El Salvador Removes Income Tax for International Investments and Transfers
El Salvador's presiden Bukele confirms tax cuts to 0% for foreign investment. | Credit: Alex Peña/Getty Images
Key Takeaways
- El Salvador slashes income tax on international investments and money transfers from 30% to 0%.
- Tax cuts deepen El Salvador’s push follows tech tax elimination in April.
- By offering a tax-free haven, El Salvador seeks to become a hub for technology.
El Salvador, the first country to adopt Bitcoin as legal tender, has enacted a significant reform to its tax legislation.
The country’s Legislative Assembly has passed a measure to cut income tax on foreign investments and remittances from 30% to 0% without imposing any restrictions on the amount involved.
El Salvador Opens Arms to Investors: 0% Tax on Foreign Money
On March 12, President Nayib Bukele announced that Congress had amended the country’s income tax law.
Meanwhile, the Asamblea Legislativa , El Salvador’s legislative body, said the tax measure was passed with 69 votes, presumably out of a total of 84, accounting for any potential abstentions or absences.
The post said :
“With 69 votes in favor, we reform the Income Tax Law so that family remittances or any capital from abroad is introduced into the country free of payment of this tax, regardless of the amount.”
El Salvador’s BTC Bet Pays Off: GDP Up, Treasury Profits as Price Soars
Since Nayib Bukele’s election in 2019, El Salvador has undergone a significant transformation. In 2021, Bukele made Bitcoin legal tender and added 200 BTC to the national treasury. Following these changes, El Salvador’s economy has grown.
According to the World Data Bank , its gross domestic product (GDP) was $24.9 billion in 2019. This rose to $32.4 billion by 2022, with projections showing a 2.8% growth in 2023.
Recent reports from CCN highlight that El Salvador’s 2021 Bitcoin investment has yielded an $85 million profit since Bitcoin’s price broke past the $72,000 mark in the week of March 10.
Bukele secured reelection on February 4, winning more than 85% of the vote.
Tax-Free Tech Haven Aims to Lure Global Giants
El Salvador’s recent tax code adjustment is yet another new economic policy from the Central American country, following a move in April 2023.
This earlier initiative saw El Salvador removing all taxes related to technological innovation, including income, property, capital gains, and import duties taxes, for a period of 15 years. The Law for the Promotion of Innovation and Technology Manufacturing aims to to foster an environment conducive to the tech sector’s growth. The legislation covers such areas as software and application programming, artificial intelligence (AI), and computer and communication hardware manufacturing.
This shift aims to attract global talent and investment. As a result, there is speculation El Salvador could become a potential hub for technology on the international stage.
El Salvador’s tax-free status seeks to revolutionize its local tech industry and expand job opportunities for its citizens. For instance, this approach has already begun to draw interest from major companies and startup incubators looking to invest.
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