In a global context of trade tensions and supply chain reconfiguration, El Salvador has made a strategic move to become one of the most attractive destinations for foreign investment in 2026. December 2025 marked a milestone: the Legislative Assembly approved key reforms to the Free Trade Zones Law, and in November, a reciprocal trade agreement was announced with the United States that eliminates tariffs on textile and apparel products .

This combination of legal certainty, expanded incentives, and proximity to the world’s largest market is being leveraged by investors seeking alternatives to Asia. As Patricia Figueroa, Executive Director of CAMTEX (Salvadoran Textile Manufacturers’ Association), points out, eliminating the 10% tariff “places the Salvadoran textile sector in a favorable position compared to other exporting countries in Asia” .

This positive outlook is further supported by a favorable macroeconomic environment. For 2026, GDP growth of approximately 4.5% is projected, backed by infrastructure investment, pro-technology regulations, and a maturing tourism sector . This guide provides all the necessary information to evaluate an investment in Salvadoran Free Trade Zones: from the new legal framework to approximate installation costs, including the tax incentives updated as of February 2026.

What are Free Trade Zones in El Salvador?

Definition of the Free Trade Zone Regime

The Free Trade Zone regime in El Salvador is a special legal framework that allows companies, both domestic and foreign, to operate under a set of tax and customs benefits aimed at promoting exports, job creation, and investment. This system is regulated by the Law of Industrial and Commercialization Free Zones (Decree No. 405), in effect since 1998 but updated in December 2025 to adapt to new international trade dynamics.

How the System Works under Salvadoran Legislation

The system allows companies to establish themselves in geographically delimited areas (industrial parks) where goods are considered outside the national customs territory for import and export tax purposes. This means companies can import raw materials, machinery, and equipment without paying tariffs or VAT, as long as their final production is intended for export.

Recent reforms introduced the concept of “Free Importation” (Libre Internación) , allowing the introduction of goods into the national territory exempt from Import Tariff Duties (DAI) and VAT, provided that established legal assumptions are met.

Difference between Free Zones and Industrial Parks

It is important to distinguish between these two concepts:

• Free Trade Zones: These are physically delimited industrial parks with shared infrastructure (security, utilities, access roads), where multiple companies operate under the Free Zone regime. The park’s administration is responsible to the Ministry of Economy.
• Deposits for Active Processing (DPA): This is a modality that allows an individual company to operate with the same tax benefits as a Free Trade Zone, but at its own location outside an industrial park, provided it meets the legal and investment requirements.

Legal Framework and Trade Agreements

Law of Industrial and Commercialization Free Zones

The Free Zones Law is the cornerstone of the regime. The reforms approved on December 23, 2025, represent the most significant update in over 25 years. The most relevant changes include:

1. Formal Definition of the San Salvador Metropolitan Area (AMSS): It aligns with the Development and Land Management Law, providing legal certainty about where projects can be located.
2. Expansion of Tax Incentives: An additional period of up to 10 years of benefits is enabled if initial investment and employment are doubled.
3. Flexibilization of Green Areas: Free Zones and DPAs must allocate 20% of the total area to green spaces, but can now locate part of these outside the industrial complex, with authorization from the competent authorities.
4. Grace Period: Current beneficiaries whose terms are ending will have two years to make new investments while maintaining their benefits.

Regulatory Institutions

• Ministry of Economy (MINEC): Authorizes the qualification of companies under the Free Zone or DPA regime.
• General Directorate of Customs (DGA): Issues the customs obligation solvencies necessary to access tax benefits .
• Land Management Directorate (DOT) and OPAMSS: Oversee compliance with urban planning and construction permits.
• Ministry of Finance: Manages tax and customs aspects.

Benefits of CAFTA-DR and the New Reciprocal Trade Agreement 2025

The Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) remains the backbone of bilateral trade. However, in November 2025, the United States and El Salvador reached a Reciprocal Trade Framework Agreement that reinforces and expands these benefits .

Main advantages of the new agreement:

• Elimination of tariffs on textile and apparel products that qualify under CAFTA-DR .
• Reduction of non-tariff barriers for pharmaceutical products, medical devices, and vehicles manufactured under U.S. standards .
• Simplification of requirements for free sale certificates and acceptance of electronic certificates .
• Elimination of apostille requirements and streamlining of product registration processes .
• Commitment from El Salvador not to impose barriers on digital services or discriminatory taxes on digital platforms .

Commitments assumed by El Salvador:

In exchange for these benefits, El Salvador committed to:

• Protect internationally recognized labor rights and prohibit the importation of goods produced through forced labor .
• Maintain “high levels” of environmental protection and combat illegal logging and illegal mining .
• Strengthen enforcement of measures against illegal wildlife trade .
• Improve governance of the forestry sector .

Key Fact: The United States is El Salvador’s main trading partner, with over $1.605 billion in exports between January and September 2025, representing 31.2% of total exports .

Advantage of Operating in a Dollarized Economy (USD)

El Salvador adopted the U.S. dollar as its official currency in 2001. For an international investor, this completely eliminates exchange rate risk, simplifies accounting and financial planning, and aligns operating costs with export revenues.

Tax Incentives and Financial Benefits

The December 2025 reforms have significantly expanded incentives, but they are now conditioned on real investment and job creation . The following table summarizes the benefits updated for 2026:

Benefit	Description
Income Tax (ISR) Exemption	Initial 10-year term for Free Zone users (depending on qualification). New: Extension of up to 10 additional years if initial investment and employment are doubled.
Minimum Investment for Extension (FZ)	US$ 500,000 for Free Zone users.
Minimum Investment for Extension (DPA)	US$ 800,000 for Active Processing Deposit (DPA) users.
Import Tariff Exemption	Free importation of machinery, equipment, raw materials, and supplies, exempt from Import Tariff Duties (DAI).
VAT Exemption	On local purchases of goods and services necessary for operations.
Municipal Incentives	Depending on the municipality, may include exemptions from license and operation fees.
Grace Period	2 years for current beneficiaries ending their term, to make new investments without losing benefits. If they do not invest, they must pay the taxes that would have corresponded.
Green Area Flexibility	20% of the total area, but part can be located outside the complex with authorization from DOT/OPAMSS.

New Law for the Promotion of Investment Expansion (2026)

In addition to the Free Zone reforms, the Law for the Promotion of Investment Expansion came into effect in February 2026, promoted by Invest in El Salvador . This law complements the Free Zone regime by offering incentives for companies already operating in the country that wish to expand but do not qualify for other regimes.

Main benefits:

• Tax credits creditable against Income Tax (ISR) of 10%, 20%, or 30% of the amount invested, depending on the size and category of the investment .
• Total exemption from ITBI (Property Transfer Tax) for the acquisition of real estate intended for productive expansion .
• 10-year stability: Benefits are guaranteed for a decade, allowing long-term planning .

Eligibility requirements:

• Have at least 10 years of operations in El Salvador.
• Not currently covered by other tax incentive regimes.
• Develop productive activities included in the law.
• The investment must contribute to productivity or employment objectives .

This law is particularly relevant for companies that, after operating under the Free Zone regime, wish to expand into new lines of business that may not strictly qualify under the original regime.

Key Note for CFOs and Planners: Free Zone incentives can be applied for more than once, as long as requirements are met. This allows structuring growth phases with rigorous financial planning.

Strategic Location and Logistics Advantages

Proximity to the United States

• Flight times: 2-3 hours to Miami, 4-5 hours to Houston.
• Competitive advantage: Shorter response times than from Asia, allowing brands to react quickly to fashion trends and seasonal demand.

Access to the Pacific Ocean

El Salvador has two main ports on the Pacific:

• Port of Acajutla: The busiest commercial port.
• Port of La Unión: Under development, with potential to become a regional logistics hub.

International Airport

The El Salvador International Airport (SAL) is a modern hub with cargo and passenger capacity, connecting to major cities in the United States and Central America.

Road and Port Infrastructure

The road network efficiently connects Free Zones to ports and the airport. Existing Free Zones are strategically located to facilitate this connectivity.

Main Free Trade Zones in El Salvador

In September 2024, the construction of 5 new Free Zones was announced, the first in 14 years, located in the departments of La Libertad (2), Sonsonate (2), Santa Ana (1), and San Vicente (1) . This diversifies the offering towards sectors like auto parts, metal structures, and food.

Key Sector Data (CAMTEX) :

• Total Free Zones in operation: 17 (plus 5 under development).
• Location: In 6 of the 14 departments.
• Companies in parks: Approximately 120.
• Companies under DPA regime: Over 100.
• Direct employment: ~63,000.
• Indirect employment: ~120,000.

Comparative Table with Location and Main Sectors

Free Zone / Location	Department	Main Sectors
San Salvador Metropolitan Area	San Salvador	Textiles, apparel, BPO services, logistics
Zones in La Libertad	La Libertad	Light manufacturing, auto parts (new projects)
Santa Ana	Santa Ana	Textiles, agribusiness
San Miguel	San Miguel	Logistics, manufacturing
New projects (2024-2026)	Sonsonate, La Libertad, Santa Ana, San Vicente	Auto parts, metal structures, food

Economic Sectors Operating in Free Zones

Textile and Apparel

It is the traditionally dominant sector and the one most benefited by the recent trade agreement with the U.S. It represents 30% of the country’s total exports. El Salvador is the 11th largest supplier of apparel to the United States.

• Main products: Socks, synthetic fiber blouses, cotton sweaters, underwear, t-shirts.
• Added value: Transition towards technical clothing, performance garments, and sports niches.
• Recent challenges: Sector exports totaled $609.5 million by September 2025, 9.3% less compared to 2024, affected by the 10% tariffs that will now be eliminated .

Light Manufacturing and Electronics

Growing, with potential for assembling electronic components and medical products. The Law for the Promotion of Innovation and Technological Manufacturing supports these investments .

Logistics and Warehousing

Leveraging the geographical position as a regional distribution center. Cross-border e-commerce represents a growing opportunity .

Business Process Outsourcing (BPO)

El Salvador is gaining traction as a nearshoring destination for contact centers and business services .

Competitive advantages of the BPO sector in El Salvador:

• Bilingual talent: Large pool of English-proficient talent, especially in San Salvador. Many bilingual agents have lived in the U.S. or have family connections, providing strong cultural alignment .
• Competitive labor costs: Salaries for entry-level agents remain affordable compared to other Latin American markets .
• CST Time Zone: Enables real-time collaboration with teams in the United States.
• Infrastructure: San Salvador and surrounding areas offer the real estate, telecommunications, and power needed for 24/7 operations .
• Government support: The government actively promotes the BPO sector through Free Zone incentives and training programs .

Trends 2026:

• Mid-market growth: Mid-sized U.S. brands seek nearshore capacity without the saturation of larger markets .
• Hybrid work evolution: Remote and hybrid agent models are increasingly prevalent .
• Higher-value services: Providers are positioning to offer services like customer loyalty, renewals, and upsells .

Considerations:

• Less mature market than Guatemala or Colombia, which may limit large-scale provider options .
• Most activity is concentrated in San Salvador, with limited options in secondary markets .

Economic Impact and Investment Data

Foreign Direct Investment Trends

The textile and Free Zone sector has faced challenges in the last four years, losing between 10,000 and 12,000 jobs due to global adjustments. However, signs of recovery are clear:

• Export decline: Slowed from -17% in 2023 to -7% in 2025 .
• 2026 Projection: Moderate growth of 2% to 3%, with gradual employment recovery .

Exports under the Free Zone Regime

• 2025 Textile Exports: $1,926.97 million (estimated close).
• Cumulative Exports to October 2025: $1,682 million.

Employment Generation

• Current direct jobs: ~63,000.
• Indirect jobs: ~120,000.

Growth Projections for 2026

Sector optimism is based on three pillars:

1. Reforms to the Free Zones Law (December 2025).
2. Trade agreement with the U.S. eliminating the 10% tariff .
3. Slowdown of the export decline and pending orders starting to be released.

Additionally, El Salvador enters 2026 with strong macroeconomic momentum, supported by:

• Projected GDP growth of ~4.5% .
• Investment in infrastructure: roads, airports, and the Pacific Train project .
• Growth of the tourism sector (Surf City) generating collateral demand .

How to Establish a Company in a Free Trade Zone

Company Incorporation Process

A Sociedad Anónima (S.A.) , similar to a Corporation, is typically used. The process includes:

1. Choosing and verifying the company name.
2. Obtaining a Tax ID Number (NIT) for foreign shareholders.
3. Drafting the incorporation deed with a Salvadoran notary.
4. Registering the company with the Commerce Registry.

Application for Authorization under the Free Zone Regime

A formal application must be submitted to the Ministry of Economy (MINEC) to qualify for the regime. The company must demonstrate it is new or, if existing, that the investors have a track record in foreign trade.

Compliance Requirements

• Obtain municipal permits.
• Comply with DOT/OPAMSS regulations (for construction).
• Register with the Ministry of Finance (obtain NIT and Taxpayer Registration).

Specific Requirements before the General Directorate of Customs

A critical step is obtaining the Customs Tax Obligation Solvency from the DGA . This free procedure has a response time of 5 business days and requires:

Necessary documentation:

• Written request with applicant’s and legal representative’s data.
• Simple photocopy of the applicant’s DUI (national ID) and NIT.
• For legal entities: NIT, Taxpayer Registration Number, Incorporation Deed and amendments.
• Updated Shareholder Registry Book minutes (if shareholders differ from the original deed) .

Submission methods:

• Online: Send scanned documents to [email protected]
• In-person: At the Correspondence Unit, General Directorate of Customs, Km 11½ Panamericana Highway, San Bartolo .

Estimated Approval Times

Stage	Estimated Time
Company Incorporation	2-3 weeks
DGA Solvency Application	5 business days
MINEC Qualification	4-8 weeks (variable)
Municipal/OPAMSS Permits	4-6 weeks
Total Approximate	3-5 months

Approximate Installation Costs

Vary by sector and size. The minimum thresholds to access benefit extensions are US$ 500,000 for Free Zones and US$ 800,000 for DPAs. The initial investment to qualify may be lower, but these amounts are relevant for long-term planning.

Nearshoring Opportunities in El Salvador

Companies Migrating Operations from Asia

The combination of higher tariffs on China and other Asian countries, along with preferential access from El Salvador, is driving relocation.

“If El Salvador attracts genuine industrial transformation processes —assembly, light manufacturing, technical certifications— it can become a reliable and legal platform for those operations” .

Geopolitical Context: U.S. Tariffs and Legitimate Triangulation

In 2025, the United States implemented significant tariff changes:

• 25% tariff on steel and aluminum .
• Universal 10% tariff on all imports, with higher rates for ~70 countries .

This scenario opens opportunities for El Salvador:

• Legitimate triangulation: Attracting genuine industrial transformation processes (assembly, light manufacturing) that meet rules of origin, not simple repackaging .
• CAFTA-DR Advantage: Products with sufficient local added value can enjoy preferential treatment, even compared to the new global tariff scheme .

Supply Chain Advantages

• Traceability and Sustainability: The Salvadoran industry is distinguished by high standards of social responsibility, environment, and water management, increasingly valued by international brands.
• Vertical Integration: Regionally integrated production chain.

Risk Diversification

For U.S. companies, relying less on Asia and more on a close and reliable partner like El Salvador reduces geopolitical and logistical risks.

Business Visits and On-Site Evaluation

Tours of Industrial Parks

The best way to evaluate an investment is an on-site visit. Free Zones are open for tours for potential investors, coordinated through CAMTEX or park administrations.

Access from the Airport to the Free Zones

All Free Zones are close to the International Airport and main highways leading to San Salvador, La Libertad, Santa Ana, and Sonsonate.

Executive Mobility and Corporate Transportation

For an investor arriving with a tight schedule of meetings in San Salvador and visits to industrial parks in La Libertad or Santa Ana, having reliable executive mobility services is crucial. Companies like Carvi offer corporate transportation solutions that guarantee punctuality, safety, and comfort, allowing executives to maximize the value of their prospecting trip. From airport-hotel transfers to complete tours of multiple Free Zones, a professional executive transportation service ensures the investor’s time and safety are optimized.

New Projects and Expansion of Free Zones

Free Zones Under Development

The 5 new Free Zones announced in 2024 are in various stages of development, with expectations to begin operations between 2026 and 2027.

Infrastructure Modernization

The government and private sector are focused on strengthening logistics, port, and digital infrastructure to attract more sophisticated investment. Notable projects include:

• Pacific Train: Will connect ports and industrial zones .
• Airport expansions: To increase cargo capacity .
• Investment in renewable energy: Geothermal and solar to reduce industrial costs .

New Government Incentives

The December 2025 reforms are the main incentive, but the government is expected to continue actively promoting El Salvador as an investment destination. The private sector, through the Industrial Council, has proposed reviewing 18 laws to promote additional incentives, including:

• International Services Law
• Law for the Promotion of Innovation and Technological Manufacturing
• Incentives Law for Renewable Energies
• E-commerce Law
• Intellectual Property Law
• Tax Code and VAT Law

Frequently Asked Questions

Can a foreign company be 100% owner?

Yes. El Salvador has no laws discriminating against foreign investors. They can own 100% of a locally incorporated company.

What percentage of production must be exported?

Historically, the regime requires a high percentage (generally over 90%) to be for export. The 2025 reforms introduce the concept of “Free Importation,” which could open the door to limited local market sales under specific conditions, but this must be analyzed case by case with legal advice.

Can I sell in the local market?

Yes, but under very specific conditions and with corresponding authorization. The general rule remains export orientation.

How long do the tax benefits last?

The initial term varies (generally 10 years for Free Zone users). With the 2025 reforms, you can access up to 10 additional years if investment and employment are doubled, and this benefit can be applied for more than once.

What requirements must I meet before Customs?

You must obtain a Customs Obligation Solvency by submitting the incorporation deed, shareholder identification, and legal representative documentation. The procedure is free and resolved in 5 business days .

Can my existing company benefit from incentives without being a Free Zone?

Yes, if it has been operating in El Salvador for over 10 years and is not under another regime, it can benefit from the Law for the Promotion of Investment Expansion (2026), which offers tax credits of 10-30% and ITBI exemption .

Conclusion: Is El Salvador a Good Option for Investing in Free Trade Zones?

Summary of Strategic Advantages

In 2026, El Salvador offers a comprehensive package difficult to match in the region:

1. Updated Legal Framework: December 2025 reforms expanding incentives and providing legal certainty.
2. Preferential Access to the U.S.: Reciprocal trade agreement eliminating tariffs on textiles and apparel .
3. Dollarized Economy: No exchange rate risk.
4. Strategic Location: Proximity and fast response times.
5. Talent and Sustainability: Bilingual workforce with international standards and an integrated production chain .
6. New Free Zones: Expansion of first-class infrastructure offerings.
7. Synergy with New Laws: Complemented by the Investment Expansion Law and other regulations under review .
8. Macroeconomic Growth: Projected ~4.5% GDP growth in 2026 .

Final Considerations for Investors

The 2025 reforms raise the compliance standard but also generously reward real investment and job creation. For companies evaluating investing, expanding, or acquiring operations under this scheme, the opportunity is real, but the margin for error is smaller. Prior strategic analysis —legal, fiscal, and operational— will be decisive in capturing benefits without exposing oneself to contingencies.

The global situation also plays in its favor: with universal 10% tariffs from the U.S. and protectionist measures, El Salvador positions itself as a reliable platform for genuine production processes that meet rules of origin .

Call to Action

The time is now. With the new legal framework, the trade agreement with the United States, and the nearshoring momentum, El Salvador stands as the most competitive destination in Central America for Free Trade Zone investment.

Ready to explore opportunities? We invite you to schedule a site visit to see the infrastructure firsthand, meet the talent, and evaluate opportunities. Our network of strategic partners, including executive mobility services like Carvi, can make your prospecting trip a productive, safe, and efficient experience.