On May 20, 2025, the new Foreign Agents Law in El Salvador was approved with 57 votes in favor. This law establishes a new legal and tax framework aimed at regulating individuals and entities that receive financing from abroad. Its implementation will mark an important change in the way organizations with international funds operate within the country. The new law came into force on June 8th.
Main Objective of the Foreign Agents Law
The central purpose of the law is to guarantee transparency in the activities and operations of those persons or entities that receive external financing. It also seeks to ensure that the Salvadoran population has access to clear information about these activities and how they could directly or indirectly affect their lives on a national level.
Who is subject to this law?
Foreign Agents are considered to be all natural or legal persons who, within the national territory, carry out activities with financing or interests coming from abroad. This includes:
- Non-governmental organizations.
Non-profit associations and foundations.
Any other entity as determined by the Registry of Foreign Agents (RAEX).
Registration and Obligations
Foreign Agents must compulsorily register in the RAEX and comply with the established legal obligations, including:
- Periodic statements
- Financial reports.
- Reports of activities related to external funds.
The country’s financial institutions will have a key role as special withholding agents, being responsible for the control and management of foreign transfers directed to these agents.
Possibility of Exclusion
The law contemplates an exception: regulated entities may request their temporary exclusion from compliance with the law. This exclusion will be evaluated by the RAEX and may be granted for annual periods, with the option of automatic renewal, depending on the type of projects being developed.
Applicable Tax Regime
One of the pillars of this law is the introduction of a new tax on financial transactions in favor of Foreign Agents:
- Tax rate: 30%
- Application: Any financial transaction, transfer, disbursement, import in kind or in goods of any kind coming from foreign funds.
- Donations: Will also be subject to the 30% tax. The foreign agent must declare and pay this tax within 10 business days after the closing of the month in which the donation was received.
