The Trust Fund for the Economic Recovery of Businesses in El Salvador

The Trust Fund for the Economic Recovery of Businesses in El Salvador

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Due to the effect of the COVID-19 pandemic, many countries have been affected by the crisis in terms of their economy, for which they have taken certain measures in order to favor the economic recovery.

Within this context in El Salvador, the Legislative Assembly enacted on July 17, 2020 the Decree N°685 or new Law for the creation of Trusts for Economic Recovery, giving priority to Micro, Small and Medium Enterprises.

The purpose of this article is to provide information on the main aspects of such law.

Term of Incorporation of the Trust

A term of 12 years is granted for the incorporation of the Trust, as from the effective date of the Law.

Purpose of the Trust

The purpose of the Trusts constituted will be to administer the following programs:

  • Subsidy Program for Employees of Micro, Small and Medium Enterprises, who are registered in the Salvadoran Institute of Social Security or in the National Commission of Micro, Small and Medium Enterprises.
  • Credit Granting Program for companies registered as employers in the Salvadoran Institute of Social Security.
  • Productive Financing Program for those entrepreneurs in the informal sector.

Constitution of the Trust

The Trust may be formalized by means of a Public Deed, which must be registered in the Registry of Commerce.

In this grant will appear as trustor, the State and the Government of El Salvador, and as trustee the Banco de Desarrollo of El Salvador or BANDESAL.

About the Trust Assets

The value of the trust (US$600 million) will be distributed as follows:

  • US$140,000,000,000 earmarked for the Employment Subsidy Program.
  • US$360,000,000 for the Credit Granting Program.
  • US$100,000,000,000 for the Productive Financing Program for entrepreneurs in the informal sector.

Likewise, interest from investments or income of the Trust, donations, inheritances and legacies, real estate and personal property and other contributions received will also be part of the trust.

Income Tax

It should be noted that the Trust is exempt from the payment of Income Tax, but must comply with the formal obligations thereof.

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