A free trade zone is an area in 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 employment.
The establishment and operation of these spaces were discussed on the program "5 Minutes of Legal Advice" on Radio Femenina 102.5 FM. Our lawyer from the Public Administration Department, Fátima Rivera, was present.
Our expert began by defining free trade zones as "parts of the national territory where importation and exportation are allowed for individuals or companies, known as users, who are exempt from tax payments."
In El Salvador, the Industrial and Commercial Free Trade Zones Law regulates their operation. According to the law, a free trade zone is an area of the national territory where goods can be imported and exported without paying taxes.
Our lawyer stated that in these zones, activities such as industrial production under the maquila system, industrial transformation of marine species, 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 need authorization from the Ministry of Economy, while the supervision and control of the tax regime in these zones are the responsibility of the Ministry of Finance, through the General Directorates of Customs and Internal Taxes," she emphasized.
According to Article 17 of the law, companies operating in free trade zones are entitled to: exemption from import taxes, exemption from income tax, exemption from municipal taxes, and complete exemption from real estate transfer tax for the acquisition of real estate used in authorized activities.
"For our country, it benefits the creation of jobs in manufacturing and marketing that takes place in El Salvador. Of course, certain requirements must be met because this does not exempt you from fulfilling basic requirements such as accounting or having a legal representative," she added.
In this regard, natural or legal persons engaged in, managing, or establishing themselves in free trade zones, whose establishments are declared active warehouses, can avail themselves of the law.
However, natural or legal persons engaged in activities such as the exploitation of natural gas, petroleum and derivatives, scrap metal trading, metallic mineral products, or involving the processing of explosives cannot benefit from the aforementioned legislation.
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-Written by the Torres Legal Team.