El Salvador has enabled the official procedures for obtaining Supplier Qualification and requesting approval for renewable self-consumption systems , paving the way for the effective implementation of the incentives provided by the Law for the Promotion of the Use of Renewable Energy (LFUER). In this first stage, the procedure is aimed at photovoltaic solar installations.
The new regime places importers, marketers, installers and service providers in front of a ten-year window of tax benefits , while allowing their clients to access tax exemptions and deductions that directly affect the initial investment.
For Félix Eduardo Zelaya Lazo , Financial Specialist in Electricity and Low-Emission Hydrogen Markets, the certification also changes competition among companies in the sector. “ This makes the Certification a direct commercial differentiator: only certified providers can offer these benefits to their clients ,” he stated.
This designation applies to individuals or legal entities that carry out one or more activities exclusively for renewable self-consumption. It includes the importation of systems, equipment, components, materials, tools, and spare parts; marketing and sales to end users; design, installation, commissioning, maintenance, and preparation of electrical studies in accordance with the guidelines of the General Directorate of Energy, Hydrocarbons, and Mines (DGEHM).
The Regulations of the Law for the Promotion of the Use of Renewable Energy (LFUER) , published in the Official Gazette on April 20, 2026 , govern local and remote self-consumption systems and virtual plants using photovoltaic, micro-wind, hydroelectric, and biomass or biogas technologies. However, the initial opening of the application process focuses on photovoltaic solar energy.
Qualified Suppliers may access a total exemption from Import Tariffs (DAI) and VAT on machinery, equipment, tools, materials, components and spare parts intended directly and exclusively for renewable self-consumption projects, according to article 45 of the Regulation.
Also contemplated is the exemption from Income Tax (ISR) on income directly and exclusively linked to the installation, start-up and maintenance, in accordance with article 46.
In addition, there is the exemption from VAT on local transfers of goods and provision of services , along with the non-application of the proportionality of the tax credit in sales to end users, in accordance with article 8 literal c of the LFUER and its relationship with article 66 of the VAT Law.
The benefits do not cover vehicles of any kind, their consumables, office materials or equipment. They also do not include goods intended for the personal use of directors, partners or staff.
The incentive extends to consumers who contract with an authorized company. The end user will be exempt from VAT on the purchase, installation, and maintenance of the system , in accordance with Article 47 of the Regulations, and may deduct the total cost of the investment from their taxable income in a single fiscal year.
Regarding the effect of these conditions on companies with higher consumption, Zelaya Lazo stated: “ For the corporate and industrial segment, the impact on return analysis is substantial .”
The certification will be valid for two years and renewable upon verification of compliance with the obligations . Requirements will vary depending on the activity requested, and beneficiaries must maintain a complete record of the use of the tax incentives.
Among the tax requirements are a Tax Identification Number (NIT), a valid Taxpayer Registration Number (NRC), and tax solvency .
The specialist identified the speed of entry into the program as another key commercial factor. “ The window of opportunity is open, and those who qualify first will have a competitive advantage ,” he stated.
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This competition will also be conditioned by the effective transfer of the tax benefit to the buyer. “ Tax benefits have real potential to trigger demand, but their effectiveness will depend on Qualified Suppliers effectively passing them on to the final price for the user ,” Zelaya Lazo warned.
The new framework recognizes the user's right to supplement or replace their electricity supply and reinject surpluses , although it limits the nominal capacity of the systems through the calculation established in Annex I of the Regulation, based on the user's own consumption.
The recent reform to the General Electricity Law, through Legislative Decree 548, defines Distributed Generation as energy from generators connected to distribution networks. According to Zelaya Lazo's interpretation, end users who generate electricity with renewable resources within their facilities to supply internal demand and reinject surplus energy for non-commercial purposes would not be included under this definition , but rather under the specific framework of the Federal Law on Energy and Natural Resources (LFUER) and its Regulations.
One of the most sensitive points for financial models arises in the economic recognition of electricity fed into the grid. “ Temporary remuneration for surpluses: 50% of the current rate, applicable only as a discount to the energy charge for the month and without exceeding said charge ,” the specialist explained.
This condition restricts the ability to transform surplus production into an independent additional income and particularly affects industrial facilities with generation profiles that exceed their demand at certain times.
In that context, Zelaya Lazo summarized the financial impact: “ Marginal contribution to cash flows, which can penalize the bankability of industrial projects .”
The regulations also maintain conditions for models that seek to aggregate the use of distributed energy resources. The regulations allow for local and remote self-consumption, as well as virtual plants, but the possibilities for aggregation remain limited during the first phase of implementation.
“ The restricted scope to self-consumption limits the systemic use of these resources: it penalizes demand response schemes and restricts virtual plant models to individual users during the first 2 years, delaying their commercial scalability ,” Zelaya Lazo pointed out.
Another open front lies in the supply chain. Tax advantages reduce the cost of importing equipment, while the framework does not incorporate equivalent incentives specifically aimed at domestic manufacturing.
“ Lack of incentives for local manufacturing of equipment, materials and components: free imports can consolidate external dependence and discourage the development of a local industry ,” he noted.
The regime also establishes an adaptation period for systems already installed or in process , which must be adapted to the provisions of the new framework.
Among the following regulatory milestones identified is the update of the UPR Standard by SIGET , planned within the 30 business days indicated in the process, in addition to the DGEHM guidelines for the qualification of suppliers.
One definition that is particularly relevant to financial structuring remains pending: the methodology for recognizing surplus prices , for which the shared analysis does not identify a specific date.
Its design will be key to determining how much additional economic value projects can capture when production exceeds instantaneous consumption and, therefore, what weight that electricity will have within the cash flows of business facilities.
With the procedures now enabled, El Salvador moves from regulation to implementation of the new renewable self-consumption scheme , with incentives capable of reducing costs for suppliers and consumers, but with challenges still open in the recognition of surpluses, virtual plants, demand response, local manufacturing and financing of industrial projects.