The Importance of Accounting Records in El Salvador

April 5, 2024

Transfer Pricing becomes relevant in a regional and globalized environment for entities members of the same group worldwide, as well as for the tax authorities of the countries where these companies perform multiple transactions and invest. 

Relevance of the Transfer Pricing Regulations

The Transfer Pricing regulations aim to prevent related companies from mispricing the exchange of goods or services, which could increase their costs or deductions or reduce their taxable income. The relevance of Transfer Pricing lies in its effects on the taxable income, expenses, and profits of associated companies in different tax jurisdictions, which is essential for both tax authorities and taxpayers. Thus, the accounting records of companies for Transfer Pricing must be reviewed. 

Key Aspects in the Accounting Records in El Salvador

Article 436 of the Commercial Code establishes that accounting records must be written in Spanish and expressed in Colones or U.S. Dollars. All companies, including agencies, affiliates, subsidiaries, or branches of foreign companies, must keep their accounting locally. Accounting may be manually recorded or through mechanized systems, without the need the Tax Administration previously authorizes, if the rules for the conservation of files and corresponding programs are complied with.  

The registration of the type of currency in the accounting of a company must be orderly and clearly filed for consistency in the returns filed in El Salvador. The main ones are VAT Statement and Payment (F-07), Monthly Report of Withholdings, Collection, and Advance on Account of VAT (F-930), Monthly Report of Documents Printed to VAT Registered Taxpayers (F-945), and Report of Financial Transactions with Related Subjects or domiciled in countries identified as tax havens (F-982). 

Mandatory Reporting on Related Party Transactions

The Report on Related Party Transactions (F-982) shall be analytically, descriptively, and explanatorily prepared to understand each element, price, and control of the related party transactions. The methodology is based on the Arm’s Length Principle, which aims to price the transaction or the profit margins obtained by the parties if all their transactions had been carried out in a competitive market, as carried out among independent parties. The importance of the recording of the type of currency lies in the correct pricing and determination of the calculated margins to analyze the related party transactions to be filed in this report.  

The mandatory reporting of transactions with related parties or parties domiciled, incorporated, or located in tax havens is established under Article 124-A of the Tax Code when such transactions, either individually or jointly, are equal to or greater than five hundred seventy-one thousand four hundred twenty-nine United States dollars ($571,429.00). It shall be filed through the forms provided by the Tax Administration with the requirements and technical specifications available. The reporting must be filed within the first three months following the end of the fiscal year at the latest. 


In conclusion, an accurate and orderly accounting record is mandatory for Transfer Pricing, according to the provisions of the Commercial Code of El Salvador. In addition, the study and understanding of these prices are made through a detailed analysis to ensure fair competition in the market. Likewise, detailed reporting on transactions between related parties domiciled in preferential tax regimes is mandatory to ensure transparency and correct taxation of these transactions, according to the provisions of the Salvadoran Tax Code.