Income Tax (ISR) in El Salvador
The Impuesto Sobre la Renta (ISR) in El Salvador is a progressive income tax that applies to individuals and businesses. Salaried employees have monthly withholdings that include AFP, ISSS, and ISR calculated on taxable income.
Mandatory Salary Deductions
Before calculating ISR, two mandatory contributions are deducted from gross salary:
- AFP (Pension): 7.25% of gross monthly salary
- ISSS (Social Security): 3% of gross salary, capped at a $1,000 monthly salary base (maximum $30/month)
Taxable income = Monthly gross salary - Monthly AFP - Monthly ISSS
El Salvador Monthly ISR Withholding Table
For salaried employees, ISR is withheld monthly on taxable income. Since the 2025 reform, the monthly withholding table is:
| Monthly taxable income | Calculation | |---|---| | Up to $550.00 | Exempt | | $550.01 to $895.24 | $17.67 + 10% on the excess over $550.00 | | $895.25 to $2,038.10 | $60.00 + 20% on the excess over $895.24 | | Over $2,038.10 | $288.57 + 30% on the excess over $2,038.10 |
El Salvador uses the US dollar (USD) as its official currency since 2001, so all ISR calculations are done in dollars.
Practical Example
For a monthly gross salary of $1,000:
- Monthly AFP: $1,000 x 7.25% = $72.50
- Monthly ISSS: $1,000 x 3% = $30.00
- Monthly taxable income: $1,000 - $72.50 - $30.00 = $897.50
- Monthly ISR: $60.00 + ($897.50 - $895.24) x 20% = $60.45
- Net salary: $1,000 - $72.50 - $30.00 - $60.45 = $837.05
In addition to employee deductions, the employer pays AFP, ISSS, and other applicable contributions. These amounts are not deducted from the employee's salary.
Employer Contributions
Employers also have mandatory contribution obligations:
- Employer AFP: 8.75% of employee salary
- Employer ISSS: 7.5% of salary, capped according to the applicable ISSS base
- INSAFORP: 1% of salary for eligible employers
These contributions are in addition to the salary and do not affect the employee's net pay.
Salaried employees with a single employer generally do not need to file an annual ISR return when monthly withholdings cover the tax obligation. If you have additional income sources, you may need to file.
Frequently Asked Questions
For payroll, ISR is withheld monthly on gross salary minus AFP and ISSS deductions. The current monthly table is exempt up to $550.00, then applies fixed amounts plus 10%, 20%, or 30% on the excess depending on the bracket.
Employees contribute 7.25% of their gross monthly salary to the AFP pension system. The employer additionally contributes a separate amount.
Employees contribute 3% of their salary to ISSS, capped at the applicable monthly salary base. For many standard salary calculations, this is commonly capped at a $1,000 base.
If monthly taxable income is $550.00 or less, payroll ISR withholding is exempt. AFP and ISSS deductions may still apply.
Salaried employees usually have ISR withheld monthly by the employer. Annual filing rules can still apply when the worker has additional income or other tax situations.
The aguinaldo may be exempt from ISR up to the legal limit. Amounts above the exempt limit can be taxable.
Yes, overtime pay is part of taxable income and is added to gross salary to determine the applicable ISR withholding.