El Salvador

Fiscal Incentives for Increased Use of Renewable Energy within the Electricity Generation Law (Law No.462)

Legislative

Law

Passed in 2007

The Law sets out to foster investments on renewable energy, including hydroelectric, geothermal, wind, solar and biomass energy. For this purpose the law conceives a series of fiscal incentives for the development of new projects of electricity generation. Tax exemption can be claimed according to the volume of energy produced, varying from 5 to 10 years, depending on the nature of the tax.

The Law also exempts investors from any sort of tax on revenues directly generated from activities related to Emission Trading Schemes (ETS), subject to a certification issued by the government.

One of the eligibility criteria to apply for these tax exemptions is compliance with certification and registration norms of the Clean Development Mechanism, under the framework of the Kyoto Protocol. Breaches of law are subject to penalty.

The Law defines institutional competences over implementation and compliance.