Services Exports in El Salvador

The export of services is a concept that involves the provision of services to users who are neither resident nor domiciled in the country where such services are performed. For a service to be considered an export.

It must meet 3 specific conditions

• It must be a service performed in the country.
• It must be provided to users who have no domicile or residence in the country.
• The services must be intended for use exclusively abroad.

While the first two conditions are usually met in most cases, the most rigorous analysis is carried out on the third condition: the services must be intended to be used exclusively abroad.

Analysis of a Practical Situation

To illustrate how this third condition applies, consider the following example with three companies: A, B and C. Company A contracts company B to provide parcel delivery services to El Salvador. Company B, in turn, subcontracts company C to manage the delivery of the packages to the final recipient in El Salvador.

Let's analyze the following points:

Commercial Relationship

• Company C (local company) and Company A (foreign customer): There is no direct business relationship between company C and company A.
• Company C and Final Recipient in El Salvador: There is no direct business relationship between Company C and the final recipient in El Salvador.
• Company C and Company B: Company C has a business relationship with Company B, which requires its parcel delivery management services in El Salvador.

2. Origin and Consumption of the Service

The parcel delivery management service has not been requested by the final addressees, but is originated and consumed abroad. Both company A, which initially requests the service, and company B, which subcontracts to company C, benefit from this service exclusively outside the national territory. In short, the perfection of the service takes place abroad.

3. Service Provision

Company C manages the shipment of the package to the final recipient on behalf of company B, which in turn received this request from company A, a non-domiciled customer. The use and utilization of the service occurs exclusively abroad, where the service contracting party requests it and its need is satisfied.

4. Need for Services

Company B, which is not domiciled, requires the services provided by company C because they are essential to complete the service contracted with its customer abroad (company A). This again indicates that the service is consumed abroad.

Conclusion

Based on the arguments presented, it is clear that for company C, the operation constitutes an export of services. As such, it should be invoiced taxed at a rate of 0% and not 13%. This analysis details how the condition that the services must be destined to be used exclusively abroad is met, validating that, in this case, the operation qualifies as an export.

By understanding and correctly applying these conditions, companies can benefit from the favorable tax regime for exports, thus optimizing their operations and complying with applicable tax regulations.