The process of company incorporation in El Salvador is essential for investors looking to expand their businesses. This process involves meeting legal, tax, and administrative requirements that allow the company to operate within the country’s regulatory framework. Below, we present the most important steps to create a business in El Salvador and ensure its proper incorporation.
What are the requirements to start a business in El Salvador?
In El Salvador, companies or corporations can have either natural persons or legal entities (companies) as partners. A minimum of 2 partners is required to create a Salvadoran corporation, and its minimum foundation capital is USD 2,000.00, in accordance with the reforms to the Commercial Code, effective since July 7, 2008.
Information and Documents Required to Incorporate a Company in El Salvador
To incorporate a company in El Salvador, it is essential to have the correct documents and meet the necessary requirements. Below, we outline the documents required for the company incorporation process:
- Tax Identification Number (NIT) of the partners (if not available, we can assist in obtaining it).
- Unique Identity Document (DUI), Resident Card, or Passport for each partner. If the shareholders are companies, the incorporation documents and credentials proving the company’s legal standing are required.
- Company Name: A name check is necessary to verify if the desired name is available at the Commercial Registry, and we offer this service free of charge.
- If the partners are Salvadoran nationals or foreign residents, they must submit a current municipal solvency certificate (original or notarized copy).
- Business Purpose: Define the main activity or business purpose of the company.
- Share Capital: According to recent legal reforms, the minimum share capital is USD 2,000.00, payable with a certified check from a Salvadoran bank in the name of the new company. You can pay the full amount or a minimum of USD 100.00 (5% of the minimum required capital), with the balance to be paid within a year.
- Ownership Percentage: Define the distribution of shares among the partners.
- Legal Representative: Specify who will act as the legal representative, who will be the alternate, or how the Board of Directors will be structured.
- With the above information and documents, the Company Deed of Incorporation will be issued and registered at the Commercial Registry within approximately 5 business days.
4 Types of Companies in El Salvador
- Corporation (S.A. de C.V.)::
- Limited Liability Company (Ltda.)::
- Simplified Joint Stock Company (SAS):
- Partnerships (Sociedades Colectivas)::
I - Initial Steps to Incorporate a Company in El Salvador
Starting a company in El Salvador requires meeting a series of legal procedures to ensure the company operates within the country’s regulatory framework. These steps include obtaining tax registrations and registering with relevant authorities. Below are the key steps every new company must follow.
Legal Obligations and Necessary Registrations to Create a Company in El Salvador
To incorporate a company in El Salvador, it is essential to meet various legal obligations and register the business with the appropriate authorities. This includes obtaining the NIT (Tax Identification Number) and VAT registration, registering the company with the municipal office, and meeting the registration requirements with different government entities.
Obtaining NIT and VAT When Creating a Company in El Salvador
- Complete Form F210 for Registration.
- Provide a certified copy of the Articles of Incorporation plus an additional copy.
- Submit a certified copy of the credentials of the Legal Representative, or, alternatively, a certified copy of the Power of Attorney, duly registered.
- Present certified copies of the NIT and DUI (Unique Identity Document) of the Legal Representative.
- Authorization letter for the person handling the registration, including all company and legal representative details, and a reference to the F210 form, Submit proof of payment for the Tax Identification Number (NIT).
How to Register with the Municipal Office After Incorporating a Company in El Salvador
- Submit the business registration form.
- Attach a certified copy of the Articles of Incorporation.
- Provide a certified copy of the company’s NIT.
- Present a certified copy of the Legal Representative or Attorney’s credentials, along with certified copies of the Legal Representative’s DUI and NIT.
- Submit the original Initial Balance Sheet, signed and stamped by an authorized Public Accountant.
- Pay 0.2% of the initial capital. For companies incorporated with the minimum share capital of USD 2,000.00, a fee of USD 4.00 will apply.
What Are the Steps to Register with ONEC After Incorporating a Company in El Salvador?
- Submit the registration form.
- Provide a copy of the Articles of Incorporation.
- Present the company’s NIT.
- Include the Initial Balance Sheet if it is within the same year.
- If registering in a different year, provide the year-end balance sheet for December 31st.
Commercial Registry Registration Process
- Submit the registration form, signed by the Legal Representative or Attorney.
- Provide proof of payment for the business establishment registration fee.
- Submit the payment receipt for the Municipal Registration Rights at the company’s registered address.
- Present proof of registration with the Directorate of Statistics and Census.
- Provide the Initial Balance Sheet, signed and stamped by an authorized Public Accountant.
- Submit proof of payment for the registration of the Initial Balance Sheet.
II - Procedures for Companies with Employees
If the company has employees, additional procedures must be followed, such as registering with the Salvadoran Institute of Social Security (ISSS) and the Pension Fund Administrators (AFP). These steps ensure social security and pension coverage for employees.
Requirements to Register with the Salvadoran Institute of Social Security (ISSS)
- Submit the registration form, fully completed and signed by the Legal Representative or Attorney.
- Attach a certified copy of the company’s Articles of Incorporation.
- Provide a certified copy of the company’s NIT.
- Submit a certified copy of the Legal Representative’s credentials or Power of Attorney.
- Present certified copies of the Legal Representative’s DUI and NIT.
- Submit a payroll list, with at least one employee.
- Provide a location map of the company’s address.
Requisitos para registrar una empresa en la AFP después de constituir una sociedad en El Salvador.
- Submit a document with all company details to the AFP of choice.
- Provide copies of the company’s NIT and VAT registrations.
- If employees are not affiliated with any AFP, inform them to join an AFP of their choice (AFP CONFIA or AFP CRECER).
III - Accounting Requirements for Starting a Business in El Salvador
Every company in El Salvador must maintain proper accounting records, which include the preparation and legalization of accounting and VAT books, and the creation of an accounting system approved by a certified public accountant. Additionally, authorization is required to produce fiscal documents, such as invoices and credit notes.
1- Accounting System:
Every company in El Salvador must maintain proper accounting records, which include the preparation and legalization of accounting and VAT books, and the creation of an accounting system approved by a certified public accountant. Additionally, authorization is required to produce fiscal documents, such as invoices and credit notes.
2 – Accounting Books:
Legalization of accounting books (daily ledger, general ledger, financial statement book, general meeting minutes, board meeting minutes, shareholder registry, and capital increase and decrease books), which must be authorized and stamped by a certified public accountant.
3- VAT Books:
Legalization of VAT books (sales to taxpayers, consumer sales, and purchase books), which must also be stamped by a certified public accountant.
4- Authorization for Fiscal Documents:
Submit a request to the Ministry of Finance for the authorization to issue fiscal documents (credit notes, final consumer invoices, delivery notes, credit notes, debit notes, and others as needed), signed by the Legal Representative or Attorney. Attach certified copies of the company’s Articles of Incorporation, NIT, VAT, and credentials or Power of Attorney.
Submit a request to the Ministry of Finance for the authorization to issue fiscal documents (credit notes, final consumer invoices, delivery notes, credit notes, debit notes, and others as needed), signed by the Legal Representative or Attorney. Attach certified copies of the company’s Articles of Incorporation, NIT, VAT, and credentials or Power of Attorney.
What do I need to create a company in El Salvador?
To create a company in El Salvador, it is necessary to comply with a series of legal procedures and registrations, including registration with the Ministry of Finance, the Municipal Mayor’s Office, the Registry of Commerce and other entities. Likewise, it is essential to have an authorized accounting system and to manage the legalization of the accounting and tax books.
IN SUMMARY: To legally establish a company in El Salvador, the following requirements must be met:
- It must be registered with the Ministry of Finance.
- It must be registered with the Municipal Mayor’s Office of its domicile.
- It must be registered with the General Directorate of Statistics and Census (DIGESTYC).
- It must be registered with the Commercial Registry and obtain a Commercial Registration Certificate.
- It must also be registered with the ministry that regulates the company’s business activity.
- It must be registered as an employer with ISSS and AFP.
- The company must have an authorized accounting system (accounting system description, chart of accounts, and application manual).
- Legalization of accounting books (general journal, general ledger, financial statements book, general assembly minutes book, board of directors minutes book, shareholders’ register, and capital increase and decrease book).
- Legalization of VAT books (book of sales to taxpayers, book of sales to consumers, and purchase book).
- Obtain authorization for fiscal stationery (credit notes, final consumer invoices, remittance notes, debit notes, and other documents as required).
Are you interested in setting up a company in El Salvador?
The costs and fees for creating a company in El Salvador vary depending on several factors such as the municipality of the company’s registered address, the number of pages the Public Accountant must authorize in each of the books, the complexity of the Accounting System and its application manual, and the amount of share capital.
For more information about the importance of registering companies in El Salvador, click the following link to read our article.
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