El Salvador has announced that it is removing income tax on investments from abroad and money transfers to attract international investment.
El Salvador Drops Income Tax
According to the announcement, El Salvador will drop income tax from 30% to 0% on international investments and money transfers. The move is part of sweeping tax reforms as the country attempts to attract international investments and drive economic growth. Bukele made the announcement in a post on X, stating that Congress had reformed the country’s income tax laws for international investments and money transfers.
“Congress has reformed our income tax law for international investments and money transfers, dropping the rate from 30% to 0%.”
With the change, money inflows from abroad in the form of remittances and company investments will be exempt from taxes. Prior to the reforms, income equal to or greater than $150,000 paid tax at the rate of 30%, payable upon entering the country. According to lawmaker Suecy Callejas, the idea behind the reform was to stimulate the economy and generate employment opportunities.
“The initiative aims to stimulate domestic and foreign investment to boost the economy and generate better and more employment opportunities.”
Attempt To Change Perception
El Salvador is one of the fastest-growing economies in the world and has made millions thanks to its Bitcoin investments. The country’s interest in Bitcoin and crypto in general is set to increase due to the markets entering a bullish phase. It was also the first country to adopt Bitcoin as legal tender and has been buying the cryptocurrency at regular intervals since September 2021. The country’s treasury sits on nearly $84 million in unrealized profits on its Bitcoin holdings.
The tax reform is the latest in a series of measures to project the country as an attractive destination for foreign investments and Bitcoin enthusiasts. The country also introduced a law that granted citizenship to Bitcoin investors who made a donation to the government. Speaking about El Salvador’s efforts at embracing Bitcoin, billionaire investor Tim Draper stated,
“[El Salvador] is the most attractive country in the world to live in just because they embraced Bitcoin. Within 30 or 40 years, they will have gone from the poorest and most crime-ridden nation to one of the richest and most innovative nations in the world only in that period of time and only because they embraced bitcoin.”
The vote by El Salvador’s Congress to remove income taxes for money from abroad passed with an overwhelming majority, with 69 votes for “Yes” and 0 for “No.” 5 voted to abstain.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
