El Salvador

The country profile includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by the employers. Results reported include the average and marginal tax burdens for eight different family types.

It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

El Salvador 2013
Tax / benefit of single persons
		Wage level (% of average wage)	67	100	167	67
		Number of children	0	0	0	2
1.	Gross wage earnings		3 556	5 308	8 864	3 556
2.	Standard tax allowances		1 915	2071	2 378	1 915
	Basic allowance		0	0	0	0
	Married or head of family		0	0	0	0
	Dependent children		0	0	0	0
	Deduction for social security contributions and income taxes		315	471	778	315
	Work-related expenses		0	0	0	0
	Other		1 600	1 600	1 600	1 600

3.	Tax credits or cash transfers included in taxable income		0	0	0	0
4.	Central government taxable income (1-2+3)		1 641	3 237	6 486	1 641

5.	Central government income tax liability (exclusive of tax credits)		0	0	454	0
6.	Tax credits		0	0	0	0
	Basic credit		0	0	0	0
	Married or head of family		0	0	0	0
	Children		0	0	0	0
	Other		0	0	0	0

7.	Central government income tax finally paid (5-6)		0	0	454	0
8.	State and local taxes		0	0	0	0
9.	Employees’ compulsory social security contributions
	Gross earnings		315	471	778	315

10.	Total payments to general government (7+8+9)		315	471	1 232	315
11.	Cash transfers from general government		0	0	0	0
	For head of family		0	0	0	0
	For two children		0	0	0	0

12.	Take-home pay (1-10+11)		3 241	4 837	7 632	3 241
13.	Employer’s compulsory social security contributions		520	776	1 276	520
14.	Average rates
	Income tax (7 / 1)		0.0%	0.0%	5.1%	0.0%
	Employees’ social security contributions (9 / 1)		8.9%	8.9%	8.8%	8.9%
	Total payments less cash transfers [(10-11) / 1]		8.9%	8.9%	13.9%	8.9%
	Total tax wedge including employer’s social security contributions [(10+13-11) / (1+13)]		20.5%	20.5%	24.7%	20.5%
15.	Marginal rates
	Total payments less cash transfers: principal earner		8.9%	8.9%	15.4%	8.9%
	Total payments less cash transfers: spouse		N.A.	N.A.	N.A.	N.A.
	Total tax wedge: principal earner		20.5%	20.5%	21.2%	20.5%
	Total tax wedge: spouse		N.A.	N.A.	N.A.	N.A.

El Salvador 2013
Tax / benefit of married couples
		Wage level (% of average wage)	100-0	100-33	100-67	100-33
		Number of children	2	2	2	0
1.	Gross wage earnings		5 308	7 059	8 864	7 059
2.	Standard tax allowances		2 071	3 671	3 986	3 671
	Basic allowance		0	0	0	0
	Married or head of family		0	0	0	0
	Dependent children		0	0	0	0
	Deduction for social security contributions and income taxes		471	471	786	471
	Work-related expenses		0	0	0	0
	Other		1 600	3 200	3 200	3 200

3.	Tax credits or cash transfers included in taxable income		0	0	0	0
4.	Central government taxable income (1-2+3)		3 237	3 388	4 878	3 388

5.	Central government income tax liability (exclusive of tax credits)		0	0	0	0
6.	Tax credits		0	0	0	0
	Basic credit		0	0	0	0
	Married or head of family		0	0	0	0
	Children		0	0	0	0
	Other		0	0	0	0

7.	Central government income tax finally paid (5-6)		0	0	0	0
8.	State and local taxes		0	0	0	0
9.	Employees’ compulsory social security contributions
	Gross earnings		471	471	786	471

10.	Total payments to general government (7+8+9)		471	471	786	471
11.	Cash transfers from general government		0	0	0	0
	For head of family		0	0	0	0
	For two children		0	0	0	0

12.	Take-home pay (1-10+11)		4 837	6 588	8 078	6 588
13.	Employer’s compulsory social security contributions		776	793	1 296	793
14.	Average rates
	Income tax (7 / 1)		0.0%	0.0%	0.0%	0.0%
	Employees’ social security contributions (9 / 1)		8.9%	6.7%	8.9%	6.7%
	Total payments less cash transfers [(10-11) / 1]		8.9%	6.7%	8.9%	6.7%
	Total tax wedge including employer’s social security contributions [(10+13-11) / (1+13)]		20.5%	16.1%	20.5%	16.1%
15.	Marginal rates
	Total payments less cash transfers: principal earner		8.9%	8.9%	8.9%	8.9%
	Total payments less cash transfers: spouse		0.0%	0.0%	8.9%	0.0%
	Total tax wedge: principal earner		20.5%	20.5%	20.5%	20.5%
	Total tax wedge: spouse		0.9%	0.9%	20.5%	0.9%

The national currency is the USD. In 2013, the average worker earned USD 5 307.72.

The Report includes estimates of the tax wedge over the whole of the income distribution ordered by deciles of total labour income of formal wage earners derived from the household surveys.

	Deciles of Incomes
	1	2	3	4	5	6	7	8	9	10
Local currency (USD)	2 130	2 526	2 802	3 039	3 491	4 242	5 296	6 247	7 877	15 657
Dollars in PPP1	4 321	5 124	5 683	6 164	7 080	8 605	10 743	12 671	15 978	31 759
Ratio to the minimum wage2	0.9	1.1	1.2	1.3	1.5	1.9	2.3	2.8	3.5	6.9
← 1. Calculated using the implied conversion rate (National currency per current international dollar in purchasing parity power) published by the IMF in the World Economic Outlook dataset.
← 2. Ratio of the income decile to the official minimum wage of the country.

1. Personal income tax system

The fiscal year is the calendar year.

1.1. Central government income tax

The income tax law of El Salvador establishes that all income (cash or in-kind) received in the national territory and all foreign investments that produce gains within the country are subject to the income tax.

The personal income tax is calculated on the taxable income which is derived after applying the tax allowances to the gross income.

1.1.1. Tax unit

Members of the family are taxed separately.

1.1.2. Tax allowances and tax credits

1.1.2.1. Standard tax allowances and tax credits

Employee contributions to the old age pension program and those paid to the ISSS.
Resident individuals may deduct USD 1 600 if their annual income is less than USD 9 100. Otherwise, taxpayer’s are entitled to a USD 800 deduction.

1.1.2.2. Main non-standard tax allowances and tax credits

None.

1.1.3. Tax schedule

The annual income tax liability was calculated on the taxable income according to the following schedule in 2013:

Income (USD) up to	Marginal rate (%)
4 064.00	0
9 142.86	10
22 857.14	20
above	30

1.2. State and local taxes

There is no state or local tax levied on wages.

2. Compulsory social security contribution to schemes operated within the government sector

2.1. Employee contributions

Employee contributions are levied on the gross earnings under two headings.

Individuals contribute 3% of their wages to the government sponsored National Institute of Social Security (ISSS). The annual lower earnings threshold is the minimum wage, USD 2 265.96 in 2013. The upper ceiling was USD 8 228.52.

Resident individuals also contribute 6.25% of their wages to a privately managed old age pension program (AFP). The lower earnings threshold is the minimum wage and the upper ceiling was USD 65 608.56. The annual bonus (Aguinaldo) is exempt from the contributions.

2.2. Employer contributions

Employers are required to contribute to the following public programs.

Program	Marginal rate (%)
National Institute of Social Security (ISSS)	7.5
Old age pension (AFP)*	6.75
Salvadorian Institute for Professional Formation (INSAFORP)**	1.0
← * Privately managed.
← ** Levied on companies with more than 10 employees.

The employer contribution rates are levied on the payroll. The contribution to the AFP has a lower earnings threshold of the minimum wage and an upper ceiling of USD 65 608.56. The annual bonus (Aguinaldo) is exempt from contributions.

3. Universal cash transfer

3.1. Amount for spouse and for dependent children

None.

4. Main changes in tax/benefit since 2013

None.

5. Memorandum items

5.1. Identification of an AW

The data refer to the earnings of workers within the formal sector. The average worker’s wage was calculated using microdata from the national household surveys.