Lowering the tax on transactions for non-domiciled investors from 20% to 3% had a positive effect on the performance of the stock market in 2015, which grew by 6% compared to 2014.
The forecast made by Rolando Duarte, president of the Stock Exchange of El Salvador (BVES), is that this type of investment will continue to grow, thanks to the incentive which was first implemented in 2015.
An agreement has been announced which will allow Salvadoran and Panamanian investors to buy securities on the stock exchange of the other country without them being registered in both markets.
The stock exchange authorities announced that the agreement implies that each recognizes the other's jurisdiction, allowing a "... Salvadoran investor to order their brokerage house to purchase a share in the Panamanian system directly and deposit the money system in custody in Panama . "
Financial companies expect that sometime before March 30 regulations of these investment instruments whose law was passed last year will be published.
It is expected that in the second half of the year the first fund management companies will be operating, once the legislation being prepared by authorities for the financial market is made known in detail. In order to promote this new instrument they are also preparing "... A plan for dissemination and promotion of a law for private business, finance and business groups in general."
Market actors in El Salvador claim that transactions are being subjected to double retention, both by brokerage firms and the bank related to it.
Because of the speed with which the financial sector has been forced to comply with the withholding tax on financial transactions, effective from September 1st this year, the same market participants are claiming that investors are suffering because they are being billed the tax twice on each transaction.
The package of new taxes proposed by the government of El Salvador will raise the price of the stock trading and the business of repurchasing shares.
The tax reform would not only reduce the profitability of the business, but would also make the resources accessible to the government, when it comes to the local market to issue bonds in order to finance public investment projects, more expensive.
A potential tax on financial transactions would discourage investment in the stock market as securities would be taxed each time they are traded.
In light of a tax proposal that would tax at 0.25% per $750 all kinds of securities, including repos and securitizations, the Stock Exchange of El Salvador (BVES) has expressed its concern for contracts already traded on the market and its dampening effect on investment.
The Stock Exchange of El Salvador promotes investment in stocks and bonds and there is a noteworthy rise in trusts to finance large infrastructure projects.
The Stock Exchange of El Salvador (BVES) carried out a campaign to promote the tools that allow participation in that market. Rolando Duarte, chief of the BVES says that "people are familiar with the exchange, but there are some fears and ignorance which we want to eliminate."
The Road Maintenance Fund will be selling bonds worth $50 million on the stock market in order to finance the construction of works to facilitate traffic in the metropolitan area of San Salvador.
The Road Maintenance Fund (FOVIAL) has chosen the securitization mechanism to sell securities to investors from different backgrounds, under an agreement that will be returned in the medium term with an additional gain.
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