Through Decree No. 229, the Legislative Assembly of El Salvador transitorily approved to declare as non-taxable income and consequently excluded from the respective withholding the yearly bonuses indicated in the Labor Code and the Additional Cash Compensation Law.
1. Background
Salvadoran families have been hard hit economically by the external factors that influence and cause the economic inflation faced by the country. Therefore, the financial situations of many taxpayers have been greatly reduced, being convenient to reduce the impact of such a crisis.
2. Non-taxable Yearly Bonus
The regulation states that the income received by workers referred to in the Labor Code and the Additional Cash Compensation Law as a yearly bonus is declared as non-taxable income for this tax (income tax) for 2021.
The additional compensation will cover up to an amount equal to and not exceeding USD 100,000.00. Those bonuses exceeding such amount will be subject to income tax withholding, deducting the amount if covered by this rule.
Source: Diario Oficial 14/12/21