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