About Tax Withholding Over Christmas Bonus for Fiscal Year 2009

Lic. Francisco A. Martínez

San Salvador, January 13rd, 2010

Legislative Decree No. 215 which came into force on December 4th, 2009, exempted employers from the obligation to withhold the income tax over sums paid to public and private employees as a Christmas Bonus. However, such decree did not establish anything about whether such received amounts by employees would be considered as taxable income or not.

A couple of weeks later, as an effort to give greater benefits to Salvadorans, in a plenary meeting held on December 16th, 2009, the Legislative Assembly issued the Legislative Decree No. 228, supplementing the first one.

Decree No. 228 provides that such compensation received by employees will be considered as a non taxable income, provided that it does not exceed the amount equivalent to 2 minimum wages *.

Even though, such Decree does not establish what the minimum wage sector is concerned (at this firm’s criteria, it would be the minimum wage in the sector which each employee pertains), it helps to resolve uncertainties and provides more obvious benefits for employees.

Decree No. 228 was published in the Official Gazzette dated December 23rd, 2009, and it came into force the same day, nationwide.

Romero Pineda & Asociados keeps informing about this and other legal matters, expecting it will be useful for many Salvadorans.

*Equivalent amount to 2 minimum wages: (Trade and Services Sector: U.S. $ 415.20; Industry Sector: U.S. $ 406.20)

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