In Brief:
- Foreign investors will be free from tax on their bitcoin profits, says the government of El Salvador.
- Bitcoin transactions would be halted temporarily if its value were ever to collapse.
Foreign investors will be free from tax on their bitcoin profits in El Salvador, according to the legal advisor for the government.
“If a person has assets in bitcoin and markets high profits, there will be no tax. This (is done) obviously to encourage foreign investment,” Javier Argueta, legal advisor to President Nayib Bukele, told AFT. “There will be no taxes to pay on either the capital increase or the income.”
One-fifth of the country’s GDP relies on remittances. The introduction of bitcoin as legal tender will cut the fees of those remittances down significantly and remove commission entirely. Bitcoin is one of the major steps towards banking El Salvador’s unbanked as well.
According to Argueta the cyber “wallet” allowing Salvadorans at home and abroad to buy and spend bitcoin, includes “relevant mechanisms” to ensure traceability.
In the latest discussion with AFP, Argueta pointed to the country’s efforts to eliminate the use of cryptocurrencies in illegal activities. “We are implementing a series of recommendations from international institutions against money laundering,” the advisor added.
Argueta also added that “Bitcoin transactions would be halted temporarily if its value were ever to collapse, in order to minimize the impact of extreme currency fluctuation.”
On September 7 Bitcoin officially became the legal tender. El Salvador purchased two bulks of 200 bitcoins on the day. The next day, Nayib Bukele announced the purchase of an additional 150 Bitcoin amid a market dip and mentioned that the country holds 550 BTC. The current value of El Salvador’s BTC holding stands at around $24 million.
