A free trade zone is an area within a country where companies are exempt from certain requirements and bureaucratic procedures, such as tariffs, quotas, and paperwork, with the aim of promoting new businesses and jobs.

The establishment and operation of these spaces were the topic of conversation on the program “Los 5 minutos legales” on Radio Femenina 102.5 FM. For this discussion, our lawyer from the Public Administration Department, Fátima Rivera, was present.

Our expert began by defining free trade zones as “part of the national territory where the import and export of goods are allowed for individuals or companies, known as users, who are exempt from paying taxes.”

In El Salvador, the Industrial and Commercial Free Trade Zones Law is the legislation that regulates their operation. According to the law, a free trade zone is an area within the national territory where tax-exempt import and export of goods are permitted.

Our lawyer stated that in these zones, activities such as industrial manufacturing, fishing of marine species for industrial processing, cultivation of flora in greenhouses and laboratories, breeding and commercialization of captive amphibians and reptiles, and dehydration of ethyl alcohol can be carried out.

“These companies must obtain authorization from the Ministry of Economy, while the surveillance and control of the fiscal regime in these zones will fall under the Ministry of Finance, through the General Directorates of Customs and Internal Revenue,” she emphasized.

According to Article 17 of the Law, companies established in free trade zones have the right to: exemption from import taxes, exemption from income tax, exemption from municipal taxes, and full exemption from the real estate transfer tax for the acquisition of real estate used in the authorized activity.

“For our country, this generates a benefit, which is the creation of jobs for manufacturing and marketing that occurs in El Salvador. Of course, certain requirements must be met because this does not exempt you from complying with basic requirements such as accounting or having a legal representative,” she added.

In this regard, individuals or legal entities that develop, manage, or establish themselves in free trade zones and whose establishments are declared active improvement deposits may benefit from the law.

However, individuals or legal entities engaged in activities such as the exploitation of natural gas, petroleum and derivatives, scrap metal trading, metallic mineral products, or activities involving the processing of explosives cannot avail themselves of the aforementioned legislation.

If you want to learn more about this or other legal, financial, or technological topics, you can consult our social media channels.