#CostaRica 🇨🇷 #BDS_LaborAlert: Constitutional Chamber Redefines Rules on Collective Bargaining and Longevity Bonuses in the Public Sector
The Constitutional Chamber of the Supreme Court of Justice recently issued Judgment No. 8201-2025,...
Following the entry into force of the Special Twenty-Fifth Fortnight Act in El Salvador, the General Office of Internal Taxes issued an Orientation Guide for the Special Twenty-Fifth Fortnight Act on January 21 to ensure its proper application.
This Guide, primarily intended for employers, Human Resources departments, and payroll administration teams, seeks to standardize criteria for the interpretation and application of the law, explain its temporal scope, specify employer obligations, and clarify the legal, labor, and tax treatment of the payment known as the Twenty-Fifth Fortnight, there by reducing the risk of error or non-compliance.
Below are the most relevant aspects of this Guide:
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Legal nature of the payment: The Twenty-Fifth Fortnight is an additional annual payment. It is independent of ordinary salary and other labor benefits (Christmas bonus or aguinaldo, vacation entitlements, bonuses). It operates under its own regulatory framework and has a distinct legal nature.
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Key differences in application during 2026 and 2027:
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- Year 2026: The payment is mandatory for the public sector. For the private sector, the granting of the benefit is voluntary. However, the law provides tax incentives for private employers who choose to grant it during this period.
- As of 2027: Payment of the Twenty-Fifth Fortnight becomes mandatory for the private sector as well, establishing itself as a permanent annual legal obligation for all employers.
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Calculation criteria and amount: The payment corresponds to 50% of the worker’s monthly salary, applicable to workers earning up to the salary threshold established by law. For employment relationships with less than one year of service, the payment must be made on a proportional basis, following criteria similar to those applicable to the Christmas bonus.
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Tax and income treatment:
- The amount paid as the Twenty-Fifth Fortnight does not constitute taxable income for the worker.
- It is not subject to Income Tax withholding.
- It is not part of the base for social security contributions or other mandatory contributions.
- For private-sector employers that grant the benefit in 2026, payments may be tax deductible, in accordance with the incentives established by law and the applicable tax regulations. These elements make it essential to ensure proper accounting and tax classification of this payment, which must be carried out following the templates provided in the Annexes to the Guide.
With respect to this, the Orientation Guide specifies that during 2026, private-sector employers that voluntarily grant theTwenty-Fifth Fortnight may qualify for a tax credit certificate (see Annex 2), which does not entail a cash refund, but rather a credit applicable in accordance with current tax regulations, subject to compliance with formal requirements and supporting documentation.
- Non-garnishmentand exclusions: the Twenty-Fifth Fortnight is non-garnishable and may not be offset against other worker’s obligations, reinforcing its protective nature.
- Employer administrative obligations: the Guide details criteria for payroll registration, documentary support, internal communication, and evidence of payment, in order to facilitate labor or tax audits.
Relevance for Companies
The Orientation Guide is effective as of its issuancedate and serves as a vital tool for employers to anticipate financial impacts, adjust budgets, properly set up payroll systems, and ensure tax and labor compliance before the law becomes fully mandatory in 2027.
For matters not addressed in this Guide, please consult the Tax Administration directly.
You may download thePDF of the Orientation Guide – Special Twenty-Fifth Fortnight Act by clicking here.
