Disincentive for Stock Market Investment in El Salvador

It has been stated that the tax on returns generated from stock market operations has discouraged investment in the country and constitutes a disadvantage compared to neighboring markets.

Monday, January 5, 2015

This 20% tax on returns from each operation has become a competitive disadvantage for the country, as investors prefer tax free markets where they are fewer barriers to investment.

José Miguel Valencia, director of Hencorp securitization, said in the article on Estrategiaynegocios.net "... When one of the investors, especially those who are responsible for managing the funds of someone else, can invest $1,000 in Panama and receive $100 or invest in $1,000 El Salvador and be paid $80, genuinely what has happened is flight on the part of investors. "

"... The report on the economic and fiscal situation for the close of 2014, released by the Foundation for Development, states that El Salvador is still one of the countries with the least amount of foreign investment in the region. In 2014 the country received $71.3 million in that area, which is an amount that reflects a decrease from money seen in 2013, when the figure was $110.3 million. "

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More on this topic

Taxes and the Stock Market

August 2018

The proposal to increase the tax on interest on financial investments in Costa Rica could eventually make credit more expensive for both the private sector and the government.

In the view of the National Securities Exchange (BNV) it is worrisome that initiatives such as an increase in tax on income from financial investments are being discussed without knowing in detail and clearly the impact that something like this could have on the stock market and the country's financial activities.

El Salvador: Tax on Stock Market Gains Lowered

November 2015

A reduction from 20% to 3% has been made on withholding tax on income from investments in securities traded on the local stock market.

From a statement issued by the Financial Supervisory Authority:

Recently, the Legislature approved a decree amending art. 158 of the Tax Code in order to decrease from 20% to 3% withholding tax to foreign persons or entities charged on income from investments in securities traded on the Stock Exchange in the Republic of El Salvador.

Nicaragua: Tax Increase for Non-resident Investors

December 2014

With the reform to the law on Tax Concentration non-resident investors in the country will have to pay 15% instead of 10% on income earned from capital.

According to Juan Sebastian Chamorro, executive director of the Nicaraguan Foundation for Economic and Social Development, the new reform "...

Stock Market Opposes Tax Reform

June 2014

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.