Wednesday, July 29, 2009

Erratum on Taxing and Social Security

The school gave us new international hires a talk on money today, amongst other things. Some of the info I had previously gathered about the social security system wasn't entirely correct, so here is the updated version (Sorry!):

In El Salvador, there is really a three-tiered health care system. The top tier is private healthcare, which only the wealthy locals and the international residents can afford. The middle tier is what is called the Social Security, in which all workers who pay taxes take part. The bottom tier of health care applies to those who make little to no money, ie. the kids who come around to sell you necklaces at the beach. Those "workers" are not covered by the Social Security, because they do not report taxes on their cash income. Maids, who make anywhere between $8 and $12 a day, also fall into this third category, since they typically do not report their earnings.

Deducted from our monthly salary are three things: Salvadorean income tax, Salvadorean Social Security tax, and the Salvadorean pension. The only part that you get back at the end of your service is the pension -- and there is no guarantee on that money, since the newly elected government could opt to pass laws to forbid foreigners from taking that money back. The rest goes to the communal fund, whether for healthcare or otherwise.

Just thought I'd clear that up, in case anyone was curious. I am sure I will continue to learn many things about the tax process as we move along... :)


Also good information to know, speaking of money: Even though El Salvador has a dollarized currency...

1. Regular checks written from local banks are not redeemable in the States.
2. You have to purchase a "draft" check in order to redeem it in the States.
3. Checks written from U.S. banks are redeemable here, but they do take about a month to clear.

Just the way it is. Doing everything takes some time down here, even though most things can be done...

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