses are also fully suspending employment contracts for the duration of the quarantine or pandemic.

Suspending employment contracts is legal and allowed by the Labor Code of El Salvador. This means workers do not receive a wage during this period and are reinstated to their jobs once the crisis is over. This measure gives companies a break and thus prevents them from falling into a state of irreversible insolvency or bankruptcy, which would harm both employees and the company.

Note that suspending contracts does not imply dismissal or compensation to employees. If you plan to reduce payroll or suspend contracts while you do business in El Salvador, consult with a local attorney who can advise you on handling employee contracts.

3. Online services

Just as companies are operating via home offices, many public and private institutions are updating and transitioning their services online. In most cases, you only need an email account to affiliate with the desired institution. The following institutions are offering online services to support you as you do business in El Salvador:

  • The National Registry Center provides online services for requesting certain documents, filing procedures, and consulting.
  • The Ministry of Finance has always had an online system for filing tax returns. It has been a great tool for online payments and allows them to keep receiving tax payments. This tax authority has also enabled other services for individuals.

There are many public and private institutions in El Salvador taking the leap to provide virtual services to facilitate procedures for people and companies. 

4. Administrative changes and extensions of terms

A business man and a business woman standing together.
The Salvadorian government allows for the payment of tax through installments.

Multiple companies doing businesses in El Salvador are not able to operate at their usual capacity. This is due to the nature of their services or the fact that some necessary services have stalled. This includes procedural deadlines for trials, which have been suspended until quarantine restrictions are lifted.

On the other hand, there have also been deadline extensions for 2019 income tax returns. Normally, tax returns must be formally submitted no later than April 30 of each year. However, this year the government extended this deadline and companies had until June 30 to submit their income statements. Note that the Salvadorian government also allows for the payment of tax through installments.

It is vital to stay updated with these changes with your local accountant as you do business in El Salvador.

5. Occupational health and safety in the workplace

Occupational health and safety management has always been a business obligation to prevent risks in the workplace. The law establishes the general internal health and safety regulations companies must implement.

In El Salvador, these laws vary greatly depending on the commercial activity of the company. The Ministry of Labor in El Salvador is responsible for ensuring compliance with occupational health and safety practices in the workplace. If you do not comply with their measures, you may be subject to high fines or be forced to close your company.

As COVID-19 restrictions are lifted in the country, the Ministry of Labor conducts inspections of all work centers and offices. Prior to the pandemic, inspections were usually conducted on companies with over 10 employees or depending on their commercial activity. Due to the effects of the pandemic, inspections are no longer limited to certain types of companies or sectors. Now they apply to practically any company, office, or establishment, regardless of its size or category.

For this reason, we recommend that you consult with an expert on the subject to create strong internal company regulations on occupational health and safety. If your measures are already considered strong enough, update them according to the ever changing environment to avoid possible future sanctions for non-compliance.

Seek the help of experts to do business in El Salvador

To do business in El Salvador can be challenging if you are not familiar with the laws and regulations of the country. In light of the pandemic, it becomes even more difficult. Nevertheless, by taking the appropriate measures, your company can remain successful.

At Biz Latin Hub, we provide adequate support to companies through our business and administrative advisory services. Our team of experts is made up of local and foreign professional experts in the legal, accounting, and tax domains, equipped to deliver excellence and enable your success. Contact us for personalized advice to assist you with your business projects.

Learn more about our team and expert authors.

Infographic: Biz Latin Hub services, including regulatory compliance in Latin America

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