Amendments to the Industrial Free Trade Zones and Marketing Law

Amendments to the Industrial Free Trade Zones and Marketing Law

Amendments to the Industrial Free Trade Zones and Marketing Law

Published on october 16 , 2023

Foto de Roberto Ernesto Pascacio Rivera

Roberto Ernesto Pascacio Rivera - Legal Collaborator

El Salvador has recently approved reforms to the Law of Industrial and Commercialization Free Zones by means of Decree No. 817 issued by the Legislative Assembly, published in the Official Gazette No. 157, volume 440, of August 25, 2023. These reforms allow companies to engage in new activities that include the cultivation, processing and commercialization of flora species or unprocessed food produced under natural or artificial systems, such as greenhouses or laboratories that have a permit issued by the corresponding authority. Aquaculture is also allowed to be subjected or not to industrial transformation, such as preparations, preserves, derivatives or by-products; as well as their respective processing and commercialization. In addition, the production, processing, transformation or commercialization of food for humans or animals is allowed.

However, there are certain activities that will not be eligible for the provisions of the Law. These activities include the production, assembly or maquila, manufacture, processing, transformation or commercialization of sugar, its substitutes, derivatives and by-products; as well as any good that directly or indirectly incorporates sugar, its substitutes, derivatives and by-products. However, the incorporation of sugar, its substitutes, derivatives and by-products as raw material is permitted for the production of chemical, cosmetic or pharmaceutical goods and human and animal foodstuffs.

These reforms are an opportunity for companies seeking to diversify their activities or expand their market presence. The new permitted activities can help foster the country's economic growth and improve the quality of life of its citizens.

If you are engaged in the development of free zones you should take into consideration that the reform establishes that new projects must comply with the following stages: pre-qualification, authorization and start of operations. In addition, developments are required to have a minimum extension of 30,000 square meters for new free zone projects. In the case of vertical free zones, if such extension is distributed between the land and buildings to be constructed, they may also be authorized and must comply with the same stages. Authorized developers may request the extension or reduction of the area of their respective free zone, as long as they comply with the corresponding construction permits.

Regarding the customs regime, it should be kept in mind that when the Ministry of Economy authorizes the definitive consumption in the national customs territory of raw materials and inputs, the beneficiary may sell to the national market the wastes and residues from its activity, paying the corresponding duties and taxes on the customs value. If the waste is handled by managers authorized by the Ministry of Environment and Natural Resources for its destruction or to companies dedicated to recycling, even if they are not beneficiaries of the present law, they will not pay any duties and taxes. When the transfer of waste is made for valuable consideration, import duties and taxes must be paid on the invoiced value.

Finally, it is important to take into account that the closing or abandonment of operations without notifying the General Directorate of Customs and without making the cancellations required by the customs regime, constitutes the crime of customs revenue fraud. In the event that a beneficiary notifies the General Directorate of Customs of the definitive closing of operations, it must present the information and documentation that demonstrates the cancellations of the goods declarations for imports under the free zone regime or temporary admission for inward processing and the payment of duties and taxes for the goods covered by those that have not demonstrated their cancellation or discharge.
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Last June, the new Instructions for the Prevention, Detection and Control of Money Laundering, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction, issued by the Attorney General's Office (FGR), under the framework of the Anti-Money Laundering Law (LCLDA), came into force. In its Article 2, the LCLDA establishes that every person must submit information to the FGR that allows demonstrating the licit origin of any transaction he/she carries out. This leads us to conclude, then, that every person must prepare the manual and internal policies for the implementation of a money laundering prevention system, and the continuous development of these.

What is the difference between the new Instructions and the prevention systems elaborated before it came into force? Article 4 of the Instructions requires individuals to apply a risk-based approach, which consists of identifying, assessing and understanding the risks of their sector and operation, and applying resources aimed at ensuring that they are effectively mitigated. Therefore, it is necessary to update the manuals and policies that companies had developed in the past, so that they have a risk-based approach and comply with the new provisions.

From the manuals prepared, it is necessary to comply with other obligations, among them, to develop due diligence and KYC policies to identify the final beneficiary of the company's business relationships, to detect and mitigate all unusual or suspicious transactions and report them to the FGR (not only cash transactions), to train employees, to keep a historical record of the files analyzed, and above all, to appoint a compliance officer.

Why is it important to comply? Article 8 of the LCLDA establishes that, if there is any encumbrance due to negligence, impertinence or ignorance of the directors or employees of the companies, there will be a sanction of two to four years in jail.

Therefore, as a Firm we recommend:


We offer you our services, in order to comply with these legal obligations, so that your company has the peace of mind and support of a money laundering prevention system.

For more information about how this may affect your company, please contact our specialized team at bvaldez@bvaldezlaw.com  or  benjamin@bvaldezlaw.com