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El Salvador VAT on foreign digital services

The Central American state of El Salvador is considering joining the global VAT on digital services movement. The Ministry of Finance has said it is looking at imposing Value Added Tax on digital or electronic services as part of a wider modernisation of its tax regime. The International Monetary Fund making reforms a condition of its ongoing USD 1.3billion loan negotiation with El Salvador.

The current VAT rate in El Salvador is 13%

Withholding VAT on non-resident digital services

Non-residents are generally required to VAT register when supplying goods and services in El Salvador, but no specific rules for digital services have been enacted. Requiring non-residents to VAT register, and then collect taxes would replace the existing ineffectual Withholding VAT. This obliges consumers to self-assess the VAT due on their payments, and remit it directly to the DGII tax authorities

The IMF in the past has pushed El Salvador to raise its VAT rate to 15% and impose a property tax.

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Central and South America VAT on digital services

Comments (click for details) Rate Date Threshold Comments
Argentina 21% Apr 2018
Bahamas 10% Jan 2015 BSD 100,000
Barbados 17.5% Dec 2019 BBD 200,000
Bolivia 13% Nov 2022 -
Brazil n/a n/a n/a Various proposals
Chile 19% Jun 2020 Nil
Colombia 19% Jan-18 Nil
Costa Rica 13% Oct 2020 Nil Withholding VAT option
Dominican Republic 18% 2023? Nil Currently withholding VAT
Ecuador 12% Sep 2020
El Salvador 13% 2022 - Replace Withholding VAT
Guatemala 12% TBC
Honduras 15% 2022 HNL 250,000
Panama 10% 2022 Withholding VAT
Paraguay 10% Jan-21 Nil Withholding VAT; 4.5% DST
Peru 18% 2022 Nil Withholding VAT
Puerto Rico 10.5% Jan 2020 $100,000; or 200 transactions Marketplaces
Uruguay 22% Jan 2018 Nil VAT and Withholding Tax

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