Tax on Banking Transactions in El Salvador

The bill proposed by the government will levy a tax of 0.25% on the amount of electronic transactions and checks.

Thursday, November 8, 2012

The bill entitled "Law on Taxes for Financial Operations", introduces a tax on checks and electronic transfers and a tax to control liquidity that applies to those transactions amounting to over $3,000.

The project must still be approved by the Legislature and signed by the President. The Ministry of Finance expects the new tax to come into effect from January next year.

"Those responsible for collecting the tax, and then reporting it and passing it on to the Treasury, will be the same entities in the financial system: banks, credit unions and savings and loan companies, and state banks", reported

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Double Tax on Financial Transactions

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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.

El Salvador: Financial Transactions Tax Comes Into Effect

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Although the banks had sought to extend the term, starting September 1 entities must charge 0,25% on operations over $1000.

From September 1 banks, credit unions and savings and loans companies must withhold 0.25% for every transaction in made in cash, by check or electronically worth over $1,000.

El Salvador: Call to Defer Tax on Financial Transactions

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The banking sector has requested a period of 6 months before starting the process of withholding tax on financial transactions as approved during a recent tax reform.

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Reactions To Tax on Transfers

November 2012

It would affect the banking sector in El Salvador, lowering the volume of transactions in the financial system, and increasing the price of money.

The Salvadoran Banking Association (Abansa) is studying a proposal by the Ministry of Finance to tax the issuance of checks and electronic transactions, but its representative Marcela de Jimenez has already indicated her criticism, noting that it has not been ruled out "that this tax will affect the banking system, ie, there will be a decrease in the level of resources that are traded through the financial system and therefore an increase in the price of money. "