Reforms its free trade zones law and introduces reinvestment incentives
23 Dec 2025
On 23 December 2025, El Salvador issued Legislative Decree No. 493, introducing amendments to the Law on Industrial and Commercial Free Trade Zones (Ley de Zonas Francas Industriales y de Comercialización), originally enacted in 1998. The Decree aims to increase national and foreign investment, promote the expansion of existing investments, and strengthen competitiveness and productivity in line with evolving global trade dynamics.
The main changes include:
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Expanded tax exemptions for reinvestment: Developers and free trade zone users may obtain additional 10-year extensions of tax exemption benefits if they significantly expand their investment, defined as at least doubling the initial investment and employment levels.
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Introduction of “libre internación”: Goods may enter the national territory without paying import duties or VAT, provided they are used for authorized activities under the free trade zone regime.
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Flexible application of green area requirements: The requirement that at least 30 per cent of the total area be designated as green or sports areas may now be fulfilled through areas located outside the project site, as long as they are formally linked and approved.
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Authorization requirement: Free trade zone users (companies operating within a designated SEZ) and DPAs (stand-alone inward-processing warehouses allowed to import inputs duty-free for export without being located in an SEZ) must obtain prior authorization from the Ministry of Economy for project modifications, including expansions, relocations, benefit changes, or closures.
Nature of measure:
Type:
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Promotion and facilitation (Investment incentives, Special economic zones)
Industry:
Inward FDI:
Yes
Outward FDI:
No
Sources:
