El Salvador Officially Enacts Landmark Law Eliminating Taxes on Tech Development

Overview of the Policy Change

Nayib Bukele, the President of El Salvador, has officially signed a comprehensive legislative framework designed to remove taxation barriers for the technology sector. The salvador signs law eliminating taxes on income, property, and capital gains tied to technology innovation and manufacturing activities within the country. This 11-page bill represents a significant shift in the nation’s approach to fostering economic growth through technological advancement.

What the Tax Elimination Covers

The legislation removes three major tax categories that previously applied to technology-related ventures:

• Income taxes on profits generated from tech innovation
• Property taxes for facilities dedicated to technological development
• Capital gains taxes on investments in the technology sector

Under the Ministry of Economy’s oversight, these tax incentives are structured to redirect resources toward private investment in technological manufacturing and innovation initiatives.

Strategic Goals Behind the Reform

The primary objectives of this law extend beyond simple tax relief. El Salvador aims to establish itself as a competitive hub for technology manufacturing in Latin America by:

Accelerating the development of microelectronics, semiconductor components, and advanced manufacturing processes. The government seeks to position the nation as a leader in emerging technology production across the region, creating new opportunities for industrial expansion.

Building local expertise through enhanced educational partnerships. The law mandates strengthened connections between employers and educational institutions to develop a skilled workforce in advanced technological manufacturing. This includes scaling training programs and technical education initiatives.

Addressing supply chain resilience. By reducing vulnerabilities in production networks and improving interconnections within the technology ecosystem, the law supports both domestic manufacturers and international supply chain stability.

Implementation and Enforcement

The Ministry of Finance will execute the law with regulatory authority granted to issue qualification agreements, conduct inspections, and verify compliance. Additionally, the government will design and implement supporting public policies that facilitate technological innovation and strengthen cooperation between domestic and international technology organizations.

Economic Implications

By eliminating these tax barriers, El Salvador aims to attract both local entrepreneurs and foreign investors interested in establishing technology manufacturing operations. The reform directly addresses the country’s broader economic development strategy, positioning technology and innovation as central drivers of sustainable growth and competitiveness in the Central American region.