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13 July 2018 Constitutional Chamber of Salvadoran Supreme Court declares various Legislative Decrees regarding tax reforms and Financial Transactions Tax unconstitutional The Constitutional Chamber of the Supreme Court of Justice in El Salvador has declared unconstitutional Legislative Decree Nos. 762, 763 and 764 (together, the Legislative Decrees), through which El Salvador reformed its Income Tax Law and Tax Code and enacted a financial transactions tax. El Salvador enacted the changes contained in the Legislative Decrees in 2014. Those changes include the following:
For further discussion of the Legislative Decrees, see EY Global Tax Alerts, El Salvador introduces Financial Transactions Tax Law, El Salvador amends Income Tax Law, and El Salvador amends Tax Code, dated 6 August 2014. The Constitutional Chamber of the Supreme Court declared the Legislative Decrees unconstitutional based on its determination that the Salvadoran Congress violated Section 135 of the Salvadoran Constitution by failing to carry out a parliamentary deliberation and discussion before approving the Legislative Decrees. Because the financial transactions tax was enacted as part of the Legislative Decrees, it was also declared unconstitutional. The Constitutional Chamber, however, focused on violations of the lawmaking process, not on whether the tax itself was unconstitutional. To prevent a national budget deficit, the Constitutional Chamber deferred the effects of its decision through 31 December 2018; consequently, the Legislative Decrees will be in force through that date. The Constitutional Chamber also held that the Salvadoran Congress has through 31 December 2018, to amend the formal violations (i.e., lack of deliberation and discussion) and approve the Legislative Decrees. If the Salvadoran Congress fails to do so by the end of 2018, the decrees will definitively be invalidated.
Document ID: 2018-5859 |
