Foreign investors exempt from tax on bitcoin profits: El Salvador

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A woman shops at a store that accepts bitcoin in El Zonte, El Salvador, the first country to recognize cryptocurrency as legal tender.

El Salvador will exempt foreign investors from taxes on profits from bitcoin speculation in the country, a government adviser said on Friday, after becoming the first to recognize cryptocurrency as legal tender.

“If a person has bitcoin assets and makes high profits, there will be no tax. This (is done) obviously to encourage foreign investment,” Javier Argueta, legal adviser to the AFP, told AFP. President Nayib Bukele.

“There will be no tax payable on either the capital increase or income.”

El Salvador introduced bitcoin as legal tender on Tuesday alongside the dollar, which has been the official currency for 20 years.

Experts and regulators have highlighted concerns about the cryptocurrency’s notorious volatility, its potential impact on price inflation in a country with high poverty and unemployment, and lack of user protection.

There are also fears about its potential for illegal use, especially in laundering money from criminal activities such as drug trafficking, and in financing terrorism.

According to Argueta, the cyber “wallet” allowing Salvadorans at home and abroad to buy and spend bitcoins includes “relevant mechanisms” to ensure traceability.

“We are implementing a series of recommendations from international institutions against money laundering,” added the adviser.

He said bitcoin trading would be temporarily halted if its value ever collapsed, to minimize the impact of extreme currency fluctuations.

The government says its experience will give many Salvadorans access to banking services for the first time and hopes it will save millions of dollars on commissions on remittances sent from abroad, mostly from the United States.

Remittances represent more than a fifth of the country’s GDP.

Mixture of curiosity and worry as El Salvador embraces bitcoin

AFP 2021

Quote: Foreign investors tax exempt on bitcoin profits: El Salvador (2021, September 11) retrieved September 11, 2021 from https://techxplore.com/news/2021-09-foreign-investors-exempt-tax-bitcoin .html

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