According to Article 1 of that mentioned decree "Notwithstanding the provisions of the Income Tax Law and the Tax Code, for the current year are exempted from withholding and payment of income tax, all incomes received by way of Christmas bonus to workers covered by the Labor Code and the Additional Cash up Compensation Act to an amount not to exceed two times the minimum wage on trade and service sector.
State and private employees to be included in that range will receive the full bonus. This measure is part of a tax reform “package” adopted by the Salvadoran Congress on Thursday, December 2th, 2010.
If Christmas bonus is paid by the company before the referred decree enters in force, Tax Code may be applied, meaning to say that thee is no obligation for the company to deduct from the employees income tax when paid according to the minimum amounts (paid for Christmas bonus) established by article 198 of the Labor Code. Christmas bonus paid over those minimums will be subject to deduction. In this case, it is not about an exception but about “not obligating” the company to deduct income tax from the employee. The obligation for the employee to include this income in the yearly income tax statement remains.
It is still pending the decision to be taken by President Funes, who can confirm, observe or veto the decree.
The regulation increases the size of the "aguinaldo" (extra salary at the end of the year), depending on the number of worked years.
Those who have been working in a company for between 1 and 3 years will receive 15 days worth of 'aguinaldo' (end of year salary payment), those with between 3 and 10 years will receive 19 days worth of aguinaldo, and those who have worked for more than 10 years, will receive 21 days worth of aguinaldo.
Payment of the bonus raises expectations of better sales in cars and electronic equipment.
Jose Cofino, marketing manager at Volkswagen, said it expects a 30% increase in sales during July, while according to Cofiño Stahl, distributor for Toyota, "July is one of the best months," because the “14” bonus helps people pay the deposit, which in past years resulted in sales increases of 20%.
Items to be taken into account to carry out an annual transaction study between related companies.
Currently, several countries have existing legislation on transfer prices. The legislation regulates the elements that should be available to carry out an annual survey of transactions between related companies, as well as indicators serving as basis for determining if transfer pricing between related parties are within legal parameters.
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