El Salvador drops income tax for foreign investments and remittances

The first country to adopt Bitcoin as a legal tender has made another radical change to its tax code.

The Legislative Assembly of El Salvador has approved a measure to reduce the income tax on foreign investments and remittances from 30% to 0% with no effective limits on amount.

President Nayib Bukele relayed the news on the X social media platform in a March 12 post:

“Congress has reformed our income tax law, for international investments and money transfers, dropping the rate from 30% to 0%.”

Source: @nayibbukele on X.

In a separate X post, Asamblea Legislativa, the legislative assembly of El Salvador, said that the measure was approved with 69 votes, out of, presumably, 84 (barring any abstaining or absent votes).

Per a translation from Spanish by Google:

“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 has experienced radical change in the wake of Bukele‘s 2019 election. In 2021, he declared Bitcoin (BTC) legal tender throughout the country and purchased 200 bitcoins for its coffers. In the subsequent years, El Salvador’s economy has shown steady growth. In 2019 its gross domestic product was $24.9 billion, according to World Data Bank. By 2022, it reached $32.4 billion. Estimates also indicate 2.8% growth for 2023.

Now, as Cointelegraph recently reported, El Salvadors 2021 bitcoin purchase has generated $85 million in profit as BTC crossed the 72K threshold the week of March 10.

Bukele was reelected on Feb. 4, 2024, with a reported 85% or more of the vote.

This most recent tax code adjustment comes after El Salvador removed all taxes related to tech innovation in April of 2023. As Cointelegraph reported at the time, the country passed a bill to effectively eliminate income, property, and capital gains taxes on technology innovations “such as software programming, coding, apps and AI development, as well as computing and communications hardware manufacturing.”