RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q3/SLV/5
26 April 2002
(02-2416)
Committee on Subsidies and
Countervailing MeasuresOriginal:  Spanish
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement on
Subsidies and Countervailing Measures
Replies to Questions Posed by AUSTRALIA1, CANADA2,
the EUROPEAN COMMUNITIES3 and the UNITED STATES4
regarding the Notification of EL SALVADOR5
The following communication, dated 24 April 2002, has been received from the Permanent
Mission of El Salvador.
_______________
QUESTIONS POSED BY THE EUROPEAN COMMUNITIES IN DOCUMENT G/SCM/Q3/SLV/2
Questions concerning the programmes me ntioned in G/SCM/N/74/SLV/1 dated
3 January 2002 (request based on procedure in G/SCM/39)
(1) Please indicate when the programmes came into operation
Reply
The programme came into operation under the Export Promotion Act, approved by
Legislative Decree No. 81 of 5 September 1974, published in Official Gazette No. 180, Volume 244
of 27 September 1974; repealed by the Free Zone  and Fiscal Enclave Regime Act, approved by
Legislative Decree No. 461 of 15 March 1990, published in Official Gazette No. 88, Volume 307 of
18 April 1990; repealed by the Export Processing Zones and Marketing Act, approved by Legislative
Decree No. 405 of 3 September 1998, published in Official Gazette No. 176, Volume No. 340 of
23 September 1998, as amended by Legislative Decree No. 464 of 22 October 1998, published in
Official Gazette No. 215, Volume No. 341 of 18 November 1998.
(2) Please indicate whether the programmes provide for other forms of subsidies than
exemption of import duties and internal taxes (e.g. grants, provision of goods orservices).
                                                     
1 G/SCM/Q3/SLV/1.
2 G/SCM/Q3/SLV/4.
3 G/SCM/Q3/SLV/2.
4 G/SCM/Q3/SLV/3.
5 G/SCM/N/74/SLV/1, G/SCM/N/74/SLV/2, G/SCM/N/71/SLV and Suppl.1.G/SCM/Q3/SLV/5
Page 2
Reply
The programme does not provide for forms of benefits or incentives other than exemption
from the payment of tariffs, income tax, VAT and municipal taxes.
(3) Do the programmes provide for a condition to use domestic goods?
Reply
The programme does not require the use of domestic goods.
However, since the Act allows goods produced in enterprises accepted under the programme
to enter the Salvadoran market, they must have a domestic content. However, for some products the
Act requires domestic or regional (Central American) content.
These goods are:(a) made-up textile products and textiles, including yarn, which to be allowed entry must
have at least a  50 per cent domestic or regional content;  and
(b) all goods of Chapters 1 to 24 of the Central American Tariff System under which
only the equivalent of the proportion of agricultural raw materials of domestic origin
in the value of any good covered by any of the aforementioned chapters can be
entered.
(4) Please indicate the rate of import duty or internal tax exemption as of
1 September 2001.
Reply
(A) If the product is Central American, it benefits from free trade, i.e. 0 per cent duty, and
(B) if it is not Central American, then:
(i) raw materials 5 per cent(ii) capital goods and intermediate goods 10 per cent
(iii) finished products 15 per cent, with exceptions that exceed 15 per cent but not
the WTO-bound tariff.
The Free Trade Agreements with Mexico and the Dominican Republic, under which many
products are subject to 0 per cent duty, should also be taken into account.  The same applies to theFree Trade Agreements with Chile and Panama which will enter into force shortly.
As regards internal taxes, legal persons (companies) established in El Salvador pay the
following:
• 25 per cent on taxable incomeG/SCM/Q3/SLV/5
Page 3
• 13 per cent VAT
• municipal taxes, which vary with the municipality.
(5) Please describe changes to the programmes since 1 September 2001, if any. In
particular, indicate any changes to the rate of exemption or the coverage of the
programmes e.g. in terms of products, location etc.
Reply
There have been no changes in the programme.
(6) Please elaborate on when and how El Salvador intends to phase out the programmes.
Reply
The programme will be subject to a time-limit established in accordance with the WTO
Agreement on Subsidies and Countervailing Measures and, in particular, Article 27.4 of that
Agreement.
Questions concerning the programme mentioned in G/SCM/N/74/SLV/2 dated
7 January 2002 (request based on Article 27.4 ASCM)
(7) Please explain in detail how the "drawback" under the Export Reactivation Law is
operated.  Is drawback contingent upon importation of goods?  Or can any exporterreceive payment under this scheme regardless of whether he imports goods?
Reply
Drawback involves refunding 6 per cent of the f.o.b. value of exports and is granted to
exporters who ship non-traditional products outside Central America. Refunds are authorized by the
Ministry of the Economy and disbursed by the Ministry of Finance.
An exporter eligible for the programme can receive a refund if the product is of Salvadoran
origin and exported outside Central America, regardless of whether or not any of the componentsneeded to make the end product exported are imported.
(8) Please elaborate on how and until what date El Salvador intends to phase out this
programme.
Reply
The programme will be subject to a time-limit established in accordance with the WTO
Agreement on Subsidies and Countervailing Measures and, in particular, Article 27.4 of that
Agreement.
QUESTIONS POSED BY CANADA IN DOCUMENT G/SCM/Q3/SLV/4
(1) For how long can a company enjoy the tax exemption benefits?  Is there a time-limit in
national legislation?G/SCM/Q3/SLV/5
Page 4
Reply
A company can enjoy the benefits as long as the programme continues to exist and as long as
it continues to comply with the corresponding requirements.
(2) How many recipient companies/industrial  parks, etc. operate under the Free Trade
Zone Programme?
Reply
As of December 2001, 243 companies, with investment from, inter alia , the United States,
Germany, China, Guatemala, United Kingdom, Japan, South Korea, Taiwan and Mexico, wereoperating under the programme.
QUESTIONS POSED BY AUSTRALIA IN DOCUMENT G/SCM/Q3/SLV/1
(1) Could El Salvador provide details on the programmes for which it is seeking an
extension?
Reply
Pursuant to the Decision on implementation-related issues and concerns (document
WT/MIN(01)/17) and under the procedure established in document G/SCM/39, El Salvador has
requested the extension of the export processing zone and inward processing warehouse programmes,
which grant incentives to users who set up in export processing zones or outside such zones in inward
processing warehouses. These users enjoy the following benefits and incentives:
(a) exemption from import duties for machinery, equipment, tools, spares and
accessories, implements and the like necessary to carry out the activity encouraged;
(b) exemption from import duties for raw materials, parts, components or elements,
semifinished products, intermediate products, containers, labels, packaging, samples
and patterns necessary to carry out the company activity encouraged. Likewise,
machinery, apparatus and equipment and any other good which has to be sent forrepair by the beneficiaries, including exports which are reimported as returned goods,
may enter under the aforementioned regime;
(c) exemption from import duties for lubricants, catalysts, reagents, fuels and any other
substances or materials necessary for the productive activity;
(d) total exemption from income tax for the period during which they carry out
operations in El Salvador, reckoned from the tax year in which the beneficiary
commences operations;
(e) total exemption from municipal taxes on the company’s assets and equity for the
period during which it carries out operations in El Salvador, reckoned from the tax
year of commencement of operations;
(f) total exemption from the tax on the transfer of landed property, in respect of the
purchase of property to be used in the activity encouraged.
Pursuant to Article 27.4 of the Agreement on Subsidies and Countervailing Measures,
El Salvador has requested the extension of the transition period provided for in the aforementionedG/SCM/Q3/SLV/5
Page 5
Article for  the drawback scheme established by the Export Reactivation Act, under which a refund of
6 per cent of the f.o.b. value of exports is granted to Salvadoran or foreign natural or legal persons
that own companies exporting or marketing goods an d services of Salvadoran origin outside the
Central American region.
QUESTIONS POSED BY THE UNITED STATES DATED 5 APRIL 2002.
Programmes established under the Export Processing Zones and Marketing Act,
extension request pursuant to G/SCM/39
(1) Could El Salvador please explain whether this programme provides any other incentives
apart from the full or partial exemption from import duties and internal taxes?
Reply
The programme does not provide for forms of benefits or incentives other than exemption
from the payment of tariffs, income tax, VAT and municipal taxes.
(2) Please provide the normal customs duty, consumption tax and income tax rates
companies would pay absent this programme.
Reply
(A) If the product is Central American, it benefits from free trade, i.e. 0 per cent duty, and
(B) if it is not Central American, then:
(i) raw materials 5 per cent
(ii) capital goods and intermediate goods 10 per cent
(iii) finished products 15 per cent, with exceptions that exceed 15 per cent but not
the WTO-bound tariff.
The Free Trade Agreements with Mexico and the Dominican Republic, under which many
products are subject to 0 per cent duty, should also be taken into account.  The same applies to the
Free Trade Agreements with Chile and Panama which will enter into force shortly.
As regards internal taxes, legal persons (companies) established in El Salvador pay the
following:
• 25 per cent on taxable income
• 13 per cent VAT
• municipal taxes, which vary with the municipality.
(3) Could El Salvador please explain whether any subsidies under this programme are
contingent upon the use of domestic goods?G/SCM/Q3/SLV/5
Page 6
Reply
The programme does not require the use of domestic goods.
However, since the Act allows goods produced in enterprises accepted under the programme
to enter the Salvadoran market, they must have a domestic content. However, for some products the
Act requires domestic or regional (Central American) content.
These goods are:(a) made-up textile products and textiles, including yarn, which to be allowed entry must
have at least a  50 per cent domestic or regional content, and
(b) all goods of Chapters 1 to 24 of the Central American Tariff System under which
only the equivalent of the proportion of agricultural raw materials of domestic origin
in the value of any good covered by any of the aforementioned chapters can be
entered.
(4) Could El Salvador please explain how many companies operate in free-trade zones and
inward processing warehouses, and what industry sectors these companies represent?
Reply
As of December 2001, 243 companies, with investment from, inter alia , the United States,
Germany, China, Guatemala, United Kingdom, Japan, South Korea, Taiwan and Mexico, were
operating under the programme. The activities represented are:
• Clothing  147 companies
• Electronics  2     companies
• Handbags  2     companies
• Data processing  1     company
• Marketing 31   companies
• Services and laundries 13   companies
• Textiles and embroidery 10   companies
• Agro-industry 10   companies
• Crafts 1     company
• Iguana breeding 1     company
• Footwear 1     company
• Dental prostheses 1     company
• Other 22   companies
(5) Please describe the duration of the subsidy and/or any other time-limits attached to it as
provided for in the current legislation for the programme.
Reply
The Export Processing Zones and Marketing Act does not specify a time-limit for the
duration of the benefit.
(6) Please provide a copy of the authorizing legislation for this programme.G/SCM/Q3/SLV/5
Page 7
Reply
See Annex.
Programmes established under the Export Reactivation Act, extension request pursuant
to Article 27.4
(7) Under this programme, does the government essentially provide exporters a six per cent
grant on the f.o.b. value of the company's exports?
Under this law the Government only refunds 6 per cent of the f.o.b. value of non-traditional
Salvadoran products exported outside Central America.
(8) Could El Salvador please explain more fu lly how eligible exports are determined under
this programme?
Reply
To be eligible, exporting companies must fulfil the following conditions:
(1) be natural or legal persons, Salvadoran or foreign;
(2) that export goods or services outside Central America.
Companies that export metal or non-metal mineral products derived from the exploitation of
the subsoil or traditional products such as coffee or cotton are not eligible, unless in the case of coffee
and cotton the product incorporates at least 30 per cent domestic value added.
Eligibility is subject to approval by the Ministries of the Economy and Finance.
(9) Please provide a copy of the authorizing legislation for this programme.
Reply
See Annexes.G/SCM/Q3/SLV/5
Page 8
DECREE No.  460. O.G. No. 88, Vol. No. 307
Date:  18 April 1990
THE LEGISLATIVE ASSEMBLY OF THE REPUBLIC OF EL SALVADOR,
WHEREAS:
I. Within the context of the progressive plan for economic liberalization, it is necessary to
facilitate the use by exporters of resources in respect of which the country has advantagesover other markets;
II. It is necessary to adopt legal provisions to promote the competitiveness of domestic products
in both regional and extra-regional markets;
III. The existing legal instruments relating to foreign trade are not adapted to the current trends in
international trade and it is the duty of the State to establish a mechanism that permits the
appropriate use of resources, with a view to achieving economic development, an appropriate
level of employment and the promotion of the welfare of all its people;
THEREFORE,
Making use of its constitutional powers and on the initiative of the President of the Republic acting
through the Ministers of the Economy and Finance,
DECREES as follows:
EXPORT REACTIVATION ACT
*Art. 1.- The purpose of this Act is the  exportation of goods and services, outside the Central
American area, by means of appropriate instruments that enable the owners of export
companies gradually to eliminate the anti-export bias created by the structures for theprotection of the import substitution industry.
*Art. 2.- The benefits of this Act shall be reserved for natural and legal persons owning
enterprises that export goods and services, with the exception of the following
traditional products: coffee, sugar, and cotton.
**Art. 3.- Natural or legal persons, whether Salvadoran or foreign, owning enterprises that
export goods or services or market them may benefit from:
*Amended by Decree No. 749, O.G. No. 95, V. 311, of 27/05/91 .
Art. 1.- The purpose of this Act is to promote the  exportation of goods and services, outside the Central
American area, by means of appropriate instruments th at enable the owners of export companies gradually to
eliminate the anti-export bias created by the structures for the protection of the import substitution industry.G/SCM/Q3/SLV/5
Page 9
(a) A refund of 8 per cent of the f.o.b. value, as compensation, both on import taxes and
on other indirect taxes generated by the export activity. In the case of exports of
services, the refund referred to in the previous sentence shall be based on the invoiced
value. In no case shall such refund exceed 8 per cent and shall be paid by the Ministry
of Finance within 45 calendar days, once evidence of the receipt of the correspondingforeign currency has been provided by submitting the respective forms.
(b) Total exemption from stamp duty on exports and any other indirect tax generated by
exportation.
***Art. 4.- Owners of enterprises that export 100 per cent of their production or are dedicated
exclusively to international marketing shall,  in addition, be exempt from the payment
of property tax.
*Amended by Decree No. 534, O.G. No. 21, V. 342, of 01/02/99
Art. 2.- The benefits of this Act shall be reserved for natural and legal persons, whether Salvadoran or foreign,
owning enterprises that export Salvadoran goods and services outside the Central American area, with the
exception of exports of metal and non-metal mineral products derived from the exploitation of the subsoil and
traditional products such as coffee, sugar, and cotton.  Coffee and sugar may be eligible for these benefits if,
departing from their traditional form, they incorporate at least 30 per cent of value added of domestic origin,subject to the approval of the Ministries of Finance and the Economy.For the purposes of this Act, coffee known in internatio nal trade as Organic or Gourmet and refined sugar shall
not be considered to be in traditional form and shall be eligible for benefits, subject to authorization by the
competent authorities.
**Amended by Decree No. 181, O.G. No. 239, V. 337, of 22/12/97.
Art. 3.- Natural or legal persons, whether Salvadoran or foreign, owning enterprises that export or market goodsor services of Salvadoran origin may benefit from a refund of 6 per cent of the f.o.b. value, subject toauthorization by the Ministry of Finance and compliance with the following requirements:
(a) Submission of an application for the refund of 6 per cent of the f.o.b. value exported, together with the
corresponding documentation, to the Ministry of the Economy within 90 calendar days of the date ofexportation.
(b) Proof of exportation in accordance with the provisions of this Act, its Regulations and other applicable
provisions.
***Amended by Decree No. 181, O.G. No. 239, V. 337, of 22/12/97.
Art. 4.- The refund to which the previous article refers shall be paid by the Ministry of Finance within45 calendar days of receipt of the documentation and the authorization of the Ministry of the Economy.
The proceeds of the refund to which the previous ar ticle refers shall not be subject to income tax.
In the case of companies, the aforementioned fiscal benefit shall apply both to the titular company and to the
partners individually, in respect of profits or dividends derived from the activity promoted.
If the partner is a legal person, this right shall be his exclusively, i.e., may not be subsequently transferred to hispartners.The Ministry of Finance may offset credit balances agai nst internal tax debts, interest and fines in accordance
with the Regulations to this Act, subject to the right conferred by the respective Act to pay income tax ininstalments.G/SCM/Q3/SLV/5
Page 10
*Art. 5.- Notwithstanding the provisions of Art. 2 of this Act, persons that export traditional
products that have been subjected to processing which incorporates at least 30 per
cent of domestic value added to that which they possessed prior to such processing
shall be entitled to the refund referred to  in Art. 3, subject to approval by the
Ministries of the Economy and Finance.
The interested party shall make application to the Ministry of the Economy and
provide evidence of compliance with the corresponding requirements. The Ministry
shall consider the application within 10 working days and grant or deny the request.
If the application is denied, the interested party shall have 3 working days within
which to apply to the Minister for reconsideration.  A ruling on this application shallbe made within 5 working days of the date of its acceptance.
**Art. 6.- Goods temporarily exported for repair, maintenance or the like or exported outright
shall not be entitled to benefit from the provisions of Art. 3 of this Act.
***Art. 7.- If an enterprise engages partially or temporarily in offshore assembly, it may request
the temporary admission procedure for the importation of goods, without prejudice to
the 8 per cent refund to which it may be entitled under this Act.
Art. 8.- The Ministries of the Economy and Finance shall be authorized to issue instructions
and orders and take other measures necessary to develop the principles laid down in
this Act, for the purpose of facilitating its implementation.
Art. 9.- The Ministry of the Economy, in coordination with the Central Reserve Bank of
El Salvador, may establish and regulate special trading systems, if the circumstancesso require. Under these systems, inter alia , barter, compensation and triangular
transactions and sales on consignment may be authorized.
The Central Reserve Bank of El Salvador and the Ministry of Finance shall provide
the Ministry of the Economy with such information as the latter may request under
this Act.
*Art. 5.- Repealed by Decree No. 181, O.G. No. 239, V. No. 337, of 22/12/97.
**Amended by  Decree No. 181, O.G. No. 239, V. 337, of 22/12/97.
Art. 6.- Goods temporarily exported for repair, maintenance or the like or re-exported outright shall not beentitled to benefit from the provisions of Art. 3 of this Act.
***Amended by Decree No. 181, O.G. No. 239, V. 337, of 22/12/97.
Art. 7.- Natural or legal persons, whether Salvadoran or foreign, engaged partially or temporarily in offshore
assembly may request the temporary admission procedure for the importation of goods under an assemblycontract.They shall also be eligible for a refund of 6 per cent on the value added of domestic origin incorporated in theassembly process.The persons referred to in the first paragraph shall be entitled to the benefits for which Art. 3 of this Act
provides, for those of their exports which are not offshore-assembled.G/SCM/Q3/SLV/5
Page 11
Art. 10.- In applying and interpreting this Act, precedence shall be given to its purpose and
economic nature. Only if it is impossible to establish, in the letter or in the spirit, the
meaning and scope of the principles, concepts or terms of the aforementioned
provisions may recourse be had to the principles, concepts or terms of ordinary law.
*Art. 11.- The owners of enterprises approved under the Export Promotion Act, which is
repealed by this decree, shall ipso jure  enjoy the benefits conferred by the present
Act, provided they comply with the requir ements laid down in respect of the activity
in which they are engaged.
Art. 12.- The government authorities competent for granting the benefits and tax incentives
under the Export Promotion Act to be repealed shall harmonize the ExecutiveDecisions approved with the present provisions, by issuing corresponding
amendments or revoking benefits and incentives granted, within 90 calendar days of
the entry into force of this decree.
Art. 13.- The Export Promotion Act in Legislative Decree No. 315 of 13 March 1986,
published in the Official Gazette No. 55, Volume 290 of 21 March 1986 is hereby
repealed.
Art. 14.- This decree shall enter into force 8 days after publication in the Official Gazette.
DONE IN THE BLUE ROOM OF THE LEGISLATIVE PALACE,
San Salvador, on the fifteenth of March nineteen hundred and ninety.
*Amended by Decree No. 749, O.G. No. 95, V. 311, of 27/05/91
Art. 11.- Natural or legal persons, whether Salvadoran or foreign, that at the time of entry into force of this Act
hold unsold balances of raw materials entered under cover of the above-mentioned Export Promotion Act mayenjoy the 8 per cent benefit, provided that they pay the value of the taxes applicable to those raw materialbalances that qualify for the 8 per cent refund requested and have the temporary admission certificates cancelledby the Audit Department of the Directorate-General of Customs Revenue.G/SCM/Q3/SLV/5
Page 12
DECREE No.  405
OFFICIAL GAZETTE No. 176
VOLUME No. 340
DATE   23 SEPTEMBER 1998
THE LEGISLATIVE ASSEMBLY OF THE REPUBLIC OF EL SALVADOR,
WHEREAS:I.- Under the Constitution of the Republic it is the duty of the State to provide the legal
instruments necessary to encourage investment, both domestic and foreign;
II.- As part of the efforts being made by this Government to integrate our economy into
the world process of globalization, it is necessary to modernize and update the legal
and regulatory framework for promoting the establishment and development of
export processing zones in our country;
III.- As a consequence thereof, and given the strategic importance of the export processing
zone regime for the national economy in generating productive employment and
foreign currency reserves, it is necessary to create optimum conditions of competition
in respect of all the operations carried out by the enterprises covered by this regime;
THEREFORE,
under its constitutional powers and on the initiative of the President of the Republic, acting
through the Minister of the Economy, and of the Deputies Juan Duch Martínez, Julio Antonio Gamero
Quintanilla, Julio Eduardo Moreno Niños, Mariella Peña Pinto, José Mauricio Quinteros, JorgeAlberto Villacorta Muñoz, René Aguiluz Carranza, Donald Ricardo Calderón Lam, Kirio Waldo
Salgado Mina, Alejandro Dagoberto Marroquín, Sonia Evelin Ponce, Ernesto Iraheta Escalante, Ronal
Umaña, José Rafael Machuca Zelaya, Alfonso Aristídes Alvarenga, Herber Mauricio Aguilar Zepeda,
Alex René Aguirre, Walter René Araujo Morale s, José Orlando Arévalo Pineda, Arturo Argumedo,
Jorge Alberto Barrera, Isidro Antonio Caballero Caballero, Olme Remberto Contreras, Roberto José
D’Aubuisson Munguía, Carlos Albe rto Escobar, René Mario Figueroa Figueroa, Hermes Alcides
Flores Molina, Nelson Funes, Elizardo González Lovo, Roman Ernesto Guerra Romero, José Ismael
Iraheta Troya, José Roberto Larios Rodríguez, Carlos Guillermo Magaña, Alvaro Gerardo Martín
Escalón, Juan Ramón Medrano Guzmán,  Sigifredo  Ochoa  Pérez, Salvador Horacio Orellana
Alvarez, Rúben Orellana, Olga Elizabeth Ortíz Murillo, Silfide Marixa Pleitez de Ramírez, Norman
Noel Quijano González, René Oswaldo Rodrígue z Velasco, José Ricardo Vega Hérnandez, Luis
Hernández, Amado Aguiluz Aguiluz, Mario Ponce and Gerardo Antonio Suvillaga García,
DECREES as follows:G/SCM/Q3/SLV/5
Page 13
EXPORT PROCESSING ZONES AND MARKETING ACT
CHAPTER I
DEFINITIONS AND GENERAL PROVISIONS
Art. 1.- The purpose of this Act is to regulate the operation of Export Processing Zones and
Inward Processing Warehouses and the benefits and responsibilities of the owners of
enterprises that develop, administer or use them.
Art. 2.- For the implementation and interpretation of this Act, the following definitions shall
apply:
(a) An Export Processing Zone is a part of the national territory where any goods
introduced are regarded, insofar as import and export duties are concerned, as being
outside the national customs territory and therefore subject to a special regime and
procedural framework;
(b) An Inward Processing Warehouse, previously known as a Fiscal Enclave, is a part of
the national territory subject to special customs treatment, where goods introduced to
be re-exported are admitted with conditional relief from duties and taxes to undergo
manufacturing, processing or repair and wh ere capital goods may remain indefinitely;
(c) Outright importation is the legal introduction of goods from abroad for consumption
or free circulation in the customs territory, subject to compliance with all the customs
and other necessary formalities;
(d) Assembly (offshore assembly) is any service provided by a natural or legal person
domiciled in the country to a contracting party domiciled abroad that supplies, on
agreed terms and conditions, raw materials, parts, components or elements which that
person manufactures or processes for the account of the said contracting party, which,
in its turn, uses or markets them, as agreed;
(e) Indirect exportation is the service provided between Inward Processing Warehouses
and Export Processing Zone Users who incorporate value added in the product to beexported;
(f) Re-exportation is the exportation of goods imported without having undergone
substantial processing.
*Art. 3.- Domestic or foreign enterprises may set up and operate in an Export Processing Zone
if they are engaged in:
(a) The production, assembly, manufacturing, processing or marketing of goods and
services;
(b) The provision of services linked to international or regional trade such as: storage,
packing and repacking, re-exportation, grouping, breaking bulk and other related or
complementary activities.
The said goods or services may be intended for direct or indirect exportation to or
outside the Central American area or for subsequent outright importation into
El Salvador.G/SCM/Q3/SLV/5
Page 14
Sales on the Salvadoran market shall give rise to import taxes on the end product
introduced, income tax, tax on the transfer of movable property and the provision of
services, and the corresponding municipal taxes.
In the case of made-up textile products and textiles, including yarn, such goods
imported outright shall give rise to import taxes, tax on the transfer of movable
property and the provision of services, except for the domestic added component of
the good or service in question, income tax and the corresponding municipal taxes
and, in addition, must have at least 50 per cent domestic or regional content.
Art. 4.- The setting up, administration and operation of Export Processing Zones shall be
authorized by the Ministry of the Economy.  The surveillance and supervision of thetax regime of these Zones shall be the responsibility of the Ministry of Finance, in
accordance with this Act, its Regulations and other tax legislation.
Art. 5.- The benefits and tax incentives of this Act shall be available to natural or legal
persons, whether Salvadoran or foreign, owning enterprises which:
*Amended by Decree No. 464 of 22/10/98,  O.G. No. 215, V. 341, of 18/11/98.
 “Art. 3.- Domestic or foreign enterprises may set up and operate in an Export Processing Zone if they are
engaged in:
(a) The production, assembly, manufacturing, processing or marketing of goods and services;
(b) The provision of services linked to international or regional trade such as: storage, packing and
repacking, re-exportation, grouping, breaking bulk and other related or complementary activities.
The said goods or services may be intended for direct or indirect exportation to or outside the Central American
area or for subsequent outright importation.
Sales on the Salvadoran market shall give rise to import taxes on the end product introduced, income tax, tax on
the transfer of movable property and the provision of services, and the corresponding municipal taxes.
In the case of made-up textile products and textiles, including yarn, such goods imported outright shall give rise
to import taxes, tax on the transfer of movable property and the provision of services, except for the domesticadded component of the good or service in question, income tax and the corresponding municipal taxes and, inaddition, must have at least 50 per cent domestic or regional content.
In the case of goods of Chapters 1 to 24 of the Central American Tariff System, an enterprise admitted to the
regime may import outright into the domestic market only a percentage of the total sales of those goodsequivalent to the share of agricultural raw materials of domestic origin in the value of the goods in question,
thereby giving rise to import tax on the end product entered, tax on
 the transfer of movable property and the
provision of services, and the corresponding municipal taxes.
In no circumstances may the declared value of goods imported outright be less than the invoiced value at which
the goods entered the Export Processing Zone or Inward Processing Warehouse, which in the case of rawmaterials and inputs may not be less than the proportional c.i.f. value recorded in the Goods Declaration under
which the goods were introduced.”G/SCM/Q3/SLV/5
Page 15
(a) develop Export Processing Zones or “Developers”;
(b) administer Export Processing Zones or “Administrators”;
(c) set up in Export Processing Zones or “Users”.
*Art. 6.- The benefits and tax incentives of this Act shall not be available to natural or legal
persons, whether Salvadoran or foreign, engaged in the following activities:
(a) Hotels;
(b) Travel agencies and airlines;
(c) Air, sea or land transport;
(d) Activities governed by the Salvadoran banking and financial legislation;
(e) Recovery of oil and natural gas;(f) Salt or fresh-water fishing;
(g) Mining (extraction phase);
(h) Cultivation, processing and marketing of species of flora and fauna that are
protected or prohibited by treaties or special laws;
(i) Activities involving the processing and handling of explosives or radioactive
materials;
(j) Production or storage of goods that may cause pollution or injure health or
the environment;
(k) Services not linked to international trade in accordance with the General
Regulations of the Act.
Likewise, the benefits and incentives of this Act shall not be available to:
(1) Natural persons with respect to whom the benefits conferred by the Act have
been suspended or revoked;
(2) Companies whose directors or shareholders include persons who were
directors or shareholders in other companies with respect to which the
benefits conferred by the Act have been suspended or revoked.
The provisions of these numbered subparagraphs shall not apply if the suspension or
revocation was requested voluntarily by the beneficiary of the Act and was not a
consequence of infringements of this Act.
Art. 7.- Natural or legal persons granted benefits under this Act must be located in an Export
Processing Zone, or the premises in which they operate must have been declared an
Inward Processing Warehouse. In neither case shall they be eligible for the benefits of
the Export Reactivation Act, unless the beneficiary waives the incentives accordedunder this Act.
Art. 8.- In applying and interpreting this Act, precedence shall be given to its purpose and
specific nature. Nevertheless, as far as customs procedures are concerned, for its
application the provisions of the customs regulations, especially those of the CentralAmerican Uniform Customs Code (CAUCA) and its supplementary rules, shall be
taken into consideration. Only if it is impossible to establish, in the letter or in the
spirit, the meaning and scope of the principles, concepts or terms of the
aforementioned provisions may recourse be had to the principles, concepts or terms
of ordinary law.G/SCM/Q3/SLV/5
Page 16
Art. 9.- Foreign companies which are the owners of enterprises referred to in this Chapter and
export their entire output shall not be subject to the provisions of the Commercial
Code or the Trading Companies and Enterprises Supervision Act relating to the
requirements with which they must comply to be authorized to engage in commercial
activities in El Salvador.
*Amended by Decree No. 464 of 22/10/98, No. 215, V. 341 of 18/11/98
“Art. 6.- The benefits and tax incentives of this Act shall not be available to natural or legal persons, whether
Salvadoran or foreign, engaged in the following activities:
(a) Hotels;
(b) Travel agencies and airlines;(c) Air, sea or land transport;
(d) Activities governed by the Salvadoran banking and financial legislation;
(e) Recovery of oil and natural gas;(f) Salt or fresh-water fishing;(g) Mining (extraction phase);(h) Cultivation, processing and marketing of species of flora and fauna that are protected or prohibited by
treaties or special laws;
(i) Activities involving the processing and handling of explosives or radioactive materials;
(j) Production or storage of goods that may cause pollution or injure health or the environment;(k) Services not linked to interna tional trade in accordance with the General Regulations of the Act.
(l) Production, assembly, manufacturing, processing or marketing of sugar or of sugar substitutes,
derivatives or by-products, and of any goods that directly or indirectly incorporate sugar or sugar
substitutes, derivatives or by-products;
(m) Production, assembly, manufacturing, processing or marketing of alcohol of any origin or of any goods
that directly or indirectly incorporate alcohol of  any origin, with the exception of persons engaged
exclusively in the dehydration of ethyl alcohol;
(n) Production, assembly, manufacturing, processing or marketing of goods packed in: bags or sacks of
natural, synthetic or man-made textile fibres.
Likewise, the benefits and incentives of this Act shall not be available to:
(1) Natural persons with respect to whom the benefits conferred by the Act have been suspended or
revoked;
(2) Companies whose directors or shareholders include persons who were directors or  shareholders in
other companies with respect to which the benefits conferred by the Act have been suspended orrevoked.
The provisions of these numbered subparagraphs shall not apply if the suspension or revocation was requested
voluntarily by the beneficiary of the Act and was not a consequence of infringements of this Act.”G/SCM/Q3/SLV/5
Page 17
Any non-domiciled person owning one of the aforementioned enterprises shall
appoint a representative in El Salvador with sufficient powers to conduct legal
business in the country.
CHAPTER II
DEVELOPERS AND ADMINISTRATORS OF EXPORT PROCESSING ZONES
Art. 10.- “Developer” shall be taken to mean a natural or legal person, whether Salvadoran or
foreign, engaged in setting up and developing Export Processing Zones by providing
them with the services and public and private infrastructure and industrial premises
they need to function properly, subject to authorization by the Ministry of theEconomy and completion of the Prequalification, Authorization and Start-up phases
specified in the General Regulations to this Act, including development of the
following buildings and spaces:
1. COMMUNAL BUILDINGS:
(a) Administration and maintenance offices;
(b) Customs and Inland Revenue office;
(c) Control and surveillance post.
2. FACTORY BUILDINGS:
(a) Offices;
(b) Production or storage area;
(c) Storage space for raw materials and finished products;(d) Loading and unloading areas;
(e) Parking area;
(f) Adequate sanitary services for men and women.
3. TOWN PLANNING:
(a) Open spaces: 30 per cent of total area, including ecological and
sports areas;
(b) Streets, passageways and footpaths;
(c) Car parks;
(d) Container park;
(e) Pedestrianized plaza;(f) Perimeter fence.
4. OPTIONAL BUILDINGS:
(a) Post office;
(b) Ministry of Labour office;
(c) Clinic;
(d) Bank;
(e) Staff canteen.
The designs of all these elements shall be subject to the standards and specifications
adopted by the Deputy Ministry of Housing and Urban Development (VMVDU), the
Directorate-General of Town Planning and Architecture (DUA), and the Planning
Office of the Metropolitan Area of San Salvador (OPAMSS), as appropriate.G/SCM/Q3/SLV/5
Page 18
Art. 11.- Developers, duly authorized by the Ministry of the Economy, in accordance with the
provisions of the previous article, shall enjoy the following benefits and tax
incentives:
(a) Total exemption from income tax for a period of 15 years from the fiscal year
in which they commenced their Export Processing Zone activity.
In the case of companies, this exemption shall apply both to the company that
owns the Export Processing Zone and to the individual partners or
shareholders, in respect of profits and dividends derived from the activity
promoted.
If one or more partners are legal persons, this right shall be exclusive to them,
and the benefit may not subsequently be transferred to their partners.
(b) Total exemption from municipal taxes on the enterprise’s assets for a period
of 10 years, which may be extended for a further period of the same duration,
reckoned from the fiscal year of commencement of operations.
(c) Total exemption from tax on the transfer of landed property, for the purchase
of property to be used in the activity promoted.
For the purpose of promoting the development of their municipalities, municipal
councils may, within the framework of thei r lawful powers, grant benefits additional
to those of this Act.
Art. 12.- If an Export Processing Zone developership or administratorship becomes available
as a result of its being relinquished or revoked or for any other reason, the
government department responsible for the economy may grant it, subject to
authorization by decision, to a natural or legal person, either Salvadoran or foreign, in
accordance with the requirements and procedures of this Act and its General
Regulations.
Art. 13.- “Export Processing Zone Administrator” shall be taken to mean a natural or legal
person, whether Salvadoran or foreign, directly responsible for the supervision,
administration and management of an Expor t Processing Zone, which shall include,
among other things: directly supplying the enterprises operating in the zone with
water, power and sanitation facilities, coordinating the maintenance of all the zone’scommunal services such as roads, passageways, open spaces and public lighting,
selling or leasing building sites and industrial buildings, promoting new investment in
the zone, and ensuring that the users of the zone comply with the law and the customs
regulations, in coordination with the zonal tax and customs office, whilst also
exercising the following powers:
(a) To agree with natural or legal persons the conditions of their installation in
the Export Processing Zone, with special reference to its internal regulations
and the provisions of this Act and its General Regulations, and to negotiate
sales of parcels of land for the establishment of enterprises within the zone;for the purposes of this Act, the selling prices and rents of user premises and
the terms of leases shall be freely determined;G/SCM/Q3/SLV/5
Page 19
(b) To take any other measure necessary for the efficient supervision,
administration and operation of the Export Processing Zone and the
enterprises established therein.
Art. 14.- Export Processing Zone Administrators , duly authorized by the Ministry of the
Economy, shall enjoy the following benefits and tax incentives:
(a) Total exemption from income tax for a period of 15 years from the fiscal year
in which they commenced their Export Processing Zone activity.
In the case of companies, this exemption shall apply both to the company that
administers the Export Processing Zone and to the individual partners orshareholders, in respect of profits and dividends derived from the activity
promoted.
If one or more partners are legal persons, this right shall be exclusive to them,
and the benefit may not subsequently be transferred to their partners.
(b) Total exemption from municipal taxes on the enterprise’s assets for a period
of 10 years, which may be extended for a further period of the same duration,
reckoned from the fiscal year of commencement of operations.
For the purpose of promoting the development of their municipalities,
municipal councils may, within the fr amework of their lawful powers, grant
benefits additional to those of this Act.
Art. 15.- If the same person acts as both a developer and an administrator of an Export
Processing Zone, he shall enjoy both sets of benefits.
CHAPTER III
USERS OF EXPORT PROCESSING ZONES
Art. 16.- “Export Processing Zone User” shall be taken to mean a natural or legal person,
whether a national or a foreigner, duly authorized by the Export Processing Zone
Administrator, in accordance with this Act and its General Regulations, to operate
therein and engaged in one of the activities mentioned in Art. 3 above .
Art. 17.- The owner of an Export Processing Zone User enterprise, duly authorized in
accordance with this Act and its General Regulations, shall have the right to enjoy the
following benefits and tax incentives:
(a) Free entry into the Export Processing Zone, for the period during which he
carries out operations in El Salvador, for machinery, equipment, tools, sparesand accessories, implements and the like necessary to carry out the activity
encouraged.
(b) Free entry into the Export Processing Zone, for the period during which he
carries out operations in El Salvador, for raw materials, parts, components orelements, semifinished products, intermediate products, containers, labels,
packaging, samples and patterns necessary to carry out the company activity
encouraged. Likewise, machinery, apparatus and equipment and any other
good which has to be sent for repair by the beneficiaries, including exportedG/SCM/Q3/SLV/5
Page 20
products which are reimported as returned goods, may enter under the
aforementioned regime;
(c) Free entry into the Export Processing Zone, for the period during which he
carries out operations in El Salvador, for lubricants, catalysts, reagents, fuelsand any other substances or materials necessary for the productive activity;
(d) Total exemption from income tax, for the period during which he carries out
operations in El Salvador, reckoned from the tax year in which he
commences operations;
In the case of companies, this exemption shall apply both to the company that
administers the Export Processing Zone and to the individual partners or
shareholders, in respect of profits and dividends derived from the activity
promoted.
If one or more partners are legal persons, this right shall be exclusive to them,
and the benefit may not subsequently be transferred to their partners.
(e) Total exemption from municipal taxes on the enterprise’s assets and property,
for the period during which it carries out operations in El Salvador, reckoned
from the tax year of commencement of operations;
(f) Total exemption from the tax on the transfer of landed property, for the
purchase of property to be used in the activity encouraged.
For the purpose of promoting the development of their municipalities, municipal
councils may, within the framework of thei r lawful powers, grant benefits additional
to those of this Act.
Users of Export Processing Zones who provide the services linked to international
and regional trade mentioned in Art. 3 of this Act shall enjoy, in addition to the
benefits conferred by this article, free entry into the Export Processing Zone, for the
period during which they carry out their operations in El Salvador, for the goods theyneed to exercise the activity encouraged.
CHAPTER IV
INWARD PROCESSING WAREHOUSES
Art. 18.- Natural or legal persons, whether Salvadoran or foreign, owning enterprises engaged
in the production, assembly, manufacture, processing or marketing of goods and
services for direct or indirect exportation to or outside the Central American area and
who, for technical reasons, are not located in an Export Processing Zone, may applyto the Ministry of the Economy to have their establishment declared an Inward
Processing Warehouse, provided they comply with the following requirements:
(a) Location in an industrial, agricultural or agro-industrial area;
(b) Their installations meet appropriate standards of industrial, occupational and
environmental safety;
(c) Formal administrative and financial structure.G/SCM/Q3/SLV/5
Page 21
Subject to authorization by the Ministry of the Economy, Inward Processing
Warehouses may enjoy the same benefits as are granted to users of Export Processing
Zones such as: selling on the domestic market and providing services linked to
international and regional trade, in accordance  with Art. 3 of this Act, provided their
establishments meet the requirements for the buildings, infrastructure and customs
and fiscal controls necessary for the development and exercise of the above-
mentioned commercial activities, as detailed below:
1. COMMUNAL BUILDINGS AND AREAS
(a) Administration and maintenance offices;
(b) Customs and Inland Revenue office;
(c) Control and surveillance post;
(d) Perimeter fence;
(e) Open spaces: at least 20 per cent of total area .
2. INDUSTRIAL BUILDINGS
(a) Offices;
(b) Production or storage;
(c) Raw materials and finished products;(d) Loading and unloading areas;
(e) Parking for vehicles and containers;
(f) Adequate sanitary services for men and women.
Art. 19.- The owner of an enterprise whose establishment has been declared an Inward
Processing Warehouse shall be entitled to enjoy the following benefits and tax
incentives:
(a) Total exemption, for the period during which he carries out his operations,
from the duties and taxes on the importation of machinery, equipment, tools,
spares and accessories, implements and the like necessary for the exportable
production;
(b) Introduction with conditional relief from import duties and taxes of raw
materials, parts, components or elements, semifinished products, intermediate
products, containers, labels, packaging, samples and patterns necessary to
engage in the activity encouraged, fo r the period during which the enterprise
carries out its operations.  Likewise, machinery, apparatus and equipment and
any other good which has to be sent for repair by the beneficiaries, including
exported products which are reimported as returned goods, may enter under
the aforementioned regime;
(c) Total exemption from import taxes, for the period during which he carries out
his operations, for lubricants, catalysts, reagents, fuels and any other
substance or material necessary for the productive process, even if not
directly incorporated in the compensating product;
(d) Total exemption from income tax, for the period during which he carries out
his operations, reckoned from the tax year in which he commences
operations;G/SCM/Q3/SLV/5
Page 22
In the case of companies, this exemption shall apply both to the company that
administers the Export Processing Zone and to the individual partners or shareholders,
in respect of profits and dividends derived from the activity promoted.
If one or more partners are legal persons, this right shall be exclusive to them, and the
benefit may not subsequently be transferred to their partners.
(e) Total exemption from municipal taxes on the enterprise’s assets and equity,
for the period during which it carries out its operations, reckoned from the
commencement of operations;
(f) Total exemption from the tax on the transfer of landed property, for the
purchase of property to be used in the activity encouraged.
For the purpose of promoting the development of their municipalities, municipal
councils may, within the framework of thei r lawful powers, grant benefits additional
to those of this Act.
Inward Processing Warehouses that provide the services linked to international and
regional trade mentioned in Art. 3 of this Act shall enjoy, in addition to the benefits
established by this article, the free introduction with conditional relief from import
duties and taxes, for the period during which they carry out their activities inEl Salvador, of the goods necessary to exercise the activity encouraged.
For the importation of goods that enjoy exemption under this Act, enterprises
accepted as Inward Processing Warehouses need not obtain prior approval of the
order nor apply for a customs duty-free importation order, since authorization of theoperation can be obtained merely by producing the corresponding goods declaration
in due form.
Art. 20.- Machinery and equipment introduced duty or tax-free more than two years previously
by beneficiaries of the Act may be transferred without payment of the duties or taxes
left uncollected as an incentive.
The General Regulations of this Act shall establish the other cases in which goods
introduced by beneficiaries with relief or total exemption from taxes may be
transferred to third persons without it being necessary to pay the taxes left uncollected
by virtue of the relief or exemption, subject to the approval of the competent
authorities.
CHAPTER V
CUSTOMS PROCEDURE
Art. 21.- The Export Processing Zone procedure is the customs procedure regulating the entry
of all the goods specified in Art. 17 of this Act, introduced by users of an Export
Processing Zone for an indefinite stay therein.  The aforementioned procedure shall
also be applicable to the introduction into the Export Processing Zone of machinery,
equipment, tools, spares and accessories, even if supplied on lease, or under someother arrangement not involving the transfer of ownership, for which the user
enterprises must produce an Export Processing Zone Goods Declaration.G/SCM/Q3/SLV/5
Page 23
With respect to Inward Processing Warehouses, the customs procedure regulating the
admission of goods specified in Art. 19(b) of this Act shall be the Temporary
Admission for Inward Processing procedure. Authorization for the outright
importation of goods specified in Art. 19(a) and (c) of this Act shall be subject to the
filing of a duty-free outright importation declaration, except in the case of goodsentered on lease or under some other arrangement not involving transfer of
ownership, which must be declared under the Temporary Admission for Inward
Processing procedure.
Art. 22.- The period of stay of goods intr oduced for processing under the Temporary
Admission for Inward Processing procedure shall be 20 months from the date of
acceptance of the corresponding Goods Declaration. At the request of the interestedparty,  the Directorate-General of Customs Revenue may extend this period once
only, for a maximum further period of 60 days, taking into consideration the purposes
of this Act, provided the request is received at least 30 days before the expiry of the
original period.
For goods which have been temporarily admitted on lease or under some other
arrangement not involving transfer of ownership, the corresponding agreement shall
determine their stay under the Temporary Admission for Inward Processing
procedure.
Art. 23.- The owner of an enterprise declared to be an Inward Processing Warehouse may
temporarily move goods into the national customs territory to enable his third-party
subcontractors to make products for export outside the Warehouse, in which case the
said owner shall be responsible for the payment of the corresponding duties and taxes
if the goods are not exported from El Salvador within the corresponding period ofstay. Such movements may also be effected by enterprises located in Export
Processing Zones.
*Art. 24.- Goods may be temporarily exported from the national  territory into an Export
Processing Zone for manufacturing, proces sing, conversion or repair or any other
service that may be required. The maximum time-limit for reimportation into the
national customs territory shall be six months from the date of entry into the ExportProcessing Zone.
On being reimported into the national customs territory, such goods shall pay the
corresponding duties and taxes only on that part of the added component incorporated
in the said process, the operation being treated as a reimportation from a countryoutside the Central American area.
Goods in free circulation sent by anyone located within the national customs territory
to an Inward Processing Warehouse for manufacturing, processing, repair or any
other service that may be required shall likewise pay the corresponding import dutiesand taxes only on the value added of foreign origin incorporated in the Warehouse.
For taxation purposes, shipments of goods referred to in the preceding paragraphs
shall be treated as temporary exportation for outward processing; nevertheless, they
shall be made under cover of the form to be established for the purpose by theDirectorate-General of Customs Revenue.
__________________________________________________________________________________________
*Amended by Decree No. 464 of 22/9/98, O.G. No. 215, V. 341 of 18/11/98.G/SCM/Q3/SLV/5
Page 24
*Art. 25.- Sales or transfers of goods and services by natural or legal persons established in the
national customs territory to a user of an Export Processing Zone or to an Inward
Processing Warehouse located within the Central American area shall be treated as
outright exportation to countries outside the Central American area. The provision of
services consisting of processing or assembly under subcontracts concluded betweenExport Processing Zone enterprises or Inward Processing Warehouses and enterprises
established in the national customs territory shall form an exception to this rule.
Natural or legal persons who export goods and services in accordance with the
provisions of this article may avail themselves of the Export Reactivation Act,
provided that they comply with the requirements laid down therein.
Art. 26.- Products introduced into El Salvador under this Act may be transported across the
national customs territory without the payment of the corresponding duties or taxes if
they are being moved to another Export Processing Zone or Inward Processing
Warehouse.
Such movements shall be requested on the appropriate form, the operation being
validated by the sole signature of the customs authority assigned to the Export
Processing Zone. If the movement is carried out from an Inward Processing
Warehouse, it shall be validated by the signature of the legal representative of the
enterprise responsible for the movement and the recipient.
In both cases, the enterprise that imported the goods moved shall be responsible for
the payment of import duties and taxes and other related charges if the goods in
question are not exported in good time.
Art. 27- Subject to authorization by the Ministry of the Economy, raw materials and inputs,
waste, scrap, by-products, defective products and production which for reasons
beyond the control of the beneficiary cannot be exported may be released for end
consumption in the national customs territory on payment of the import duties and
taxes on the invoiced value, which in the case of raw materials and inputs may not be
less than the proportional c.i.f. value recorded in the Goods Declaration, under cover
of which the goods were introduced.
In the case of donations to the Government of the Republic or to non-profit public or
private institutions providing humanitarian, educational or other services for the
community, exemption from taxes may be granted, subject to the approval of the
Ministry of the Economy and the Legislative Body.
__________________________________________________________________________________________
“Art. 24.- Goods may be temporarily exported from the national customs territory to an Export Processing Zone
for processing, manufacturing, repair or any other service that may be required. The maximum period allowed
for their reimportation into the national customs territory shall be six months from the date of entry into the
Export Processing Zone.
On being reimported into the national customs territory, such goods shall pay  the corresponding duties and taxes
only on that part of the added component of foreign origin incorporated in the said process, the operation being
treated as a reimportation from a country outside the Central American area.G/SCM/Q3/SLV/5
Page 25
CHAPTER VI
OBLIGATIONS AND SANCTIONS
Art. 28.- Export Processing Zone users an d Inward Processing Warehouses shall:
(a) Notify the Administrator of the Export Processing Zone or the Ministry of the
Economy, in the case of users and Inward Processing Warehouses,
respectively, of any changes in the plans and projects of their enterprise
within 10 working days of the date of the change.
(b) Record on electronic or magnetic media or any other medium required by the
Ministry of Finance all information relating to the operations that they carry
out, stock movements and any other information deemed necessary for tax
administration purposes. These records must be submitted to the Ministry of
Finance annually or upon request, and moreover shall be subject to audit or
inspection by the said Ministry and by the Ministry of the Economy, for thepurpose of ascertaining that the legal obligations have been fulfilled.
(c) Provide the Ministry of the Economy with a biannual report on their
operations, which shall contain at least: the value and origin of imports and
exports, the number of jobs created, sales on the domestic market and theamount of investment made.
(d) Allow representatives of the Ministry of the Economy, in the performance of
their duties, access to the installations of the beneficiary enterprise, and
provide them with truthful information and documentation upon request.
__________________________________________________________________________________________
Goods in free circulation sent by anyone located within the national customs territory to an Inward Processing
Warehouse for manufacturing, processing, repair or any other service that may be required shall likewise paythe corresponding import duties and taxes only on the value added of foreign origin incorporated in theWarehouse.
For taxation purposes, shipments of goods referred to in the preceding paragraphs shall be treated as temporary
exportation for outward processing; nevertheless, they shall be made under cover of the form to be establishedfor the purpose by the Directorate-General of Customs Revenue.
The operations and services referred to in this article shall not be eligible for the benefits granted by the Export
Reactivation Act.”
*Amended by Decree No. 464 of 22/10/98, O.G. 215, V. 314, of 18/11/98
“Art. 25.- Sales or transfers of goods and services by natural or legal persons established in the national customs
territory to a user of an Export Processing Zone or to an Inward Processing Warehouse located within the
Central American area shall be treated as outright ex portation to countries outside the Central American area.
Natural or legal persons who carry out the above-mentioned operations may avail themselves of the Export
Reactivation Act, provided they comply with the re quirements laid down therein, with the exception of
temporary export operations and the provision of services consisting of processing or assembly undersubcontracts concluded between Export Processing Zone enterprises or Inward Processing Warehouses andenterprises established In the national customs territory.”G/SCM/Q3/SLV/5
Page 26
(e) Give the Ministry of the Economy 30 days notice of any change of domicile
or closing down of operations.
Art. 29.- In addition to the above-mentioned obligations, the beneficiaries of this Act shall:
(a) Respect the laws, regulations and other legal provisions relating to labour and
social security, in favour of their workers, such as:
(1) the right of association;
(2) the right to form a trade union;
(3) the prohibition of forced or any form of compulsory labour;
(4) the minimum age for working minors;(5) acceptable conditions of employment with respect to minimum wage,
working hours, health and industrial safety and the worker’s
occupational development.
(b) Pay compensation, bonuses and redundancy benefits in the form and the
amounts laid down in the Labour Code to all workers affected by the total or
partial closure of the enterprise or establishment;
(c) In the exceptional event of the enterprise’s operations being totally closed
down, without justification, its assets shall be used preferentially for payingoff its liabilities and other labour obligations, without prejudice to any
appropriate administrative sanctions.
(d) Comply with the requirements and provisions of this Act and its General
Regulations and other laws of the Republic.
Art. 30.- Export Processing Zone Administrators shall:
(a) Receive and assess applications from parties interested in setting up in the
Zone under their administration and, if the requirements and provisions of the
Act and its General Regulations are satisfied, authorize the installation of the
applicant as an Export Processing Zone user.
(b) Notify the Ministry of the Economy, within five working days of the
respective authorization, by sending it a copy thereof, together with any other
relevant documents, in order that the Ministry may record it in its database
and monitoring system and inform the other competent institutions.
(c) Inform the Ministry of the Economy, on the basis of the reports submitted by
users, of any changes in the plans and projects of the enterprises established
in their Export Processing Zone, within 3 working days of their being
notified, and ensure that that the latter comply with the provisions of the Act,its General Regulations and other laws of the Republic, reporting twice
yearly to the Ministry of the Economy on the performance of each user
enterprise.
Art. 31.- Beneficiaries of tax incentives granted under this Act who infringe against its
provisions shall be administratively sanctioned by the Ministry of the Economy,
without prejudice to any fiscal penalties that may be incurred.G/SCM/Q3/SLV/5
Page 27
If labour, social security or customs obligations are infringed, the final decision of the
competent institution concerned shall be notified to the Ministry of the Economy for
the application of administrative sanctions, without prejudice to any civil or criminal
liability.
Art. 32.- Infringements resulting from failure to comply with the provisions of this Act and its
Regulations may be minor, ordinary or serious.
Art. 33.- The following shall be deemed to be a minor infringement:
(a) Breach of the obligations under Art. 28(a), (c) and (d) of this Act.
(b) Breach of the obligation under Art. 30(a) of this Act.
Art. 34.- The following shall be deemed to be an ordinary infringement:
(a) Breach of the obligation under Art. 28(b) of this Act.(b) Breach of the obligations under Art. 30(b) and (c) of this Act.(c) Breach of the obligations under Art. 29(a) and (b) of this Act.
(d) The repetition of any minor infringement.
Art. 35.- The following shall be deemed to be a serious infringement:
(a) If it is proved that a different use has been made of benefits and incentives
granted under this Act.
(b) Breach of the obligations under Art. 29(c) of this Act.(c) The repetition of any ordinary infringement.
Art. 36.- The above-mentioned infringements shall be administratively sanctioned by the
Ministry of the Economy, as follows:
(a) Minor infringements: with a written warning.(b) Ordinary infringements: with a fine of FIVE THOUSAND COLONS for
offences specified in Art. 34(a), (b), (c) and (e), and TEN THOUSAND
COLONS for offences specified in Art. 34(d).
(c) Serious infringements: temporary suspension or permanent revocation of the
benefits granted.
Art. 37.- Final decisions which, in accordance with this Chapter, impose a fine shall be
enforced within THIRTY DAYS of notification of the penalty.
The fine shall be paid into the institutions authorized by the Ministry of Finance.
Art. 38.- If the infringements committed are criminal offences, the Ministry of the Economy
shall make an official report to the Office of the Attorney General of the Republic in
order that it may take the appropriate action.G/SCM/Q3/SLV/5
Page 28
Art. 39.- If any natural or legal person availing himself of the benefits of this Act fails to
operate the enterprise he owns for a continuous period of 12 months, he shall forfeit
ipso jure  the status of Export Processing Zone User or Inward Processing Warehouse
and hence the benefits granted.
Art. 40.- If an Export Processing Zone User enterprise or Inward Processing Warehouse
permanently closes down its operations or is abandoned, judicial proceedings shall be
initiated to secure the payment of any outstanding liabilities and ensure that the
premises are vacated, even if there has been no default, without prejudice to the right
of the Ministry of Finance, for the purpose of safeguarding the interests of the
treasury and the public and subject to the taking of an inventory, to order the goods tobe removed to its own or other authorized premises or to make use of the
arrangements for the disposal of goods granted by the law to the Directorate-General
of Customs Revenue.
An enterprise may be declared to have been abandoned at the request of an interested
party or by the Office of the Attorney General of the Republic, upon application to
the competent court which, after verifying the facts, shall declare abandonment within
five working days.
Proceedings to assert fiscal, economic or labour rights shall be brought before the
competent court, which shall make an enforceable ruling within 90 days.
A judicial declaration of abandonment shall give rise to the provisional attachment of
the goods and their being placed under bond, subject to a judicial decision.
In the event of the goods attached being sold and to protect the interests of the
workers, the Legislative Assembly may grant exemption from payment of the
corresponding taxes.
If the time-limits specified in this article are not respected, the parties or the Office of
the Attorney General of the Republic may use the corresponding instances to
establish the administrative or criminal responsibility of the infringers.
Art. 41.- If, after obtaining benefits under this Act, a natural or legal person who owns an
enterprise has those benefits suspended or revoked, he may not request them for
another enterprise nor appear as a shareholder or director of companies that request
them.
Art. 42.- Companies with shareholders or director s who were shareholders or directors of other
companies which had benefits conferred under this Act suspended or revoked shall
not be eligible for the benefits of the Act.
CHAPTER VII
PROCEDURES AND REMEDIES
Art. 43.- Those interested in obtaining benefits under this Act  shall make application to the
Administrator of the Export Processing Zone or the Ministry of the Economy, as
appropriate, through their authorized legal representative or agent.G/SCM/Q3/SLV/5
Page 29
Art. 44.- In the application, the interested party shall indicate the activity in which it will be
engaged, the tax regime of which it wishes to avail itself, and the general
characteristics of the enterprise, together with its legal documentation and the
necessary information required by the Regulations.
Art. 45.- If the application is complete and the requirements of the Act are met and it is
requested that the establishment be declared an Inward Processing Warehouse, the
Ministry of the Economy shall rule on the application within a maximum of
10 working days, through a reasoned Resolution if the application is rejected or by
issuing a Decision, which shall be published in the Official Gazette, if the application
is approved.
The User of an Export Processing Zone shall submit his application to its
Administrator who shall rule on it within 48 hours. Once the application has been
approved, the user and the Administrator shall sign a contract that stipulates, at least,
the purpose, value, guarantees and term thereof and the activity or activities to be
carried out. A copy of the contract, together with a valid authorization issued by theAdministrator in accordance with the General Regulations to this Act, shall
automatically confer on the user the benefits and tax incentives specified in Art. 17 of
the Act, unless there has been an infringement or non-compliance resulting in the
benefits being suspended or revoked.
The Administrator shall notify the Minist ry of the Economy, within five working
days, of the corresponding authorization, enclosing a copy thereof and other relevant
documents in order that the Ministry may record it in its database and monitoring
system and, subject to verification, inform the other competent institutions.
Art. 46.- The General Regulations to this Act shall establish the procedures relating to any
other application that beneficiaries of the Act may be required to make.
Art. 47.- The Ministry of the Economy may investigate persons who enjoy the benefits of this
Act, for the purpose of ensuring compliance therewith.
Art. 48.- If investigations made by the Ministry of the Economy reveal infringements or non-
compliance with the provisions of the Act, the Ministry shall draw up a report and
hold a hearing so that, within five working days of being served notice, the suspected
infringer may offer evidence in his defence.
The Ministry of the Economy shall rule within eight days of the end of the hearing.
Art. 49.- Resolutions may be appealed to the Ministry of the Economy within eight days of
notification. Relevant evidence and arguments shall be accompanied by a written
petition to appeal.
Art. 50.- Once the Resolution of the Ministry of the Economy suspending or revoking benefits
and tax incentives is final, the corresponding Decision shall be issued and
communicated to the interested parties and the relevant authorities, and orders shall
be given for it to be published in the Official Gazette.
Art. 51.- The Executive Organ shall issue the General Regulations to this Act within 90 days
of its entry into force.G/SCM/Q3/SLV/5
Page 30
CHAPTER VIII
TRANSITIONAL PROVISIONS
Art. 52.- Enterprises approved under the Free Zone Regime and Fiscal Enclave Act, repealed
by this Decree, shall enjoy ipso jure  the benefits for which the present Act provides.
Likewise, all those enterprises benefiting under this Act which, as a consequence of
the provisions of this Act, undergo changes in their operations shall request the said
authorization from the Ministry of the Economy or the Administrator of the Export
Processing Zone, respectively, and in the latter case the Administrator of the Export
Processing Zone shall notify the Ministry of the Economy in accordance with the
procedure laid down in Art. 30 of this Act.
Art. 53.- Goods covered by Goods Declarations wh ich at the time of entry into force of this
Act have already been accepted by customs shall continue to be regulated by the
provisions that were in force at the time of acceptance until those declarations are
discharged.
Art. 54.- Applications for benefits which at the time of entry into force of this Decree are being
processed by the Ministry of the Economy shall be adjusted by that Ministry to the
provisions of this Act within a period of not more than 30 days.
CHAPTER IX
REPEAL AND ENTRY INTO FORCE
Art. 55.- Legislative Decree No. 461 of 27 March 1990, published in Official Gazette No. 88,
Volume No. 307 of 18 April 1990, which contains the Free Zone Regime and Fiscal
Enclave Act, its subsequent amendments and any other provision that may conflict
with this Act are hereby repealed.
Art. 56.- This Decree shall enter into force eight days after its publication in the Official
Gazette.
DONE IN THE BLUE ROOM OF THE LEGISLATIVE PALACE, San Salvador, on
the third of September nineteen hundred and ninety-eight.
JUAN DUCH MARTINEZ
PRESIDENT
GERSON MARTINEZ
FIRST VICE-PRESIDENTCIRO CRUZ ZEPEDA PEÑA
SECOND VICE-PRESIDENT
RONAL UMAÑA
THIRD VICE-PRESIDENTNORMA FIDELIA GUEVARA DE RAMIRIOS
FOURTH VICE-PRESIDENT
JULIO ANTONIO GAMERO QUINTANILLA
FIRST SECRETARYJOSE RAFAEL MACHUCA ZELAYA
SECOND SECRETARY
ALFONSO ARISTIDES ALVARENGA
THIRD SECRETARYGERARDO ANTONIO SUVILLAGA GARCIA
FOURTH SECRETARYG/SCM/Q3/SLV/5
Page 31
ELVIA VIOLETA MENJIVAR
FIFTH SECRETARYJORGE ALBERTO VILLACORTA MUÑOZ
SIXTH SECRETARY
__________