BLP Newflash: Important changes in legislation, political landscape in El Salvador / June 2018

El Salvador

– June 2018 –

TAX

Repeal of the Tax on Financial Transaction Law

On May 28, 2018, the Supreme Court of Justice repealed the Tax on Financial Transactions Law (“TFTL”) which levies upon financial operations undertaken in El Salvador. The Supreme Court argued that the Legislative Assembly had violated the constitutional procedure for enacting laws because the text of the TFTL was not properly debated and discussed. The TFTL will be effectively repealed on December 31, 2018, in order to avoid any liquidity problems in the national budget for this year. Therefore, this tax will be in force until the before mentioned date. Additionally, the Supreme Court clarified that no tax paid before December 31, 2018, shall be refunded as a consequence of this ruling.

(Ruling number 96-2014 rendered by the Constitutional Chamber of the Supreme Court of Justice on May 28, 2018)

 

New Legislative Assembly

A new Legislative Assembly was legally installed for the period 2018-2021, changing the political landscape in El Salvador. As a result of the victory achieved in the last legislative elections,  the right-wing/conservative party Nationalistic Republican Alliance (ARENA) gained 37 of the 84 seats disputed and increased its control on the Assembly, whereas the Farabundo Martí National Liberation Front left-wing party (FMLN) obtained only 22 deputies, with other political parties holding  the remaining seats. The Legislative Assembly consists of a single house of 84 elected members and, pursuant to the Constitution, bills must be approved by a majority of the Legislative Assembly (at least 43 votes) to be enacted as laws. Consequently, ARENA will likely form an alliance with other minor parties in order to have the necessary votes to pass their bills and projects.