Doing Business 2019 El Salvador Economy Profile El Salvador Page 1 Doing Business 2019 El Salvador Economy Profile of El Salvador Doing Business 2019 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as post-filing processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Labor market regulation Flexibility in employment regulation and aspects of job quality Page 2 Doing Business 2019 El Salvador About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation. Although Doing Business does not present rankings of economies on the labor market regulation indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational reports, which exhaustively cover business regulation and reform in different cities and regions within a nation. These reports provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business report, published in 2003, covered 5 indicator sets and 133 economies. This year’s report covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. More about Doing Business (PDF, 5MB) Page 3 Doing Business 2019 El Salvador Ease of Doing Business in DB 2019 Rank Region Latin America & Caribbean 190 1 El Salvador Income Category Lower middle income 85 DB 2019 Ease of doing business score Population 6,377,853 0 100 City Covered San Salvador 65.41 DB 2019 Ease of Doing Business Score 0 100 69.24: Colombia (Rank: 65) 68.89: Costa Rica (Rank: 67) 65.41: El Salvador (Rank: 85) 62.17: Guatemala (Rank: 98) 58.97: Regional Average (Latin America & Caribbean) 58.22: Honduras (Rank: 121) Note: The ease of doing business score captures the gap of each economy from the best regulatory performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s ease of doing business score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance. The ease of doing business ranking ranges from 1 to 190. Rankings on Doing Business topics - El Salvador 1 22 28 44 55 62 73 82 89 Rank 97 109 109 136 147 161 163 173 190 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Ease of Doing Business Score on Doing Business topics - El Salvador 100 89.76 78.41 80.00 80 77.30 71.24 66.32 Score 60 55.30 51.82 45.63 38.33 40 20 0 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Page 4 Doing Business 2019 El Salvador Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate To make the data comparable across economies, several assumptions about the a company (number) business and the procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business - Is a limited liability company (or its legal equivalent). If there is more than one type city of limited liability company in the economy, the most common among domestic firms • Postregistration (for example, social security is chosen. Information on the most common form is obtained from incorporation registration, company seal) lawyers or the statistical office. - Operates in the economy’s largest business city. For 11 economies the data are • Obtaining approval from spouse to start a business or to leave the home to register the also collected for the second largest business city. company - The entire office space is approximately 929 square meters (10,000 square feet). - Is 100% domestically owned and has five owners, none of whom is a legal entity; • Obtaining any gender specific document for has a start-up capital of 10 times income per capita and has a turnover of at least company registration and operation or national 100 times income per capita. identification card - Performs general industrial or commercial activities, such as the production or sale of goods or services to the public. The business does not perform foreign trade Time required to complete each procedure activities and does not handle products subject to a special tax regime, for example, (calendar days) liquor or tobacco. It does not use heavily polluting production processes. • Does not include time spent gathering - Leases the commercial plant or offices and is not a proprietor of real estate and the information amount of the annual lease for the office space is equivalent to the income per capita. • Each procedure starts on a separate day (2 procedures cannot start on the same day) - Does not qualify for investment incentives or any special benefits. - Has at least 10 and up to 50 employees one month after the commencement of • Procedures fully completed online are recorded operations, all of whom are domestic nationals. as ½ day - Has a company deed that is 10 pages long. • Procedure is considered completed once final document is received The owners: • No prior contact with officials - Have reached the legal age of majority. If there is no legal age of majority, they are assumed to be 30 years old. Cost required to complete each procedure (% of - Are sane, competent, in good health and have no criminal record. income per capita) - Are married and the marriage is monogamous and registered with the authorities. - Where the answer differs according to the legal system applicable to the woman or • Official costs only, no bribes man in question (as may be the case in economies where there is legal plurality), the • No professional fees unless services required by answer used will be the one that applies to the majority of the population. law or commonly used in practice Paid-in minimum capital (% of income per capita) • Funds deposited in a bank or with third party before registration or up to 3 months after incorporation Page 5 Doing Business 2019 El Salvador Starting a Business - El Salvador Standardized Company Legal form Sociedades Anónimas de Capital Variable Paid-in minimum capital requirement USD 100 City Covered San Salvador Indicator El Salvador Latin America OECD high Best Regulatory & Caribbean income Performance Procedure – Men (number) 9 8.2 4.9 1 (New Zealand) Time – Men (days) 16.5 28.5 9.3 0.5 (New Zealand) Cost – Men (% of income per capita) 45.1 37.8 3.1 0.0 (Slovenia) Procedure – Women (number) 9 8.2 4.9 1 (New Zealand) Time – Women (days) 16.5 28.5 9.3 0.5 (New Zealand) Cost – Women (% of income per capita) 45.1 37.8 3.1 0.0 (Slovenia) Paid-in min. capital (% of income per capita) 2.7 1.5 8.6 0.0 (117 Economies) Figure – Starting a Business in El Salvador and comparator economies – Ranking and Score DB 2019 Starting a Business Score 0 100 86.71: Guatemala (Rank: 89) 85.31: Colombia (Rank: 100) 79.92: Costa Rica (Rank: 142) 79.40: Regional Average (Latin America & Caribbean) 78.41: El Salvador (Rank: 147) 77.06: Honduras (Rank: 154) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2019 El Salvador Figure – Starting a Business in El Salvador – Procedure, Time and Cost Time (days) Cost (% of income per capita) 25 16 14 Cost (% of income per capita) 20 12 Time (days) 10 15 8 10 6 4 5 2 0 0 1 2 3 *4 5 6 *7 *8 *9 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2019 El Salvador Details – Starting a Business in El Salvador – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Deposit the legally required initial capital in a bank and obtain a deposit 1 day no charge evidence or a certified check Agency : Bank At least 5% of the initial start-up capital has to be shown and evidenced to a public notary. This capital has to be shown through a certified check payable to the name of the company, for the amount for which the company will initiate its operations. The check will be deposited in the company’s new account once the deed is duly registered at the Commercial Registry (that is, the company has been established). 2 Verify the availability of the company name Less than one day no charge Agency : Commercial Registry (online procedure) Entrepreneurs can check the uniqueness of the company name at the online platform of the Commercial Registry (http://www.e.cnr.gob.sv/portal/). 3 Notarize the articles of association 1 day Between USD 500 Agency : Notary and USD 1,000 To establish a new company, Article 22 and Article 101 of the Code of Commerce require fulfillment of the following requirements: - Name and personal data of company shareholders (minimum of two shareholders) - Commercial name - Term, domicile, and company social purpose - Capital stock - External and fiscal auditors. The cost to notarize the articles of incorporation ranges between USD 500 to USD 1,000. 4 Pay the required registration fees at a local bank 1 day (simultaneous included in procedure Agency : Bank with previous 5 Registration fees must be paid at a local bank. Once the payment is done, the procedure) receipts must be presented to the Commercial Registry with the application for company registration. 5 Register the company and obtain the publication and legalization of books 3 days see procedure details Agency : Commercial Registry Registration takes place at the Commercial Registry. Companies must also be registered with the Ministry of Labor, the Tax Authorities (Hacienda), and the Salvadorian Institute of Social Security, and this is done a the Registry through a registration process called “trámite integral”. Company registration fees are established by Arts. 63, 66 and 71 of the Commercial Registry Act (Ley de Registro de Comercio). The registration fees are the following: USD 0.57 for every USD 100 of the start- up capital (company registration fee) + USD 2.3 (for copies) + USD 17.14 (Balance Deposit fee) + USD 91.43 (Business License) + USD 0.1 per page (legalization of books, assuming 3 books, 100 pages per book) + USD 34.29 (Registration of each office). In addition, every founder partner must fill form F-210 (USD 1.67) to obtain a Salvadoran Tax Card (Numero de Identificacion Tributaria/Tarjeta de NIT). This form can be filled at the time of registration or after registration before the Ministry of Treasury (Decreto Legislativo 227 del 12 de Diciembre de 2009 Ley del NIT). The pre-registration can be done online (http://miempresa.gob.sv). However, most entrepreneurs still complete this procedure in-person and it is required to visit the registry to obtain the final documents. 6 Legalize the company books by an auditor 10 days USD 450 Agency : Auditor The external auditor of the company authorizes the accounting procedures and the internal books, which include the general shareholders meeting book, the board of directors' book, the registry of shareholders book, and the increase or decrease of capital stock book. Article 40 of the Code of Commerce, states that the books can be legalized either by the external auditor or by the Register of Commerce. Page 8 Doing Business 2019 El Salvador 7 Register employees with either of the two Pension Fund Administrators 3 days no charge Agency : Pension Fund Administrator (Administradora de Fondos de Pensiones: (simultaneous with AFP CRECER or AFP CONFIA) previous procedure) All new businesses must register employees with any of the Pension Fund Administrators (Administradora de Fondos de Pensiones).This obligation is procured before any of the two Pension Fund Administrators in El Salvador (AFP CRECER or AFP CONFIA). The following documents must be presented: a) a copy of the Salvadoran Identification Card of Passport of the Legal Representative b) a copy of the VAT card of the company c) a copy of the Incorporation Document d) a filing of the application 8 Register the company for local taxes at the Municipality 1 day (simultaneous USD 10 per owner Agency : Municipality with previous Upon registering at the Commercial Registry, each founder must register at the procedure) Municipality and pay a local tax (Vialidad A) of about USD 10 each. The following requirements apply: i) Filing of an application ii) Fling of a notary certified copy of the registered initial balance sheet of the company iii) Filing of a notary certified copy of the registered incorporation document of the company iv)Filing a notary certified copy of the Identification Document of the Legal Representative of the company v)Payment of fees vi) A notary certified copy of he VAT card of the company coup be requested 9 Make a company seal 2 days USD 15 Agency : Sealmaker (simultaneous with The company must make a company seal. A company seal can be made in 1 or previous procedure) 2 days at a cost of about USD 15 – USD 30, depending on the size and design selected by the client. Takes place simultaneously with previous procedure. Page 9 Doing Business 2019 El Salvador Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2018. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse To make the data comparable across economies, several assumptions about the (number) construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining The construction company (BuildCo): all necessary clearances, licenses, permits and certificates - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest business city. For 11 economies the data are also collected for the second • Submitting all required notifications and receiving largest business city. all necessary inspections - Is 100% domestically and privately owned; has five owners, none of whom is a • Obtaining utility connections for water and legal entity. Has a licensed architect and a licensed engineer, both registered with sewerage the local association of architects or engineers. BuildCo is not assumed to have any other employees who are technical or licensed experts, such as geological or • Registering and selling the warehouse after its completion topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse Time required to complete each procedure upon its completion. (calendar days) The warehouse: • Does not include time spent gathering information - Will be used for general storage activities, such as storage of books or stationery. - Will have two stories, both above ground, with a total constructed area of • Each procedure starts on a separate day— approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 though procedures that can be fully completed meters (9 feet, 10 inches) high and will be located on a land plot of approximately online are an exception to this rule 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the • Procedure is considered completed once final warehouse is valued at 50 times income per capita. document is received - Will have complete architectural and technical plans prepared by a licensed architect. If preparation of the plans requires such steps as obtaining further • No prior contact with officials documentation or getting prior approvals from external agencies, these are counted Cost required to complete each procedure (% of as procedures. income per capita) - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements). • Official costs only, no bribes The water and sewerage connections: Building quality control index (0-15) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there • Quality of building regulations (0-2) is no water delivery infrastructure in the economy, a borehole will be dug. If there is • Quality control before construction (0-1) no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. • Quality control during construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average • Quality control after construction (0-3) wastewater flow of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and a peak wastewater flow of 1,136 liters (300 • Liability and insurance regimes (0-2) gallons) a day. • Professional certifications (0-4) - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 10 Doing Business 2019 El Salvador Dealing with Construction Permits - El Salvador Standardized Warehouse Estimated value of warehouse USD 182,965.90 City Covered San Salvador Indicator El Salvador Latin America OECD high Best Regulatory & Caribbean income Performance Procedures (number) 17 15.4 12.7 None in 2017/18 Time (days) 314 199.0 153.1 None in 2017/18 Cost (% of warehouse value) 5.7 3.2 1.5 None in 2017/18 Building quality control index (0-15) 10.0 8.9 11.5 15.0 (3 Economies) Figure – Dealing with Construction Permits in El Salvador and comparator economies – Ranking and Score DB 2019 Dealing with Construction Permits Score 0 100 71.05: Costa Rica (Rank: 74) 68.77: Colombia (Rank: 89) 66.10: Honduras (Rank: 116) 64.72: Guatemala (Rank: 122) 63.48: Regional Average (Latin America & Caribbean) 51.82: El Salvador (Rank: 173) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Figure – Dealing with Construction Permits in El Salvador – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 2 300 Cost (% of warehouse value) 250 1.5 200 Time (days) 1 150 100 0.5 50 0 0 1 *2 3 4 *5 *6 7 8 9 10 11 12 13 14 15 16 17 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 11 Doing Business 2019 El Salvador Figure – Dealing with Construction Permits in El Salvador and comparator economies – Measure of Quality 15 11.0 11.0 11.0 Index score 10.0 10.0 10 8.9 5 0 El Salvador Colombia Costa Rica Guatemala Honduras Latin America & Caribbean Details – Dealing with Construction Permits in El Salvador – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain results of geotechnical study / soil test 11 days USD 1,695 Agency : Private licensed company BuildCo will request a soil test for the structural calculations for the foundation. Contractors ask for a soil test to ensure that the foundation of the building is solid. The engineer must understand the suitability of the soil for the proposed construction work. It allows to build a solid foundation and avoid structures to be damaged or collapsed or leaned. 2 Obtain results of topographical study 5 days USD 400 Agency : Private licensed company A topographical study is conducted prior to construction to measure the levels on the specific terrain. It is a general technical requirement when building a structure of this class. 3 Request and obtain construction line, site qualification and zoning 21 days USD 1,243 clearance Agency : OPAMSS (Office of Planning of Metropolitan Area of San Salvador) To request a construction line, BuildCo must present the deed of ownership and a topographical plan with geodesic coordinates. The site or land qualification defines whether the proposed construction is allowed on that land for the use projected. The compatibility of land use is based on reference to the soil matrix, as defined in the General Plan of Zoning in force for AMSS, which indicates the requirements for project development. This document is valid for 12 months and should be requested from OPAMSS, the Municipal Authority, or the Vice-Ministry of Housing. BuildCo. can start having the the zoning or road construction revision should be requested from (Office of Planning of Metropolitan Area of San Salvador, OPAMSS), the Municipal Authority, or the Vice-Ministry of Housing. The document verifies the compliance of the planned construction with the requirements established for the use of soil, as established under the General Plan of Zoning for the Metropolitan Area of San Salvador and its standing bylaws. Compliance with this procedure includes verification of the internal road network, dwelling spaces, circulation of pedestrians, recreational areas, and the provision of equipment. The silence-is-consent rule applies to this procedure. Approvals are granted automatically if the applicant does not hear from OPAMSS in 30 days. 4 Request and obtain analysis of the feasibility of connecting to potable 210 days USD 92 water and sewage services. Agency : ANDA BuildCo requests for the feasibility of potable water and sewage services study with the national water and sewage utility (ANDA). The utility defines the place for the sewage discharge and where are the locations of the water mains. In order to obtain the feasibility study, BuildCo should receive an on-site inspection by the national water and sewage utility (ANDA). After the request, payment of the fees is made through a commercial bank. 5 Obtain approval of environmental form (formulario ambiental) 21 days no charge Agency : Ministry of Environment According to Acuerdo Ejecutivo No. 23 (Environmental Law on the Classification of Activities, Works and Projects) published in the Diario Oficial No 162, Tomo No 380 from September 1st 2008, the warehouse in the Doing Business case study would fall under Category 'A' which is exempt from an Environmental Impact Study. In this case, all that is required is for the architect or engineer to fill out an Environmental Form and submit it to MARN (Ministry of Environment) on http://www.marn.gob.sv/sistema-de-evaluacion-ambiental-3/. The form outlines the project and its potential environmental impact. MARN will then decide if the work can be considered exempt from the full impact study. Page 12 Doing Business 2019 El Salvador 6 Receive inspection by the national water and sewage utility (ANDA) 1 day no charge Agency : ANDA BuildCo. receives the inspection from the utility company (ANDA), in order to assess the feasibility of the connection. 7 Request and obtain construction permit 21 days USD 3,343 Agency : OPAMSS (Office of Planning of Metropolitan Area of San Salvador) The following documents are needed to obtain the construction permit, which constitutes the final approval of the project: soil study, architectonic designs, structural designs, electric system designs, hydraulic systems design, mechanical systems designs, fireproof system, calculations report, and technical specifications. The construction permit is granted by the OPAMSS in San Salvador or by the Municipal Authority or the Vice-Ministry of Housing. The different approvals mentioned are coordinated by the OPAMSS itself and do not require BuildCo’s follow up. 8 Notify OPAMSS of the start the construction 1 day no charge Agency : OPAMSS (Office of Planning of Metropolitan Area of San Salvador), Municipal Authority or Vice-Ministry of Housing is involved in this procedure The OPAMSS must be notified of the start of the construction and will then inspect the site at least once per month. The notice must be given at least 15 days before the start of construction. An inspection takes 2-3 hours and does not interrupt construction work. According to "Reglamento a la Ley de Desarrollo y Ordenamiento Territorial del Area Metropolitana de San Salvador y de los Municipios Aledaños con sus Anexos" (article VIII.27), the OPAMSS with the collaboration of the appropriate institutions and municipalities from AMSS, has the right and obligation to inspect all the works of division (of lands into plots) and/or construction by qualified staff duly authorized to enforce this regulation. The builders or owners of the work will not be able to prevent the inspections and must provide access to the documentation indicated in this regulation. Inspectors from OPAMSS must visit at least once a month, unless the OPAMSS suggests having more frequent inspections. Inspectors must periodically submit reports of their visits and will be jointly responsible with the Director of the construction works, if they do not report the corresponding anomalies. The inspection is performed at no cost. 9 Receive set-out inspection during construction 1 day no charge Agency : OPAMSS (Office of Planning of Metropolitan Area of San Salvador), Municipal Authority or Vice-Ministry of Housing is involved in this procedure BuildCo. receives the first out of three phased inspections during the construction phase. 10 Receive excavation inspection during construction 1 day no charge Agency : OPAMSS (Office of Planning of Metropolitan Area of San Salvador), Municipal Authority or Vice-Ministry of Housing is involved in this procedure BuildCo. receives the second out of three phased inspections during the construction phase. 11 Receive foundation inspection during construction 1 day no charge Agency : OPAMSS (Office of Planning of Metropolitan Area of San Salvador), Municipal Authority or Vice-Ministry of Housing is involved in this procedure BuildCo. receives the third out of three phased inspections during the construction phase. 12 Request and receive inspection from Fire Department 4 days no charge Agency : Fire Department Once all the inspection were conducted, BuildCo. can request the Fire Department Inspection. From the time of the request, it takes about 4-5 working days until the fire inspectors visit the site. 13 Hire authorized electrician to request electricity service and certify internal 3 days USD 450 installation Agency : Certified electrician According to Norm 93-E-2008 Art. 16, the electrician or contractor who makes the internal wiring must submit the application for delivery of electric power as soon as the work is finished. The electrician who makes the internal wiring is the person in charge of applying for the point of delivery of electric power. 14 Request "recepcion de obras" and obtain final inspection 1 day USD 2,601 Agency : OPAMSS (Office of Planning of Metropolitan Area of San Salvador), Municipal Authority or Vice-Ministry of Housing is involved in this procedure The project manager at BuildCo needs to fill out a form and request the "recepcion de obra" at OPAMSS. Once the construction is completed and the final inspection is done jointly by OPAMSS and the corresponding Municipality, BuildCo will obtain the "Recepción de obras". This is the official resolution BuildCo is given that proofs that the construction has been done in accordance to plans. Page 13 Doing Business 2019 El Salvador 15 Obtain "recepción de obras" and request occupancy permit 1 day no charge Agency : OPAMSS (Office of Planning of Metropolitan Area of San Salvador), Municipal Authority or Vice-Ministry of Housing. The "recepcion de obras" is granted once the final inspection by OPAMSS and the Municipal Authority is approved,. This "recepcion de obras" will be necessary for BuildCo to obtain the occupancy permit ("permiso de habitar") from the Municipality Agency. 16 Obtain occupancy permit 8 days USD 221 Agency : Municipal Authority Upon payment, BuildCo. receives the occupancy permit. The cost associated with the occupancy permit, assuming that BuildCo constructs the warehouse in Apopa is USD 221.10 (USD 0.17 per sq. meter) 17 Obtain water and sewage connection 30 days USD 338 Agency : ANDA All utilities can be requested only after the occupancy permit is granted. Takes place simultaneously with previous procedure. Page 14 Doing Business 2019 El Salvador Details – Dealing with Construction Permits in El Salvador – Measure of Quality Answer Score Building quality control index (0-15) 10.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; 1.0 Free of charge. Which requirements for obtaining a building permit are clearly specified in the building List of required 1.0 regulations or on any accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in Licensed 1.0 compliance with existing building regulations? (0-1) engineer. Quality control during construction index (0-3) 1.0 What types of inspections (if any) are required by law to be carried out during construction? Inspections at 1.0 (0-2) various phases. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 0.0 inspections are not always done in practice during construction. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance Yes, final 2.0 with the approved plans and regulations? (0-2) inspection is done by government agency; Yes, in- house engineer submits report for final inspection; Final inspection is not required by law. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 0.0 Which parties (if any) are held liable by law for structural flaws or problems in the building . 0.0 once it is in use (Latent Defect Liability or Decennial Liability)? (0-1) Which parties (if any) are required by law to obtain an insurance policy to cover possible No party is 0.0 structural flaws or problems in the building once it is in use (Latent Defect Liability Insurance required by law or Decennial Insurance)? (0-1) to obtain insurance . Professional certifications index (0-4) 3.0 What are the qualification requirements for the professional responsible for verifying that the Minimum number 2.0 architectural plans or drawings are in compliance with existing building regulations? (0-2) of years of experience; University degree in architecture or engineering; Being a registered architect or engineer. Page 15 Doing Business 2019 El Salvador What are the qualification requirements for the professional who supervises the construction Minimum number 1.0 on the ground? (0-2) of years of experience; University degree in engineering, construction or construction management. Page 16 Doing Business 2019 El Salvador Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection To make the data comparable across economies, several assumptions about the (number) warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining The warehouse: all necessary clearances and permits - Is owned by a local entrepreneur and is used for storage of goods. • Completing all required notifications and - Is located in the economy’s largest business city. For 11 economies the data are receiving all necessary inspections also collected for the second largest business city. • Obtaining external installation works and possibly - Is located in an area where similar warehouses are typically located and is in an purchasing material for these works area with no physical constraints. For example, the property is not near a railway. - Is a new construction and is being connected to electricity for the first time. • Concluding any necessary supply contract and - Has two stories with a total surface area of approximately 1,300.6 square meters obtaining final supply (14,000 square feet). The plot of land on which it is built is 929 square meters Time required to complete each procedure (10,000 square feet). (calendar days) The electricity connection: • Is at least 1 calendar day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed • Each procedure starts on a separate day capacity of 140-kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 • Does not include time spent gathering kilowatt (kW). information - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution network and is either overhead or underground, whichever is more • Reflects the time spent in practice, with little common in the area where the warehouse is located and requires works that involve follow-up and no prior contact with officials the crossing of a 10-meter road (such as by excavation or overhead lines) but are all Cost required to complete each procedure (% of carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road. income per capita) - Does not require work to install the internal wiring of the warehouse. This has • Official costs only, no bribes already been completed up to and including the customer’s service panel or • Value added tax excluded switchboard and the meter base. The reliability of supply and transparency of The monthly consumption: tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 • Duration and frequency of power outages (0–3) p.m. (8 hours a day), with equipment utilized at 80% of capacity on average and that • Tools to monitor power outages (0–1) there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest • Regulatory monitoring of utilities’ performance supplier. (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation • Financial deterrents limiting outages (0–1) purposes only 30 days are used. • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor the ranking on the ease of getting electricity. Page 17 Doing Business 2019 El Salvador Getting Electricity - El Salvador Standardized Connection Price of electricity (US cents per kWh) 16.7 Name of utility CAESS S.A. - AES El Salvador City Covered San Salvador Indicator El Salvador Latin America OECD high Best Regulatory & Caribbean income Performance Procedures (number) 7 5.5 4.5 3 (25 Economies) Time (days) 56 65.5 77.2 18 (3 Economies) Cost (% of income per capita) 553.4 946.3 64.2 0.0 (3 Economies) Reliability of supply and transparency of tariff 6 4.3 7.5 8.0 (27 Economies) index (0-8) Figure – Getting Electricity in El Salvador and comparator economies – Ranking and Score DB 2019 Getting Electricity Score 0 100 85.10: Costa Rica (Rank: 38) 84.12: Guatemala (Rank: 44) 75.77: Colombia (Rank: 80) 71.24: El Salvador (Rank: 97) 70.59: Regional Average (Latin America & Caribbean) 53.78: Honduras (Rank: 153) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Page 18 Doing Business 2019 El Salvador Figure – Getting Electricity in El Salvador – Procedure, Time and Cost Time (days) Cost (% of income per capita) 450 50 400 Cost (% of income per capita) 350 40 300 Time (days) 30 250 200 20 150 100 10 50 0 0 1 *2 3 4 5 *6 7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Figure – Getting Electricity in El Salvador and comparator economies – Measure of Quality 8 7 7 7 6 6 6 Index score 5 4.3 4 3 2 1 0 0 El Salvador Colombia Costa Rica Guatemala Honduras Latin America & Caribbean Page 19 Doing Business 2019 El Salvador Details – Getting Electricity in El Salvador – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Request feasibility study from AES El Salvador and await outcome 7 calendar days USD 82.08 Agency : AES El Salvador The client's electrician forwards the request for a feasibility study. The request for service must be signed by an electrician certified by the Superintendency of Electricity and Telecommunications (SIGET). The following information must be provided with the application: • Name of the owner. • Unique Identity Document (DUI), driver's license or passport of the owner. • Project's name. • Exact address and telephone number of the project manager or executor. • Sketch of project location. • Type of service (Commercial or industrial). • Number of services to connect. • Load to be demanded in kVA (detailing the single-phase and / or three-phase load). • Capacity of the substation to be installed and / or configured. • Qualification of the place, construction lines, road revision and zoning extended by the OPAMSS (for municipalities attached to this office) and in the other municipalities authorizations by the Municipality. • Certificate of Guarantee of Safety of the Internal Electrical Installations, according to the form established by the distributor. The certificate should have been issued by a licensed Electrical Engineer or a certified electrician (submit also copy of the credentials, i.e. that he is accredited as an electrician with SIGET). AES El Salvador will identify the best point of connection for the new supply and send the customer a notice authorizing the service. 2 Receive site inspection by AES El Salvador for feasibility study 7 calendar days USD 0 Agency : AES El Salvador An external site inspection is conducted to determine the feasibility of the project and the adequate connection point. It is recommended that a representative of the applicant be present during the inspection. 3 Submit electrical plans and wait for approval 12 calendar days USD 91.86 Agency : AES El Salvador AES El Salvador will then revise the electrical plans and send its approval in writing to the client. 4 Install transformers and cables for external wiring 7 calendar days USD 14,500 Agency : Sub-contratista Once the customer has received the approved plans, the client can start preparing the works that fall under his responsibility. He will install the transformers and poles (if needed) and prepare the cables that the utility will later connect to the meter, etc. The time estimate for this procedure includes the wait time to obtain the relevant material. Customers have the choice of paying for this investment themselves and getting in return a lower consumption tariff or asking the utility to bear the investment and paying a higher consumption tariff later on. Most costumers with a load of 140kVA prefer the first option of making the initial investment in return of a lower consumption tariffs later on. 5 Submit plans for the constructed connection for approval 10 calendar days USD 199.34 Agency : AES El Salvador Once the external works are finished, the client will resubmit the plans to AES El Salvador, so that the utility can verify that the transformers and poles were properly installed. 6 Request connection fees and file formal application 7 calendar days USD 35.4 Agency : AES El Salvador The customer will request the cost estimate that the utility will charge for the connection (cost of the meter and labor). The customer must submit the following documents with the formal application: • the feasibility report and point of delivery, • a draft budget, • Certification of Guarantee of the Security of internal installations (by a responsible electrician), • electrical plans, • location sketches, etc Page 20 Doing Business 2019 El Salvador 7 Pay for connection, sign supply agreement and await final connection 19 calendar days USD 5,342.18 Agency : AES El Salvador The utility installs the meter, connects it and makes a service test. Before the electricity can start flowing, the external connection works must be inspected. Then the final connection is scheduled and performed, and the electricity begins to flow. Takes place simultaneously with previous procedure. Page 21 Doing Business 2019 El Salvador Details – Getting Electricity in El Salvador – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 6 Total duration and frequency of outages per customer a year (0-3) 1 System average interruption duration index (SAIDI) 6.7 System average interruption frequency index (SAIFI) 4.2 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of Yes supply? Financial deterrents aimed at limiting outages (0-1) 1 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages Yes exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online http://www.aes- elsalvador.com/servi cio-al-cliente/tarifas- vigentes/ Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 22 Doing Business 2019 El Salvador Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on To make the data comparable across economies, several assumptions about the immovable property (number) parties to the transaction, the property and the procedures are used. • Preregistration procedures (for example, The parties (buyer and seller): checking for liens, notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). - Are located in the periurban area of the economy’s largest business city. For 11 • Registration procedures in the economy's largest economies the data are also collected for the second largest business city. business city. - Are 100% domestically and privately owned. • Postregistration procedures (for example, filling - Have 50 employees each, all of whom are nationals. title with municipality) - Perform general commercial activities. Time required to complete each procedure The property (fully owned by the seller): (calendar days) - Has a value of 50 times income per capita, which equals the sale price. • Does not include time spent gathering - Is fully owned by the seller. information - Has no mortgages attached and has been under the same ownership for the past • Each procedure starts on a separate day - 10 years. though procedures that can be fully completed - Is registered in the land registry or cadastre, or both, and is free of title disputes. online are an exception to this rule - Is located in a periurban commercial zone, and no rezoning is required. - Consists of land and a building. The land area is 557.4 square meters (6,000 • Procedure is considered completed once final square feet). A two-story warehouse of 929 square meters (10,000 square feet) is document is received located on the land. The warehouse is 10 years old, is in good condition, has no • No prior contact with officials heating system and complies with all safety standards, building codes and legal requirements. The property, consisting of land and building, will be transferred in its Cost required to complete each procedure (% of entirety. property value) - Will not be subject to renovations or additional construction following the purchase. • Official costs only (such as administrative fees, - Has no trees, natural water sources, natural reserves or historical monuments of duties and taxes). any kind. - Will not be used for special purposes, and no special permits, such as for • Value Added Tax, Capital Gains Tax and illicit residential use, industrial plants, waste storage or certain types of agricultural payments are excluded activities, are required. - Has no occupants, and no other party holds a legal interest in it. Quality of land administration index (0-30) • Reliability of infrastructure index (0-8) • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 23 Doing Business 2019 El Salvador Registering Property - El Salvador Indicator El Salvador Latin America OECD high Best Regulatory & Caribbean income Performance Procedures (number) 6 7.2 4.7 1 (4 Economies) Time (days) 31 63.3 20.1 1 (New Zealand) Cost (% of property value) 3.8 5.8 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 14.0 11.9 23.0 None in 2017/18 Figure – Registering Property in El Salvador and comparator economies – Ranking and Score DB 2019 Registering Property Score 0 100 74.36: Costa Rica (Rank: 47) 71.22: Colombia (Rank: 59) 66.32: El Salvador (Rank: 73) 64.90: Guatemala (Rank: 86) 63.43: Honduras (Rank: 95) 55.25: Regional Average (Latin America & Caribbean) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Figure – Registering Property in El Salvador – Procedure, Time and Cost Time (days) Cost (% of property value) 3.5 30 3 Cost (% of property value) 25 2.5 20 Time (days) 2 15 1.5 10 1 5 0.5 0 0 1 *2 3 4 5 6 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 24 Doing Business 2019 El Salvador Figure – Registering Property in El Salvador and comparator economies – Measure of Quality 30 25 Index score 20 17.5 16.5 15 14.0 13.5 14.0 11.9 10 5 0 El Salvador Colombia Costa Rica Guatemala Honduras Latin America & Caribbean Details – Registering Property in El Salvador – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain a Literal Certification (LC) and a Non-Lien Certification (NEC) of the 3 days USD 19.47; (Literal property at the Register of Property Certification: Agency : Immovable Property and Mortgages Registry (Registro de la Propiedad USD8.86 + Non-Lien Raíz e Hipotecas) Certification (NEC) These documents are requested by the buyer as due diligence in order to verify USD 8.86 + USD outstanding debts or liabilities of the property. Both certifications must be 0.35 per page obtained by the seller before starting the transaction formally. (assuming 5 pages)) 2 Obtain tax clearance from the Municipality of San Salvador (Solvencia 2 days USD 5 Municipal) Agency : Municipality Although it is not required by law for property transfers located in San Salvador (it might be mandatory in other municipalities), it is a common practice to request a Tax Clearance certificate from the Municipality of San Salvador (Solvencia Municipal) to ensure that all liabilities charging the property such as municipal services have been duly paid. 3 Preparation and notarization of the sale agreement 3 days USD 1,052.05; (0.15 Agency : Public Notary – 1.0% of property A notary will prepare and notarize the sale agreement. In El Salvador, only price (notary’s fees)) lawyers are notaries. The parties are responsible for gathering all the documentation to be presented to the notary. The documentation shall include: (i) Photocopy of the parties ID’s of the Limited Liability Companies (LLC) (ii) Photocopy of the Tax Identification Numbers (NIT) of the parties (iii) Photocopy of the corporate documents of the LLC’s (Articles of Incorporation, credentials, documents that can duly establish the legal representation and empowerment of the representatives of the LLC, etc) (iv) Photocopy of the Tax Identification Numbers (NIT) of the LLC’s (v) Copy of the property title or Literal Certification (LC) (obtained in Procedure 1) (vi) Proof of payments of municipal taxes (vii) Proof that parties are tax solvent with Ministry of Finance 4 Payment of registration fees and transfer tax at a commercial bank 1 day USD 5,784.52; Agency : Commercial Bank (0.63% of property The registration fee is 0.63% of the total value of the property agreed in the sale price (Registration and purchase agreement. The Property Registry issues a payment order, which Fee) + 3% over the has to be canceled by the applicant at any authorized bank. excess of USD 28,571.43 of the total The Transfer Tax of 3% on the excess of USD 28,571.43, is paid directly to the Ministry of Finance ("Hacienda") or any authorized bank, based on a request price (Transfer of made by the Notary. Real Estate Tax)) 5 The deed is presented to the Registry office for registration 21 days Already paid in Agency : Immovable Property and Mortgages Registry (Registro de la Propiedad procedure 3 Raíz e Hipotecas) The public deed is submitted at the Immovable Property and Mortgages Registry to be recorded under the name of the buyer. The deed will be registered, if it meets all the legal requirements, in 2 - 4 weeks. The registry has to check with the Ministry of Finance ("Hacienda") if the parties are Tax solvent. In addition to reforms at the registry set out by the Law on Standard Procedures of August 2004, an electronic system is currently being introduced and, once fully functional, is expected to reduce the registration time. In addition, a special service is available (mainly used by banks, law firms or companies). Since May 2016, a new fast track service is available in order to register property transfer in 2 days in exchange for a premium payment (40 USD plus VAT). However, the majority of practitioners in San Salvador still use the default procedure to register property transfers. Page 25 Doing Business 2019 El Salvador 6 The public deed is filed at the respective Municipality 3 days USD 96.06; (USD Agency : Municipality 0.06 for every USD This is done in order to update the information at the Municipality and for 114.29 of the property calculation on municipal taxes. The title is already valid even if not filed at the value declared in the Municipality. The incentive to file the public deed lies on the old owner, who will deed) have to continue paying the taxes on the property if this is not done. Depending on the municipality, this step can take from 1 to 5 days. In San Salvador, the municipality has offices in each district. If someone goes to district 1 to register a property that is located on district 4, the registry process can take about 5 days, because the documents of the property are in district 4, but if going directly to district 4, the registry process takes about 1 to 2 days. Takes place simultaneously with previous procedure. Page 26 Doing Business 2019 El Salvador Details – Registering Property in El Salvador – Measure of Quality Answer Score Reliability of infrastructure index (0-8) 5.0 What is the institution in charge of immovable property registration? Registro de la Propiedad Raíz e Hipotecas In what format are the majority of title or deed records kept in the largest business city—in a Computer/Scann 1.0 paper format or in a computerized format (scanned or fully digital)? ed Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions Yes 1.0 and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Instituto Geográfico y del Catastro Nacional In what format are the majority of maps of land plots kept in the largest business city—in a Computer/Scann 1.0 paper format or in a computerized format (scanned or fully digital)? ed Is there an electronic database for recording boundaries, checking plans and providing Yes 1.0 cadastral information (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral Different 1.0 or mapping agency kept in a single database, in different but linked databases or in separate databases but databases? linked Do the immovable property registration agency and cadastral or mapping agency use the No 0.0 same identification number for properties? Transparency of information index (0–6) 4.0 Who is able to obtain information on land ownership at the agency in charge of immovable Freely accessible 1.0 property registration in the largest business city? by anyone Is the list of documents that are required to complete any type of property transaction made Yes, online 0.5 publicly available–and if so, how? Link for online access: http://www.cnr.go b.sv/servicios- del-registro-de- la-propiedad-raiz- e-hipotecas/ Is the applicable fee schedule for any property transaction at the agency in charge of Yes, online 0.5 immovable property registration in the largest business city made publicly available–and if so, how? Link for online access: http://www.cnr.go b.sv/aranceles- del-registro-de- la-propiedad-raiz- e-hipotecas/ Does the agency in charge of immovable property registration commit to delivering a legally Yes, online 0.5 binding document that proves property ownership within a specific time frame–and if so, how does it communicate the service standard? Link for online access: http://www.cnr.go b.sv/cartas-de- servicio-al- cliente/ Is there a specific and separate mechanism for filing complaints about a problem that No 0.0 occurred at the agency in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the No 0.0 immovable property registration agency? Number of property transfers in the largest business city in 2017: Page 27 Doing Business 2019 El Salvador Who is able to consult maps of land plots in the largest business city? Freely accessible 0.5 by anyone Is the applicable fee schedule for accessing maps of land plots made publicly available— Yes, online 0.5 and if so, how? Link for online access: http://www.cnr.go b.sv/productos- digitales- catastrales/ http://www.cnr.go b.sv/documentos/ igcn/2014/Folleto _de_Requisitos_ y_Aranceles_de_ Servicios_julio_2 014.pdf Does the cadastral or mapping agency commit to delivering an updated map within a Yes, online 0.5 specific time frame—and if so, how does it communicate the service standard? Link for online access: http://www.cnr.go b.sv/cartas-de- servicio-al- cliente/ Is there a specific and separate mechanism for filing complaints about a problem that No 0.0 occurred at the cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.0 Are all privately held land plots in the economy formally registered at the immovable property No 0.0 registry? Are all privately held land plots in the largest business city formally registered at the No 0.0 immovable property registry? Are all privately held land plots in the economy mapped? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Land dispute resolution index (0–8) 5.0 Does the law require that all property sale transactions be registered at the immovable Yes 1.5 property registry to make them opposable to third parties? Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Is there a specific compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a property Yes 0.5 transaction (e.g., checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Notary; Does the legal system require verification of the identity of the parties to a property Yes 0.5 transaction? If yes, who is responsible for verifying the identity of the parties? Registrar; Notary; Is there a national database to verify the accuracy of identity documents? Yes 1.0 For a standard land dispute between two local businesses over tenure rights of a property Juzgados de lo worth 50 times gross national income (GNI) per capita and located in the largest business Civil y Mercantil city, what court would be in charge of the case in the first instance? How long does it take on average to obtain a decision from the first-instance court for such a Between 2 and 3 1.0 case (without appeal)? years Are there any statistics on the number of land disputes in the first instance? No 0.0 Number of land disputes in the largest business city in 2017: Equal access to property rights index (-2–0) 0.0 Page 28 Doing Business 2019 El Salvador Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 29 Doing Business 2019 El Salvador Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of • Rights of borrowers and lenders through indicators. The depth of credit information index measures rules and practices collateral laws (0-10) affecting the coverage, scope and accessibility of credit information available • Protection of secured creditors’ rights through through a credit registry or a credit bureau. The strength of legal rights index bankruptcy laws (0-2) measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first Depth of credit information index (0–8) determined whether a unitary secured transactions system exists. Then two case • Scope and accessibility of credit information scenarios, case A and case B, are used to determine how a nonpossessory security distributed by credit bureaus and credit registries interest is created, publicized and enforced according to the law. Special emphasis (0-8) is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest In some economies the legal framework for secured transactions will allow only case credit bureau as a percentage of adult population A or case B (not both) to apply. Both cases examine the same set of legal provisions Credit registry coverage (% of adults) relating to the use of movable collateral. • Number of individuals and firms listed in credit Several assumptions about the secured borrower (ABC) and lender (BizBank) registry as a percentage of adult population are used: - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 30 Doing Business 2019 El Salvador Getting Credit - El Salvador Indicator El Salvador Latin America OECD high Best Regulatory & Caribbean income Performance Strength of legal rights index (0-12) 9 5.4 6.1 12 (5 Economies) Depth of credit information index (0-8) 7 4.9 6.7 8 (42 Economies) Credit registry coverage (% of adults) 29.8 14.6 21.8 100.0 (4 Economies) Credit bureau coverage (% of adults) 33.6 44.5 65.3 100.0 (25 Economies) Figure – Getting Credit in El Salvador and comparator economies – Ranking and Score DB 2019 Getting Credit Score 0 100 95.00: Colombia (Rank: 3) 85.00: Costa Rica (Rank: 12) 85.00: Honduras (Rank: 12) 80.00: Guatemala (Rank: 22) 80.00: El Salvador (Rank: 22) 51.56: Regional Average (Latin America & Caribbean) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Figure – Legal Rights in El Salvador and comparator economies 9 12 10 9 9 8 7 6 5.4 Index Score 5 4 3 2 1 0 El Salvador Colombia Costa Rica Guatemala Honduras Latin America & Caribbean Page 31 Doing Business 2019 El Salvador Details – Legal Rights in El Salvador Strength of legal rights index (0-12) 9 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and Yes enforcement of functional equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without Yes requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a Yes specific description of collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and Yes replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be Yes secured between parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by Yes asset type, with an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? Yes Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed Yes online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency No procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? No Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization No procedure? Does the law protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow Yes the secured creditor to sell the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in El Salvador and comparator economies 8 8 7 7 7 7 7 6 Index Score 4.9 5 4 3 2 1 0 El Salvador Colombia Costa Rica Guatemala Honduras Latin America & Caribbean Page 32 Doing Business 2019 El Salvador Details – Credit Information in El Salvador Depth of credit information index (0-8) Credit Credit Score bureau registry Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative credit data distributed? Yes Yes 1 Are data from retailers or utility companies - in addition to data from banks and Yes No 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries No No 0 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes Yes 1 By law, do borrowers have the right to access their data in the credit bureau or Yes No 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes Yes 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help Yes No 1 banks and financial institutions assess the creditworthiness of borrowers? Total Score ("yes" to either public bureau or private registry) 7 Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 1,370,659 1,210,476 Number of firms 6,834 10,691 Total 1,377,493 1,221,167 Percentage of adult population 33.6 29.8 Page 33 Doing Business 2019 El Salvador Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Review and To make the data comparable across economies, a case study uses several approval requirements for related-party assumptions about the business and the transaction. transactions; Disclosure requirements for related- party transactions The business (Buyer): • Extent of director liability index (0–10): Ability - Is a publicly traded corporation listed on the economy’s most important stock of minority shareholders to sue and hold exchange. If there are fewer than ten listed companies or if there is no stock interested directors liable for prejudicial related- exchange in the economy, it is assumed that Buyer is a large private company with party transactions; Available legal remedies multiple shareholders. (damages, disgorgement of profits, fines, - Has a board of directors and a chief executive officer (CEO) who may legally act on imprisonment, rescission of the transaction) behalf of Buyer where permitted, even if this is not specifically required by law. • Ease of shareholder suits index (0–10): - Has a supervisory board in economies with a two-tier board system on which Mr. Access to internal corporate documents; James appointed 60% of the shareholder-elected members. Evidence obtainable during trial and allocation of - Has not adopted bylaws or articles of association that go beyond the minimum legal expenses requirements. Does not follow codes, principles, recommendations or guidelines that are not mandatory. • Extent of conflict of interest regulation index - Is a manufacturing company with its own distribution network. (0–10): Simple average of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two • Extent of shareholder rights index (0-10): directors to Buyer’s five-member board. Shareholders’ rights and role in major corporate - Mr. James also owns 90% of Seller, a company that operates a chain of retail decisions hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-10): - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Governance safeguards protecting shareholders Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price from undue board control and entrenchment is equal to 10% of Buyer’s assets and is higher than the market value. - The proposed transaction is part of the company’s principal activity and is not • Extent of corporate transparency index (0-10): outside the authority of the company. Corporate transparency on ownership stakes, - Buyer enters into the transaction. All required approvals are obtained, and all compensation, audits and financial prospects required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0– - The transaction causes damages to Buyer. Shareholders sue Mr. James and the 10): Simple average of the extent of shareholders executives and directors that approved the transaction. rights, extent of ownership and control and extent of corporate transparency indices • Strength of minority investor protection index (0–10): Simple average of the extent of conflict of interest regulation and extent of shareholder governance indices Page 34 Doing Business 2019 El Salvador Protecting Minority Investors - El Salvador Indicator El Salvador Latin America OECD high Best Regulatory & Caribbean income Performance Extent of disclosure index (0-10) 3.0 4.1 6.5 10 (13 Economies) Extent of director liability index (0-10) 0.0 5.2 5.3 10 (Cambodia) Ease of shareholder suits index (0-10) 7.0 6.7 7.3 10 (Djibouti) Extent of shareholder rights index (0-10) 6.0 5.4 6.4 10 (Kazakhstan) Extent of ownership and control index (0-10) 1.0 3.2 5.4 None in 2017/18 Extent of corporate transparency index (0-10) 6.0 3.9 7.6 10 (6 Economies) Figure – Protecting Minority Investors in El Salvador and comparator economies – Ranking and Score DB 2019 Protecting Minority Investors Score 0 100 75.00: Colombia (Rank: 15) 48.33: Costa Rica (Rank: 122) 47.50: Regional Average (Latin America & Caribbean) 41.67: Honduras (Rank: 140) 38.33: El Salvador (Rank: 161) 31.67: Guatemala (Rank: 174) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Figure – Protecting Minority Investors in El Salvador and comparator economies – Measure of Quality El Salvador 6 0 3 1 6 7 Colombia 6 7 9 9 6 8 Costa Rica 3 5 5 4 4 8 Guatemala 3 2 3 1 5 5 Honduras 2 8 3 1 5 6 OECD high income 7.4 5.5 6.5 5.2 6.3 7.4 Latin America & Caribbean 4.2 5.4 4.4 3.5 5.6 6.5 0 5 10 15 20 25 30 35 40 45 50 Sub-Indicator Score Extent of corporate transparency index (0-10) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-10) Extent of shareholder rights index (0-10) Ease of shareholder suits index (0-10) Page 35 Doing Business 2019 El Salvador Details – Protecting Minority Investors in El Salvador – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-10) 3.3 Extent of disclosure index (0-10) 3.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Shareholders 3.0 excluding interested parties Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) No disclosure 0.0 obligation Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) No disclosure 0.0 obligation Must Buyer immediately disclose the transaction to the public? (0-2) No disclosure 0.0 obligation Extent of director liability index (0-10) 0.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the No 0.0 transaction caused to Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0- Not liable 0.0 2) Can shareholders hold the other directors liable for the damage the transaction caused to Not liable 0.0 Buyer (0-2) Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by No 0.0 shareholders? (0-1) Must Mr. James repay profits made from the transaction upon a successful claim by No 0.0 shareholders? (0-1) Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of 0.0 fraud or bad faith Ease of shareholder suits index (0-10) 7.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the No 0.0 transaction documents? (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying Yes 1.0 specific ones? (0-1) Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Preapproved 1.0 questions only Is the level of proof required for civil suits lower than that of criminal cases? (0-1) Yes 1.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-10) 4.3 Extent of shareholder rights index (0-10) 6.0 Does the sale of 51% of Buyer's assets require shareholder approval? No 0.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of Yes 1.0 shareholders? Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new Yes 1.0 shares? Must shareholders approve the election and dismissal of the external auditor? Yes 1.0 Page 36 Doing Business 2019 El Salvador Are changes to the rights of a class of shares only possible if the holders of the affected No 0.0 shares approve? Assuming that Buyer is a limited company, does the sale of 51% of its assets require No 0.0 member approval? Assuming that Buyer is a limited company, can members representing 10% call for a No 0.0 meeting of members? Assuming that Buyer is a limited company, must all or almost all members consent to add a Yes 1.0 new member? Assuming that Buyer is a limited company, must a member first offer to sell their interest to Yes 1.0 the existing members before they can sell to non-members? Extent of ownership and control index (0-10) 1.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of No 0.0 directors? Must the board of directors include independent and nonexecutive board members? No 0.0 Can shareholders remove members of the board of directors without cause before the end Yes 1.0 of their term? Must the board of directors include a separate audit committee exclusively comprising board No 0.0 members? Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of No 0.0 Buyer? Must Buyer pay declared dividends within a maximum period set by law? No 0.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? No 0.0 Assuming that Buyer is a limited company, must Buyer have a mechanism to resolve No 0.0 disagreements among members? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to No 0.0 all shareholders upon acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer distribute profits within a maximum No 0.0 period set by law? Extent of corporate transparency index (0-10) 6.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? No 0.0 Must Buyer disclose information about board members’ primary employment and No 0.0 directorships in other companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? No 0.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting Yes 1.0 agenda? Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Assuming that Buyer is a limited company, must members meet at least once a year? Yes 1.0 Assuming that Buyer is a limited company, can members representing 5% put items on the Yes 1.0 meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual financial statements be Yes 1.0 audited by an external auditor? Page 37 Doing Business 2019 El Salvador Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2018 covering for the Paying Taxes indicator calendar year 2017 (January 1, 2017 – December 31, 2017). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in Using a case scenario, Doing Business records taxes and mandatory contributions a 2017 (number per year adjusted for electronic medium size company must pay in a year, and measures the administrative burden and joint filing and payment) of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of filing and payments, time taken to comply with tax • Total number of taxes and contributions paid or laws, time taken to comply with the requirements of postfiling processes and time withheld, including consumption taxes (value waiting. added tax, sales tax or goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2016. Time required to comply with 3 major taxes It produces ceramic flowerpots and sells them at retail. All taxes and contributions (hours per year) recorded are paid in the second year of operation (calendar year 2017). Taxes and • Collecting information, computing tax payable mandatory contributions are measured at all levels of government. • Preparing separate tax accounting books, if The VAT refund process: required - In June 2017, TaxpayerCo. makes a large capital purchase: the value of the • Completing tax return, filing with agencies machine is 65 times income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are • Arranging payment or withholding equally expensed per month (875 times income per capita divided by 12). The Total tax and contribution rate (% of commercial machinery seller is registered for VAT and excess input VAT incurred in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, profits) sales and the machine and the tax reporting period is every month. Input VAT will • Profit or corporate income tax exceed Output VAT in June 2017. • Social contributions, labor taxes paid by The corporate income tax audit process: employer - An error in calculation of income tax liability (for example, use of incorrect tax • Property and property transfer taxes depreciation rates, or incorrectly treating an expense as tax deductible) leads to an • Dividend, capital gains, financial transactions incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. taxes discovered the error and voluntarily notified the tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax liability • Waste collection, vehicle, road and other taxes due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. Postfiling Index • Time to comply with a VAT refund (hours) • Time to obtain a VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 38 Doing Business 2019 El Salvador Paying Taxes - El Salvador Indicator El Salvador Latin America OECD high Best Regulatory & Caribbean income Performance Payments (number per year) 7 27.1 11.2 3 (Hong Kong SAR, China) Time (hours per year) 180 330.0 159.4 49 (Singapore) Total tax and contribution rate (% of profit) 35.6 46.7 39.8 26.1% (32 Economies) Postfiling index (0-100) 49.54 47.04 84.41 None in 2017/18 Figure – Paying Taxes in El Salvador and comparator economies – Ranking and Score DB 2019 Paying Taxes Score 0 100 77.99: Costa Rica (Rank: 57) 77.30: El Salvador (Rank: 62) 70.30: Guatemala (Rank: 102) 60.49: Regional Average (Latin America & Caribbean) 57.85: Colombia (Rank: 146) 51.74: Honduras (Rank: 164) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Figure – Paying Taxes in El Salvador and comparator economies – Measure of Quality 100 87.15 80 Index score 60 49.54 48.17 47.04 40 33.04 35.14 20 0 El Salvador Colombia Costa Rica Guatemala Honduras Latin America & Caribbean Page 39 Doing Business 2019 El Salvador Details – Paying Taxes in El Salvador Tax or Payments Notes on Time Statutory Tax base Total tax Notes on mandatory (number) Payments (hours) tax rate and TTCR contribution contribution rate (% of profit) Corporate 1.0 60.0 25% if less taxable profit 16.37 income tax than $150,000, else 30% Employer 1.0 44.0 7.5% gross salaries 8.46 paid - Social security contributions Employer 0.0 jointly 7.75% gross salaries 7.80 paid - Pension fund contributions (AFP) Municipal tax 1.0 various rates total assets 1.14 Employer 0.0 jointly 1% gross salaries 1.13 paid - Training tax (INSAFORP) Capital gains 0.0 jointly 10% capital gains 0.51 tax Business 1.0 fixed fee 0.16 license tax Vehicle taxes 1.0 fixed fee 0.08 Value added 1.0 76.0 13% value added 0.00 not included tax (VAT) Employee 0.0 jointly 7.25% gross salaries 0.00 withheld paid - Pension fund contributions (AFP) Employee 0.0 jointly 3% gross salaries 0.00 withheld paid - Social security contributions Fuel tax 1.0 $0.20 per fuel 0.00 gallon consumption Totals 7 180 35.6 Page 40 Doing Business 2019 El Salvador Details – Paying Taxes in El Salvador – Tax by Type Taxes by type Answer Profit tax (% of profit) 16.9 Labor tax and contributions (% of profit) 17.4 Other taxes (% of profit) 1.4 Page 41 Doing Business 2019 El Salvador Details – Paying Taxes in El Salvador – Measure of Quality Answer Score Postfiling index (0-100) 49.54 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? No Restrictions on VAT refund process Restricted to international traders Percentage of cases exposed to a VAT audit (%) Not applicable Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) No VAT refund 0 per case study scenario Time to obtain a VAT refund (weeks) No VAT refund 0 per case study scenario Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 0% - 24% Time to comply with a corporate income tax correction (hours) 2.5 98.17 Time to complete a corporate income tax correction (weeks) No tax audit per 100 case study scenario Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 42 Doing Business 2019 El Salvador Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are or border handling in origin economy recorded as 22×24=528 hours). If customs clearance takes 7.5 hours, the data are • Obtaining, preparing and submitting documents recorded as is. Alternatively, suppose documents are submitted to a customs agency required by destination economy and any transit at 8:00a.m., are processed overnight and can be picked up at 8:00a.m. the next day. economies The time for customs clearance would be recorded as 24 hours because the actual • Covers all documents required by law and in procedure took 24 hours. practice, including electronic submissions of Cost: Insurance cost and informal payments for which no receipt is issued are information excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors Border compliance are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Contributors are private sector • Customs clearance and inspections experts in international trade logistics and are informed about exchange rates. • Inspections by other agencies (if applied to more than 20% of shipments) Assumptions of the case study: - For all 190 economies covered by Doing Business, it is assumed a shipment is in a • Handling and inspections that take place at the warehouse in the largest business city of the exporting economy and travels to a economy’s port or border warehouse in the largest business city of the importing economy. - It is assumed each economy imports 15 metric tons of containerized auto parts (HS Domestic transport 8708) from its natural import partner—the economy from which it imports the largest • Loading or unloading of the shipment at the value (price times quantity) of auto parts. It is assumed each economy exports the warehouse or port/border product of its comparative advantage (defined by the largest export value) to its • Transport between warehouse and port/border natural export partner—the economy that is the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while - The mode of transport is the one most widely used for the chosen export or import shipment is en route product and the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 43 Doing Business 2019 El Salvador Trading across Borders - El Salvador Indicator El Salvador Latin America OECD high Best Regulatory & Caribbean income Performance Time to export: Border compliance (hours) 24 61.9 12.5 1 (19 Economies) Cost to export: Border compliance (USD) 128 529.8 139.1 0 (19 Economies) Time to export: Documentary compliance (hours) 9 52.5 2.4 1 (26 Economies) Cost to export: Documentary compliance (USD) 50 110.4 35.2 0 (20 Economies) Time to import: Border compliance (hours) 36 62.6 8.5 0 (25 Economies) Cost to import: Border compliance (USD) 128 647.2 100.2 0 (28 Economies) Time to import: Documentary compliance (hours) 13 79.1 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 67 116.3 24.9 0 (30 Economies) Figure – Trading across Borders in El Salvador and comparator economies – Ranking and Score DB 2019 Trading Across Borders Score 0 100 89.76: El Salvador (Rank: 44) 79.32: Costa Rica (Rank: 73) 77.15: Guatemala (Rank: 83) 69.15: Regional Average (Latin America & Caribbean) 65.85: Honduras (Rank: 123) 61.83: Colombia (Rank: 133) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Figure – Trading across Borders in El Salvador – Time and Cost Time (hours) Cost (USD) 40 128 36 128 140 35 120 30 Time (hours) 100 Cost (USD) 24 25 67 80 20 50 60 15 13 9 40 10 5 20 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 44 Doing Business 2019 El Salvador Details – Trading across Borders in El Salvador Characteristics Export Import Product HS 61 : Articles of apparel and clothing HS 8708: Parts and accessories of motor accessories, knitted or crocheted vehicles Trade partner United States United States Border Anguiatú border crossing Anguiatú border crossing Distance (km) 124 124 Domestic transport time (hours) 4 4 Domestic transport cost (USD) 400 400 Details – Trading across Borders in El Salvador – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required 24.0 110.3 by customs authorities Export: Clearance and inspections required 0.0 0.0 by agencies other than customs Export: Port or border handling 20.0 18.0 Import: Clearance and inspections required 36.0 110.3 by customs authorities Import: Clearance and inspections required 0.0 0.0 by agencies other than customs Import: Port or border handling 36.0 18.0 Page 45 Doing Business 2019 El Salvador Details – Trading across Borders in El Salvador – Trade Documents Export Import Commercial invoice Commercial invoice Packing list Packing list Customs Export Declaration Customs Import Declaration Certificate of origin Certificate of origin Road Transport Document Transit Document Transit document Bill of lading Bill of lading Non-Intrusive Scanner Payment Receipt Terminal handling receipt Terminal Handling receipt Non-Intrusive Scanner Payment Receipt Road Transport Document SOLAS certificate SOLAS certificate Page 46 Doing Business 2019 El Salvador Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the The dispute in the case study involves the breach of a sales contract between 2 courts (calendar days) domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt • Time to file and serve the case enforcement. • Time for trial and to obtain the judgment To make the data comparable across economies, Doing Business uses several • Time to enforce the judgment assumptions about the case: Cost required to enforce a contract through the - The dispute concerns a lawful transaction between two businesses (Seller and courts (% of claim) Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. • Attorney fees - The buyer orders custom-made goods, then fails to pay alleging that the goods are • Court fees not of adequate quality. - The value of the dispute is 200% of the income per capita or the equivalent in local • Enforcement fees currency of USD 5,000, whichever is greater. - The seller sues the buyer before the court with jurisdiction over commercial cases Quality of judicial processes index (0-18) worth 200% of income per capita or $5,000. • Court structure and proceedings (-1-5) - The seller requests the pretrial attachment of the defendant’s movable assets to secure the claim. • Case management (0-6) - The dispute on the quality of the goods requires an expert opinion. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. • Alternative dispute resolution (0-3) - The seller enforces the judgment through a public sale of the buyer’s movable assets. Page 47 Doing Business 2019 El Salvador Enforcing Contracts - El Salvador Standardized Case Claim value USD 8,068 Court name San Salvador Civil and Commercial Courts City Covered San Salvador Indicator El Salvador Latin America OECD high Best Regulatory & Caribbean income Performance Time (days) 816 768.5 582.4 None in 2017/18 Cost (% of claim value) 19.2 31.4 21.2 None in 2017/18 Quality of judicial processes index (0-18) 8.0 8.5 11.5 None in 2017/18 Figure – Enforcing Contracts in El Salvador and comparator economies – Ranking and Score DB 2019 Enforcing Contracts Score 0 100 55.30: El Salvador (Rank: 109) 53.39: Regional Average (Latin America & Caribbean) 53.33: Costa Rica (Rank: 121) 45.54: Honduras (Rank: 152) 34.55: Guatemala (Rank: 176) 34.29: Colombia (Rank: 177) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Figure – Enforcing Contracts in El Salvador – Time and Cost Time (days) Cost (% of claim value) 1600 45.8 50 Cost (% of claim value) 1402 1400 1288 35.2 40 1200 Time (days) 31.4 1000 920 852 816 26.5 30 24.3 768.5 800 21.2 19.2 582.4 600 20 400 10 200 0 0 Colombia Costa El Guatemala Honduras Latin OECD Rica Salvador America high & income Caribbean Page 48 Doing Business 2019 El Salvador Figure – Enforcing Contracts in El Salvador and comparator economies – Measure of Quality El Salvador 2.5 2 0.5 3 Colombia 2.5 1.5 1.5 3.5 Costa Rica 2.5 2.5 0.5 3 Guatemala 2 0.5 0.5 3 Honduras 2.5 2 0 3 OECD high income 2.5 3.1 2.3 3.6 Latin America & Caribbean 2.4 2.1 0.9 3.5 0 2 4 6 8 10 12 14 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in El Salvador Indicator Time (days) 816 Filing and service 70 Trial and judgment 381 Enforcement of judgment 365 Cost (% of claim value) 19.2 Attorney fees 15 Court fees 3 Enforcement fees 1.2 Quality of judicial processes index (0-18) 8.0 Court structure and proceedings (-1-5) 3.0 Case management (0-6) 2.0 Court automation (0-4) 0.5 Alternative dispute resolution (0-3) 2.5 Page 49 Doing Business 2019 El Salvador Details – Enforcing Contracts in El Salvador – Measure of Quality Answer Score Quality of judicial processes index (0-18) 8.0 Court structure and proceedings (-1-5) 3.0 1. Is there a court or division of a court dedicated solely to hearing commercial cases? No 0.0 2. Small claims court 1.0 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? No 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 2.0 1. Time standards 1.0 1.a. Are there laws setting overall time standards for key court events in a civil Yes case? 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be No granted? 2.b. Are adjournments limited to unforeseen and exceptional circumstances? Yes 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? No 3. Can two of the following four reports be generated about the competent court: (i) time to No 0.0 disposition report; (ii) clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the Yes 1.0 competent court? 5. Are there any electronic case management tools in place within the competent court for No 0.0 use by judges? 6. Are there any electronic case management tools in place within the competent court for No 0.0 use by lawyers? Court automation (0-4) 0.5 1. Can the initial complaint be filed electronically through a dedicated platform within the no 0.0 competent court? 2. Is it possible to carry out service of process electronically for claims filed before the No 0.0 competent court? 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 0.5 4.a Are judgments rendered in commercial cases at all levels made available to the No general public through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme Yes court level made available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 1. Arbitration 1.5 Page 50 Doing Business 2019 El Salvador 1.a. Is domestic commercial arbitration governed by a consolidated law or Yes consolidated chapter or section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public No order or public policy—that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes 2. Mediation/Conciliation 1.0 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or Yes consolidated chapter or section of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation No (i.e., if mediation or conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 51 Doing Business 2019 El Salvador Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s - The value of the hotel is 100% of the income per capita or the equivalent in local estate) currency of USD 200,000, whichever is greater. - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s • Measured as percentage of estate value real estate. The hotel cannot pay back the loan, but makes enough money to • Court fees operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to • Lawyers’ fees judicial liquidation and reorganization proceedings and the extent to which best • Assessors’ and auctioneers’ fees insolvency practices have been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 52 Doing Business 2019 El Salvador Resolving Insolvency - El Salvador Indicator El Salvador Latin America OECD high Best Regulatory & Caribbean income Performance Recovery rate (cents on the dollar) 32.5 30.9 70.5 None in 2017/18 Time (years) 3.5 2.9 1.7 0.4 (Ireland) Cost (% of estate) 12.0 16.8 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going 0 .. .. .. concern) Strength of insolvency framework index (0-16) 9.0 7.1 11.9 None in 2017/18 Figure – Resolving Insolvency in El Salvador and comparator economies – Ranking and Score DB 2019 Resolving Insolvency Score 0 100 67.40: Colombia (Rank: 40) 45.63: El Salvador (Rank: 89) 38.91: Regional Average (Latin America & Caribbean) 34.53: Costa Rica (Rank: 134) 32.09: Honduras (Rank: 143) 27.59: Guatemala (Rank: 156) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Figure – Resolving Insolvency in El Salvador – Time and Cost Time (years) Cost (% of estate) 4 3.8 16.8 18 3.5 3.5 14.5 14.5 14.5 16 Cost (% of estate) 3.0 3.0 2.9 14 3 Time (years) 12.0 12 2.5 9.3 10 2 8.5 1.7 1.7 8 1.5 6 1 4 0.5 2 0 0 Colombia Costa El Guatemala Honduras Latin OECD Rica Salvador America high & income Caribbean Page 53 Doing Business 2019 El Salvador Figure – Resolving Insolvency in El Salvador and comparator economies – Measure of Quality El Salvador 4 2 3 0 Colombia 5.5 3 1 0.5 Costa Rica 2 3 1 0 Guatemala 0 2 2 0 Honduras 4 2 1 0 OECD high income 5.3 2.8 2.2 1.9 Latin America & Caribbean 3.7 2.4 1.9 0.8 0 2 4 6 8 10 12 14 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in El Salvador and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 100 80 67.2 60 40 32.5 29.3 28.0 30.9 19.0 20 0 El Salvador Colombia Costa Rica Guatemala Honduras Latin America & Caribbean Page 54 Doing Business 2019 El Salvador Details – Resolving Insolvency in El Salvador Indicator Answer Score Proceeding foreclosure After Mirage’s default, the most likely scenario for BizBank would be to start a foreclosure proceeding in order sale the estate used as a collateral. Mirage would not be able to request any suspension of the enforcement action to avoid foreclosure because the law does not provide for this possibility. In a foreclosure procedure based on the Civil Procedure Code, the creditor would request the payment by filing a claim before the court. The debtor would have the opportunity to counter-claim. After that an approval to initiate foreclosure will be handed down by the Court and an order to set up an auction will be issued. Once the time allocated by law for appeal lapses, the court would appoint an auctioneer to sell the debtor's assets pledged as collateral in a public auction. The Court would subsequently validate the distribution of the debtor’s assets among the creditors. Outcome piecemeal sale Because of the sale of the property through a public auction the hotel won’t be able to continue operating and its assets will be sold separately. Time (in years) 3.5 The foreclosure proceeding will take approximately 3.5 years in El Salvador from the moment of Mirage’s default until the debt is repaid to the secured creditor. It will take 1 year until the approval to initiate foreclosure is handed down by the Court including all required notifications and the debtor’s counter-claim. After that, it would take 2 years for the auction to take place (including the necessary time to appoint an auctioneer, the scheduling of the auction and the sale of the real estate). It will take additional 6 months for the judge to approve the sale. Cost (% of 12.0 For a foreclosure proceeding, the estimate cost would be 12% of the value of Mirage’s estate. The estate) main component of the cost are the attorney’s fees (8%). The rest (3%) will be appraisal and auctioneer’s fees and fees of other professionals such as accountants (1%). In El Salvador, there are not judicial costs or cost related to service, since free access to justice is assured by the Constitution. Recovery rate 32.5 (cents on the dollar) Page 55 Doing Business 2019 El Salvador Details – Resolving Insolvency in El Salvador – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 9.0 Commencement of proceedings index (0-3) 2.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (b) Debtor may 0.5 file for liquidation only Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a 0.5 creditor may file for liquidation only What basis for commencement of the insolvency proceedings is allowed under the (a) Debtor is 1.0 insolvency framework? generally unable to pay its debts as they mature Management of debtor's assets index (0-6) 4.0 Does the insolvency framework allow the continuation of contracts supplying essential goods Yes 1.0 and services to the debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome Yes 1.0 contracts? Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after No 0.0 commencement of insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 0.0 Which creditors vote on the proposed reorganization plan? N/A 0.0 Does the insolvency framework require that dissenting creditors in reorganization receive at No 0.0 least as much as what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, No 0.0 does each class vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 3.0 Does the insolvency framework require approval by the creditors for selection or Yes 1.0 appointment of the insolvency representative? Does the insolvency framework require approval by the creditors for sale of substantial No 0.0 assets of the debtor? Does the insolvency framework provide that a creditor has the right to request information Yes 1.0 from the insolvency representative? Does the insolvency framework provide that a creditor has the right to object to decisions Yes 1.0 accepting or rejecting creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 56 Doing Business 2019 El Salvador Labor Market Regulation Doing Business presents detailed data for the labor market regulation indicators on the Doing Business website (http://www.doingbusiness.org). The report does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the (i) whether fixed-term contracts are prohibited for worker and the business are used. permanent tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the The worker: probationary period; (iv) minimum wage. - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. Working hours - Is a full-time employee. (i) maximum number of working days allowed per - Is not a member of the labor union, unless membership is mandatory. week; (ii) premiums for work: at night, on a weekly rest day and overtime; (iii) whether there are The business: restrictions on work at night, work on a weekly rest - Is a limited liability company (or the equivalent in the economy). day and for overtime work; (iv) whether - Operates a supermarket or grocery store in the economy’s largest business city. nonpregnant and nonnursing women can work For 11 economies the data are also collected for the second largest business city. same night hours as men; (v) length of paid annual - Has 60 employees. leave. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the food retail sector and they apply even to firms that are not party to them. Redundancy rules - Abides by every law and regulation but does not grant workers more benefits than (i) whether redundancy can be basis for terminating those mandated by law, regulation or (if applicable) collective bargaining workers; (ii) whether employer needs to notify agreements. and/or get approval from third party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments due when terminating a redundant worker. Job quality (i) whether law mandates equal remuneration for work of equal value and nondiscrimination based on gender in hiring; (ii) whether law mandates paid or unpaid maternity leave; (iii) length of paid maternity leave; (iv) whether employees on maternity leave receive 100% of wages; (v) availability of five fully paid days of sick leave a year; (vi) eligibility requirements for unemployment protection. Page 57 Doing Business 2019 El Salvador Labor Market Regulation - El Salvador Details – Labor Market Regulation in El Salvador Answer Hiring Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) No limit Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage applicable to the worker assumed in the case study (US$/month) 252.9 Ratio of minimum wage to value added per worker 0.5 Maximum length of probationary period (months) 1.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 25.0 Premium for work on weekly rest day (% of hourly pay) 100.0 Premium for overtime work (% of hourly pay) 125.0 Restrictions on night work? Yes Whether nonpregnant and nonnursing women can work the same night hours as men Yes Restrictions on weekly holiday? Yes Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 11.0 Paid annual leave for a worker with 5 years of tenure (working days) 11.0 Paid annual leave for a worker with 10 years of tenure (working days) 11.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 11.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? No Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure 0.0 Notice period for redundancy dismissal for a worker with 5 years of tenure 0.0 Notice period for redundancy dismissal for a worker with 10 years of tenure 0.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 0.0 Severance pay for redundancy dismissal for a worker with 1 year of tenure 4.3 Page 58 Doing Business 2019 El Salvador Severance pay for redundancy dismissal for a worker with 5 years of tenure 21.4 Severance pay for redundancy dismissal for a worker with 10 years of tenure 42.9 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 22.9 Job quality Equal remuneration for work of equal value? No Gender nondiscrimination in hiring? No Paid or unpaid maternity leave mandated by law? Yes Minimum length of maternity leave (calendar days)? 112.0 Receive 100% of wages on maternity leave? Yes Five fully paid days of sick leave a year? No Unemployment protection after one year of employment? No Minimum contribution period for unemployment protection (months)? n.a. Page 59 Doing Business 2019 El Salvador Business Reforms in El Salvador In the past year, Doing Business observed a peaking of reform activity worldwide. From June 2, 2017, to May 1, 2018, 128 economies implemented a record 314 regulatory reforms improving the business climate. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. = Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2019 Dealing with Construction Permits: El Salvador made dealing with construction permits less time-consuming by eliminating the requirement to obtain a feasibility study for rainwater drainage for land plots under 1,000 square meters. Trading across Borders: El Salvador made exporting easier by introducing an intermediate customs post for shipments transiting through the Anguiatú land border. DB2018 Dealing with Construction Permits: The municipal authorities of the San Salvador Metropolitan Area introduced legislation requiring phased inspections during construction, as well as experience requirements for professionals in charge of inspections. Furthermore, an online system was implemented for the payment of preliminary construction fees. Getting Electricity: El Salvador improved the reliability of electricity by introducing new software programs allowing better outage management and maintenance planning. Paying Taxes: El Salvador made paying taxes easier by implementing an online platform for filing and payment of taxes, and by moving to risk-based audit assessment selection system focusing more on larger companies. Trading across Borders: El Salvador made exporting and importing easier by increasing the number of customs officers at the Anguiatú land border. DB2017 Getting Credit: El Salvador made access to credit information more difficult by reducing the coverage of the credit bureau. Paying Taxes: El Salvador made paying taxes easier by encouraging the use of the electronic system for filing taxes. DB2016 Getting Credit: El Salvador improved access to credit by adopting the Law on Movable Property, which established a modern, centralized, notice-based collateral registry and allows a general description of a single category of assets granted as collateral. Trading across Borders: El Salvador increased the border compliance time for exporting and importing by adding an extra, nonintrusive inspection at the Anguiatú border crossing with Guatemala. DB2014 Paying Taxes: El Salvador made paying taxes more costly for companies by increasing the corporate income tax rate. Trading across Borders: El Salvador made trading across borders easier by developing a one-stop shop for exporting and by implementing electronic data interchange systems. DB2013 Getting Credit: El Salvador improved access to credit information through a new law regulating the management of personal credit information. Paying Taxes: El Salvador introduced an alternative minimum tax. DB2012 Protecting Minority Investors: El Salvador strengthened investor protections by allowing greater access to corporate information during the trial. DB2009 Starting a Business: El Salvador made starting a business easier by reducing the minimum capital requirement, simplifying the legalization of accounting books and easing publication requirements. Trading across Borders: El Salvador reduced the time for exporting and importing by modernizing its customs system, reducing physical inspections, improving traffic control at the port and implementing a single-window system, while improvements in the banking sector reduced the time required to obtain a letter of credit. Page 60 Doing Business 2019 El Salvador DB2008 Trading across Borders: El Salvador made trading across borders easier by establishing a one-stop shop for importers. Page 61 Doing Business 2019 El Salvador Page 62