Employer Tax Contributions

Tax Type	Rate	Base
Social Security (ISSS)	7.5%	Up to $1,000 monthly salary
Pension Fund (AFP)	8.75%	Employee's total wages (no maximum cap)
Vocational Training (INSAFORP)	1.0%	Total payroll (no maximum base per employee), for companies with over 10 employees

Filing & Compliance

• Monthly payroll taxes (ISSS, AFP, INSAFORP, Income Tax Withholding) are generally due within the first ten working days of the month following the payroll period.
• Employers must file an annual income tax report (Form 101) summarizing employee income and taxes withheld.
• Employers are responsible for withholding income tax from employee salaries based on a progressive tax scale.

In El Salvador, employee tax deductions encompass various areas, including income tax, social security contributions, and pension fund contributions.

Income Tax

Salaried individuals earning up to USD 9,100 annually are exempt from filing a tax return and receive a standard deduction of USD 1,600. Those earning above this threshold do not qualify for the standard deduction but can deduct medical and educational expenses up to USD 800 per item. Donations to non-profit organizations are deductible up to 20% of net income after subtracting the donation amount. Voluntary contributions to private pension funds are deductible up to 10% of the monthly income declared to the pension fund. Income tax rates are progressive, ranging from 10% to 30% based on income brackets. Non-residents are subject to withholding tax rates of 20% or 25%, or potentially lower rates for specific services. Capital gains are generally taxed at 10%.

Social Security Contributions

Both employers and employees contribute to social security. Employees contribute 3% of their monthly salary up to a cap of USD 1,000. Employers contribute 7.5% up to the same cap. For salaries exceeding USD 1,000, the employee contributes a fixed USD 30, and the employer contributes USD 75. These contributions fund health/maternity, disability, old age, and death benefits. Health disability is covered by the employer for the first three days, with social security covering 75% of the salary thereafter. Maternity leave receives 100% coverage of the monthly salary for four months. Disability benefits vary based on duration, with social security providing a percentage for up to a year and pension funds covering longer durations. Retirement age is 60 for men and 55 for women, or after 30 years of service. Death benefits are provided to the deceased's family from their pension fund savings.

Pension Fund (AFP)

Both employers and employees make mandatory contributions to a private pension fund administered by Pension Fund Administrators (AFPs). The employee contributes 7.25% of their monthly salary, and the employer contributes 8.75%. These contributions are deducted and reported monthly through the payroll process. This system is separate from the mandatory social security contributions.

Additional Considerations

• Tax Year: El Salvador's tax year is the calendar year (January 1st to December 31st).
• Tax Havens: El Salvador maintains a list of tax haven jurisdictions for tax purposes, with transactions involving entities in these jurisdictions subject to specific regulations and potentially a 25% withholding tax. As of 2025, the list includes 101 jurisdictions.
• Interest on Late Payments: As of February 1, 2023, interest on late tax payments is 6.35% for up to 60 days and 10.35% thereafter.

It is important to note that this information is based on the available data as of today, February 5, 2025, and may be subject to change due to updates in tax regulations. Consulting with a tax advisor is always recommended for personalized guidance and to remain informed about the latest updates.