The transformation undergone by El Salvador in recent years is undeniable.
The small Central American country, with just 6 million inhabitants, was globally known for its high crime rate, poverty, lack of legal security, and the near-total control of gangs (Maras) that plagued the lives of its citizens.
This situation has taken a 180-degree turn, partly due to measures such as the dollarization of the economy in 2001, the adoption of Bitcoin as legal tender in 2021, and ongoing efforts to attract foreign investment through improvements in infrastructure and taxation.
However, the turning point that has changed the history of this country has been the crackdown on organized crime by President Nayib Bukele. His administration has managed to imprison most gang members, making El Salvador one of the safest countries in the Americas.
Currently, all eyes worldwide are on El Salvador, including those of major companies like Google, which has just opened its first headquarters in Central America in the country.
And it’s no wonder, as the country’s safety is complemented by attributes such as its mild tropical climate, low cost of living, ease of obtaining citizenship, and tax exemptions that allow for a tax-free life.
If you also find the new direction of El Salvador impressive, keep reading, because in this article I will explain in detail all its advantages and how to take advantage of them.
Taxes in El Salvador
From a fiscal perspective, El Salvador does not offer the most favorable conditions, as both the Corporate Tax and Personal Income Tax reach 30%.
However, El Salvador operates under a territorial tax system, similar to countries like Panama, the Dominican Republic, or Paraguay. This means that taxes only apply to income generated within the country.
Thanks to this territorial regime, both individuals and businesses can reside fiscally in El Salvador and receive income and capital gains generated outside the country without being subject to taxes.
Additionally, El Salvador offers several tax advantages, such as the absence of an exit tax, no wealth tax, exemptions on inheritance and donation taxes up to the second degree of kinship, not being considered a tax haven, and the lack of international tax transparency rules (CFC Rules).
As a drawback, El Salvador has few Double Taxation Agreements in force. Therefore, it is advisable to consult with a professional before making a change of fiscal residence or undertaking a business project involving El Salvador and other countries.
Finally, it is interesting to note that in El Salvador, you are not considered a tax resident until you have stayed in the country for more than 200 days continuously within a calendar year.
Here is a summary of the main fiscal keys in El Salvador:
| Aspect | Details |
|---|---|
Business Profits | 0% on foreign-source income, 25-30% on national-source income, and a full exemption for 15 years for technology companies. |
Personal Income | 0% on foreign-source income, progressive taxes up to 30% on national income. |
Cryptocurrency Gains | 0% as they are technically earned outside Salvadoran territory. |
Wealth Tax | Does not exist. |
Inheritance and Gift Tax | Exempt up to the second degree of kinship. |
Exit Tax | Does not exist. |
Controlled Foreign Corporation (CFC Rules) | Do not exist, allowing greater flexibility in corporate structure design. |
Tax Residency | An individual is considered a tax resident if they stay in El Salvador for more than 200 consecutive days in a calendar year or if they have their primary source of income in the country. |
Types of Residency in El Salvador
El Salvador allows entry to citizens from many countries as tourists without the need for a visa.
However, as tax nomads, it is essential to explore the most accessible and convenient options for obtaining temporary or permanent residency legally. This not only secures our status as tax residents and facilitates obtaining the tax certificate but also may bring us closer to the possibility of obtaining a second passport.
You can consult all migration possibilities on El Salvador’s official site here. To simplify, we will now review the most interesting options for establishing your residency in El Salvador:
Temporary Residency for Rentiers
Temporary Residency for Pensioners
The temporary residency visa for pensioners is available to individuals of any age, provided they can demonstrate regular income from a pension. To qualify, you must prove that your monthly income is at least three times the Salvadoran minimum wage.
It is important to note that, under this visa, engaging in paid employment in El Salvador is also not permitted.
Temporary Residency for Investment
Foreigners can apply for this visa if they make an investment exceeding 4,000 times the minimum monthly wage. With the current minimum wage, this amounts to an investment of $1,460,000.
Additionally, it is also possible to obtain this residency if you act as the legal representative of a national company or a foreign branch established in the country.
To qualify, applicants must meet one of the following criteria:
- Be the president, board member, legal representative, or shareholder of a legally established commercial company in El Salvador with some local activity.
- Be the owner or general manager of a company with active investment in the country, provided that the investment meets the $1,460,000 requirement.
Permanent Residency
The temporary residencies we’ve discussed offer permits valid for 1 or 2 years, with the possibility of indefinite renewal. Once you have maintained your temporary residency status for three years, you can opt to convert it into permanent residency.
Permanent residency grants greater rights, including indefinite stay in El Salvador and, in many cases, the ability to work without restrictions in the country.
El Salvador’s Passport
To obtain Salvadoran nationality, you can opt for the standard naturalization process:
a) Citizens of Spain or Spanish-speaking countries: Must have resided in El Salvador for at least one year with permanent residency status.
b) Foreigners of other nationalities: Must have lived in El Salvador for a total of five years, combining both temporary and permanent residency.
c) Spouses of Salvadoran citizens: If you are married to a Salvadoran, you must have lived in El Salvador for two years.
If you leave the country for more than five years, you could lose nationality obtained through naturalization.
In addition to these conventional routes, El Salvador offers the following special procedures for acquiring citizenship:
Buy Salvadoran Passport with Cryptocurrencies
The “Freedom Passport” is a program designed to attract investors and prominent individuals, especially from the technology and cryptocurrency sectors, to El Salvador.
By making a donation of 1 million US dollars in USDT or Bitcoin to the national treasury, you, your spouse, and your children under 18 can obtain Salvadoran citizenship.
The process of obtaining the Freedom Passport typically takes between 4 and 6 weeks. Once completed, you can collect your passport at an El Salvadoran embassy or directly in the country.
In our opinion, while the Freedom Passport offers valuable citizenship and visa-free access to numerous countries, the cost of 1 million US dollars can be high. For those seeking more affordable options, Malta offers citizenship with access to the European Union at a lower cost, and some Caribbean alternatives may be more economical, around 200,000 dollars.
El Salvador Golden Visa
The introduction of a “Golden Visa” in El Salvador is also being considered, which would allow residency through an investment in real estate, paid in Bitcoin or USDT. This visa would offer the possibility of applying for citizenship after several years of residency.
It is important to note that this proposal has not yet been approved, so the specific details and requirements could change in the future.
5,000 Free Citizenships
In April 2024, President Nayib Bukele announced an innovative program offering 5,000 free passports to outstanding professionals in fields such as science, engineering, medicine, art, and philosophy. This program will ensure relocation without taxes or duties on personal and commercial goods, with the aim of attracting global talent to enrich Salvadoran society.
Unlike traditional naturalization processes, this program, termed “citizenship by exception,” will not require beneficiaries to meet criteria such as learning Spanish or residing in the country for years.
This proposal is still in its early stages, and specific details of the program, including selection criteria and the application process, have not yet been fully defined.
El Salvador Residency and Passport Review
In our opinion, El Salvador is emerging as a highly attractive option for tax nomads and international investors.
From a fiscal perspective, the country offers an exceptionally favorable environment, comparable to other destinations in its region, such as Panama and Costa Rica, primarily due to its territorial tax system.
Additionally, Spanish as the official language, combined with the growing proficiency in English, the use of the US dollar and Bitcoin, and proactive policies to attract capital, have made El Salvador an ideal choice for tax nomads seeking a stable and favorable environment for personal and economic growth.
The ease of obtaining citizenship, whether through naturalization or innovative programs like the Freedom Passport, adds significant appeal, as it allows for setting up a citizenship Plan B while developing a tax-free life.
There is no doubt that El Salvador is already positioned to become a key destination in our sector, and that is why we are already operating there. We will stay tuned to updates, which are undoubtedly heading in a very promising direction.
If you want to obtain tax residency, citizenship, set up a company in El Salvador or wish to receive a comprehensive analysis of your situation to discover your best options, simply fill out the form below and let us know your case and needs.
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El Salvador offers a territorial tax system, meaning that only income generated within the country is subject to taxation. Additionally, there is no wealth tax, no exit tax, and cryptocurrency gains are tax-exempt. There are also exemptions on inheritance and gift taxes up to the second degree of kinship.
To obtain tax residency in El Salvador, you must meet one of the following criteria:
- Continuous Residency: Remain in El Salvador for more than 200 consecutive days within a calendar year.
- Principal Source of Income: Have your principal source of income in El Salvador, even if you do not meet the 200-day residency requirement.
You can obtain temporary residency in El Salvador through visas for rentiers, pensioners, or investors. Each type of visa requires meeting specific income or investment requirements.
To obtain Salvadoran citizenship, you must reside in El Salvador:
- Citizens of Spanish-speaking countries: 1 year with permanent residency.
- Foreigners of other nationalities: 5 years in total, combining temporary and permanent residencies.
- Spouses of Salvadorans: 2 years of residency.
The Golden Visa is a proposal that would allow obtaining residency through an investment in real estate, paid in Bitcoin or USDT. This visa would offer the possibility of applying for citizenship after several years of residency. The program is still in the proposal stage and has not been officially approved.
