El Salvador seeks to encourage construction of high-rise buildings with tax exemption

The opposition sought to require investors to build social interest housing as a tax exemption, but their proposals were not accepted.

El Salvador has a new law that seeks to encourage investors to build buildings of 35 levels or more.

With 57 votes, the Legislative Assembly of El Salvador (Congress) approved the decree of “Special provisions for the promotion and granting of tax incentives to encourage the development of high-rise real estate projects”.

The same gives an income tax exemption to the profits obtained by the owners from the construction of new buildings of 35 levels or more for 15 years.

The decree grants the Income Tax exemption to individuals, legal entities and associations of individuals, domiciled or not in the national territory, who are holders or owners of new investments in construction projects or construction of high rise real estate developments -35 levels or more- either in the first sale and purchase of high rise real estate, rental of high rise real estate for tourism, commercial or service purposes, rental of spaces or hotel services, or provision of construction services.

In order to obtain the tax incentives, investors must apply to the Dirección General de Impuestos Internos, at the Ministry of Finance, before construction work begins.

Present at the plenary session was the executive director of the Planning Office of the Metropolitan Area of San Salvador (OPAMSS), Luis Rodríguez, who has projected an investment of US$7.8 billion in different projects in AMSS, Libertad Costa and Libertad Este.

The deputies also explained that currently real estate development is centralized in certain areas because they are more developed and with more space to build horizontally; however, with this initiative builders could develop high-rise housing in places such as San Martin, Soyapango, Apopa and other municipalities.

“We see that the government and private enterprise are joining forces to develop an activity that is latent and that we want to encourage so that construction provides solutions to the population in terms of housing and these housing exemptions motivate the builder,” said Congressman Edgardo Mulato.

Debate for social interest housing

Although they did not receive votes, opposition deputies requested that the decree require investors, in exchange for receiving the tax exemption, to build social interest housing.

Congresswoman Claudia Ortiz, from Vamos, proposed an article that would require investors to build three homes whose market cost does not exceed US$25,000 for each apartment that exceeds US$200,000, after three years of receiving the tax exemption.

The request comes as housing prices have increased in El Salvador. “Especially in the last two years, housing prices have been skyrocketing and a couple that has just started living together can hardly have access to a house of their own”, said the congresswoman.

Likewise, Arena’s congresswoman, Marcela Villatoro, presented a proposal to exempt from Income Tax for investors of housing projects of social interest with prices between US$50,000 and US$150,000. “Here we are going to demonstrate one thing: for whom are they legislating, for the rich or for the people who need help”, she said.

The congresswoman told Nuevas Ideas that the “incentives that are being presented today are for millionaires”, “for big capital”, and asked them if they did not know that 60% of Salvadorans live in overcrowded conditions.

According to data from the Central Reserve Bank (BCR), the construction industry generates more than 200 thousand direct jobs and this sector employs 8% of the people working in the country. In addition, this sector represents 12.5% of the Gross Domestic Product.

Source: Revista E&N