El Salvador’s 2026 Christmas Bonus: Payments from October and Income Tax Exemption

The statutory Christmas bonus, known in El Salvador as the aguinaldo, is an important part of year-end business planning. On September 23, 2026, the Legislative Assembly approved reforms allowing payments from October 1, together with tax provisions for the 2026 fiscal year.

When can the bonus be paid?

The approved payment window runs from October 1 through December 20 each year. This gives employers more time to meet their obligation: the option to pay earlier does not mean that all employers must make the payment on October 1.

What changes for income tax?

According to the Legislative Assembly, the Christmas bonus and additional cash compensation covered by the approved provisions will be exempt from income tax up to $1,500. If the benefit exceeds that threshold, withholding applies to the excess.

This is a temporary tax measure for 2026; businesses should not assume that it will automatically apply in subsequent fiscal years.

How to prepare your business for year-end

To implement the changes effectively, we recommend coordinating administration, accounting, and human resources before processing payroll:

1. Plan cash flow. Set a payment date that allows the business to cover the bonus alongside wages, supplier payments, and other commitments.
2. Review employee records. Keep hiring dates, salary terms, and employment termination documentation up to date.
3. Separate payment components. Clearly identify the benefit amount, its tax treatment, and any other legally applicable withholding.
4. Document and communicate. Retain the calculation and proof of payment, and explain the expected payment date and the items shown on each employee’s payment statement.

As a practical step, any announcement of early payment should be accompanied by a review of each employee’s calculation. Changing the payment date does not replace that review or justify paying every employee the same amount.

Employment law advice for your business

At Montano & Co., we help businesses review their employment obligations and establish legally sound internal processes. Timely planning helps resolve questions before payment and reduce legal exposure.

Let’s talk about your next project. Visit montanoandco.net.