Proposals for Special Economic Zones Law

In El Salvador, it is proposed that the law discussed in the Assembly, considers the reduction of minimum requirements for investments made in special economic zones, to compensate for the disadvantages of lack of productive activity in the area.

Monday, July 8, 2019

In July 2018, the Executive Branch presented to the Legislative Assembly the draft Law on Special Economic Zones (LZEE), which is being analyzed by the Economy Commission.

The proposal consists of creating special economic zones in 26 municipalities in the southeast of the country, where tax incentives would be provided for activities related to clean energy and the exploration of natural gas and oil.

The Salvadoran Foundation for Economic and Social Development (Fusades) made an analysis of the proposal and also makes recommendations so that the application of the law achieves the expected results.

One of the conclusions of the analysis is that "... the proposal that fiscal incentives be limited in terms of time (finite time), in addition to reducing the minimum investment requirements, so that they are more attractive than in other laws, and that they compensate for the disadvantages of the lack of productive activity in the area, should be submitted for discussion by the various actors."

The document adds that "... The main conclusion of the report is that, in order to guarantee the development of the eastern zone, or any other region, it is not enough to have a special zone law, but it is necessary that the law be accompanied by other public policy measures that constitute a comprehensive local development agenda, so that the inhabitants of the zone achieve a continuous improvement in their welfare. At the same time, the local development agenda must be framed within a long-term development strategy for the country as a whole.

See " Analysis of the Law on Special Economic Zones in the South Eastern Region of El Salvador" (in Spanish).

More on this topic

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The regulation for Special Public Economic Development Zones, which came into effect in Guatemala on February 4, establishes fiscal incentives for companies operating under this scheme.

Among the tax benefits provided by the Law on Special Public Economic Development Zones (ZDEEP), include the exemption for 10 years of 100% of income tax, as well as the temporary suspension of taxes associated with imports.

Special Economic Zone for El Salvador

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A proposal has been made to create a special economic zone in 26 municipalities in the southeast of the country, which would provide tax incentives for activities related to clean energy and the prospecting of natural gas and oil.

The Executive presented to the Legislative Assembly a preliminary draft of the Law on the Special Economic Zone of the Southeast Region of El Salvador, which has the objective of developing 26 municipalities of Usulután, San Miguel and La Unión.

Update to Incentive Law for Panama Pacific

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A law has been approved which updates the tax treatment of high-value services and movement of goods from the free zone in Panama Pacific to other countries.

From a statement issued by the National Assembly of Panama:

The full National Assembly approved on its third reading Bill 118, which amends Article 41 of the Law of 20 July 2004 on the Panama-Pacific Area and adds Article 91-A.

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The government is promoting a bill that will modernize the tax status of high-value services and the movement of goods from the zone to other countries.

From the preamble to the draft submitted to the National Assembly of Panama:

Law 41 of July 20, 2004, created the Panama-Pacific Special Economic Area as a scheme for legal matters, tax, customs, labor, immigration and special business, oriented towards encouraging and promoting investment, job creation and to make the Republic of Panama more competitive in the global economy.

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