Promotion of renewable energies in El Salvador

By zone_admin | 27 de May de 2022 | Blog

El Salvador promotes the creation of projects that promote the use of renewable energy through tax incentives. Investments that enable the sustainable development of projects that use this type of energy resources will benefit. All this in order to improve the quality of life of the population and comply with the commitments established in the "Kyoto Protocol" and the "United Nations Framework Convention on Climate Change", whose main purpose is to promote actions leading to a reduction in the effect of greenhouse gases. By virtue of the foregoing, with the Law on Fiscal Incentives for the Promotion of Renewable Energies in Electricity Generation in force, it is intended that natural and legal persons who invest in plants for the generation of electrical energy or in expansion projects already existing, that use hydraulic, geothermal, wind, solar, marine, biogas or biomass resources; as well as any other source that in the future is identified as renewable for the generation of electrical energy, enjoy the following tax benefits, exclusively in relation to the costs and expenses of the investment corresponding to said projects:
  1. a) During the first ten years they will enjoy total exemption from the payment of Import Tariff Rights for machinery, equipment and supplies destined exclusively for the construction and expansion of the works of the electric power generation plants, including the construction of the network. necessary to distribute the energy from the generation plant.
  2. b) The income derived directly from the generation of renewable energy, will enjoy total exemption from the payment of Income Tax for a period of five (5) years in the case of projects greater than 10 megawatts (MW); and ten (10) years in the case of projects of 10 or less megawatts (MW); in both cases, counted from the fiscal year in which they obtain income derived from the generation of energy.
  3. c) Total exemption from the payment of all types of taxes on income derived directly from the sale of "Certificates of Reduced Emissions" (CER), within the framework of the Clean Development Mechanism (CDM) of the Kyoto Protocol, or markets of similar carbon, obtained by the projects qualified and benefited according to this law.
In the case of geothermal power plants, the costs and expenses related to the activities related to the total reinjection process of the geothermal resource may be deducted from income tax for a maximum period of ten years. This deduction may not exceed twenty percent of the gross income generated in the previous year. The management to obtain these benefits must be requested before the General Superintendency of Electricity and Communications (SIGET), which will issue a certification of the projects that meet the requirements to benefit from the tax incentives prescribed by law. Once the previous certification has been obtained, the respective processes must be initiated before the General Directorate of Internal Taxes and the General Directorate of Customs, both dependencies of the Ministry of Finance, to make the aforementioned benefits effective.