INVESTMENT FUNDS LAW.

INVESTMENT FUNDS LAW

Decree 776 containing “The Investment Funds Law (“Ley de Fondos de Inversion”) was approved by The Legislative Assembly of El Salvador last August. This is an innovative financial law, which will allow market development trough new investments on the Stock Market.

The main objective of the Law is the creation of a new Collective Investment Scheme in the country that will promote participation of various actors that traditionally do not invest in the stock market individually, they will get to invest collectible with other participants and diversify risk of investment. An investor will be able to participate with minimum amounts in the market that together with others will permit a bigger investment.

Investors will have an ad-hoc legal frame work for their specific investment, since each Fund will create its own rules trough guides, regulations, manuals and other instruments that will rule each transaction.

TAX BENEFITS

For the Investment Fund.

ü  Exempt from payment of Income tax,

ü  Exempt of any special tax or quotation.

ü  Exempt from VAT (only applies to the case of open-end funds)

ü  Exempt from payment of tax on the Transfer of Real Estate (only for closed-end funds that invest in real estate)

The assets in which the Fund invests may not be seized, nor subject to any precautionary or preventive measure by creditors of the Management Company or the Investors.

For The Investor.

Exempt of payment of income tax over revenues or profits from their shares in investment funds (first 5 years after the first established Fund). This exemption does not apply to legal persons.

Exemptions do not apply to investments in shares of foreign investment funds.

Areas where you can invest:

ü  Innovative projects that require a large capital

ü  Shares of listed companies;

ü  Bonds;

ü  instruments or securities issued by the Salvadoran State or other States;

ü  Real Estate;

ü  Stocks and bonds issued by foreign companies;

ü   Unlisted Shares, among others.

The Act provides a beneficial space for both, investors: who can participate in a market with greater opportunities of return and the managers: who generate profit through the Fund's management fees and investment returns; it also creates benefits for those players who need or seek nontraditional financing with better conditions, placing the funds in a position of advantage over the traditional financial institutions. 

Por. Alejandra Sanchez