While it’s more common to incorporate a company in El Salvador, there are some cases in which it’s better to establish your own office. Navigating the process to form a branch office in El Salvador can prove complex, particularly for foreign entities attempting to manage the incorporation process independently. However, it is not impossible, especially if you follow our step by step guide.
Since the Salvadoran Civil War finished in 1992, the country has experienced great advances socially, politically and economically. This has had a positive impact on FDI in the region. In more recent years, the country has taken great strides in terms of security. This has greatly diminished the reasons not to form a branch office in El Salvador.
Reading on will provide you with valuable insights into the process to form a branch office in El Salvador, enabling companies to navigate the bureaucracy effectively and capitalize on the opportunities offered by this dynamic Central American market.
4 steps on how to form a branch office in El Salvador
In order to form a branch office in El Salvador, you must follow these 4 steps:
- Step 1 – Appoint a Local Legal Representative.
- Step 2 – Registration of the foreign capital.
- Step 3 – Registration of the foreign investment.
- Step 4 – Registration of the branch office.
Keep reading to find out more about the 4 steps to register a branch office in El Salvador.
1. Appoint a Local Legal Representative
The first step in the incorporation process is to appoint a legal representative for the Branch Office. This person must be a permanent residence in El Salvador; it could be a Salvadoran citizen or a foreign person with residence in the country. This person must have the sufficient faculties to perform every necessary procedure related to the incorporation of the Branch Office, including:
- Act on behalf of the company before all local authorities.
- Register the company capital with the Ministry of Economy.
- Provide guidance on current in-country regulations.
- Assist with renewals of registrations.
- Sign documents on behalf of the company.
The appointing of the legal representative must be by done through a resolution made by the Board of Directors of the Head Office that indicates the decision to form a branch office in El Salvador and the selection of the person who will act on behalf of this company. The appointing of the Legal Representative can be made through a Power of Attorney (POA). Such document must be duly legalized, apostilled and presented in the Registry of Commerce.
2. Registration of the Foreign Capital
The second step to form a branch office in El Salvador is the registration of the foreign capital. This must be done by transfer to a local bank. Please note that only the Head Office Company can make this transfer and the capital cannot be less than USD$12,000. It is recommendable that the capital should be higher than this amount given fees related to bank commissions and the issuing of the certification of initial foreign capital by the bank.
The legal representative will complete all the procedures in the bank. Once you have the certificate of the capital you should find a local public accountant for the elaboration of the initial company financial statements.
3. Registration of the foreign investment
The third step of the incorporation process, once you have your legal representative and company financial statements registered in El Salvador, is to register the foreign investment as an initial capital of the Branch Office; the procedure is made in the Ministry of Economy, with the National Office being responsible for its final approval.
Once the foreign investment is duly registered, the Ministry of Economy will provide you with documentation that highlights the approval of the company capital.
4. Registration of the branch office
The fourth and final step is completed through the Registry of Commerce. Here, the documents obtained in the previous steps and the incorporation deed of the Head Office (Headquarters) will be presented. This authority will provide you with the following:
- Documentation certifying the approval of the Branch Office Company
- Documentation certifying the foreign capital
- The License of Commerce (allowing you to conduct commercial activities)
With the process finished now, you can duly perform business activities in El Salvador.
FAQs about how to form a branch office in El Salvador
Based on our experience, these are the typical questions and areas of uncertainty for our clients.
1. Can a foreigner own a branch in El Salvador?
Yes, a business can be 100% foreign owned by either legal persons (“legal entities”) or natural persons (“individuals”).
2. How long does it take to register a branch in El Salvador?
It takes 6-8 weeks to form a branch office in El Salvador.
3. What is the minimum capital investment for opening a branch in El Salvador?
A minimum capital investment of USD$12,000.
4. What is a branch in El Salvador?
The Branch Office model is the least common structure seen in El Salvador, as a result of a longer incorporation process, which requires registration at the Ministry of Economy.
5. What are the documents needed to form a branch office in El Salvador?
- POA appointing a legal representative in El Salvador to conduct such activity.
- Certified Copy of the public deed of incorporation and/or current bylaws of the parent company, duly registered in the corresponding institution in the country of origin and with the corresponding Apostille or authentication.
- Document that proves the decision to establish its domicile in El Salvador, adopted in accordance with its Bylaws (Decision by GSM).
- Original bank statement of income of foreign currency containing originator (company that establishes the branch), destination, country of origin, date of income, amount received, signature and seal of the person authorized by the financial institution that receives the foreign currency.
- Original initial balance sheet dated after or equal to the date of the registered capital, signed by the appointed legal representative of the branch, accountant, and external auditor.
Biz Latin Hub can help you form a branch office in El Salvador
It’s not always easy to form a branch office in El Salvador. For this reason, it is recommended to work with a local partner. At Biz Latin Hub, our group of local professionals can provide you with tailored market-entry and back-office services to assist you to enter and establish operations in the country.
For more personalized information, get in contact with us and see how we can support you and your business.
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