El Salvador

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El Salvador

Legal framework

 

It aims to evaluate whether the national legislation in place supports or hampers the development of cooperatives, and is therefore “cooperative friendly” or not, and the degree to which it may be considered so, also in comparison to the legislation in force in other countries of the ICA region, or at the supranational level.

In addition, the research aims to provide recommendations for eventual renewal of the legal frameworks in place in order to understand what changes in the current legislation would be necessary to improve its degree of “cooperative friendliness”, which is to say, to make the legislation more favourable to cooperatives, also in consideration of their specific identity. This webpage presents a snapshot of the legal framework analysis results for El Salvador.

 

 

In El Salvador, the Constitution of the Republic decreed in 1986, determines in Article 114 that: "The State will protect and promote Cooperative Associations, enabling its organization, expansion and financing".  Hence its foundation for the secondary legislation currently regulating Cooperative Associations called "General Law on Cooperative Associations", promulgated by Legislative Decree number 339, dated May 6th, 1986, published in the Official Journal number 86, volume 291 dated May 14th of that same year, which came to replace the Law on Cooperatives of 1969.

 

Cooperative Friendliness

The tax aspects for cooperatives in El Salvador do not differ in terms of the nature of the other subjects required to pay tax, and cooperatives are exempt only from Income and Municipal taxes. As for considering whether the law is favorable or unfavorable to the development of cooperatives, this can be said to be favorable because it is a simple, non-restrictive law, which can have a favorable response to unresolved concerns.

 

Key recommendations for improvement

  • That the cooperative act be recognized procedurally, in order to have special jurisdiction.
  • To compile all decrees and laws concerning the regulation of the activity of cooperatives, which are currently scattered.
  • That the legal nature of cooperatives be respected in laws, norms and any other document, so that they are not considered and treated as financial entities for profit.

 

Conclusions

Cooperative Associations in El Salvador are on the path to their economic and social boom. An arduous task that nevertheless is on its way.
The General Law on Cooperative Associations, despite being in effect for the past thirty-three years, meets the needs for the development of cooperatives, meaning that to date there has been no overriding need for their reform or for the approval of a new law. However, at some point it will be necessary to adapt the law to current times, in order to apply new technologies in their processes whether administrative or judicial in nature.

 

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