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After adopting Bitcoin as a legal tender, El Salvador has been sweetening the deal by offering perks as a means of attracting investors. Its latest enticement comes in the form of tax perks where foreign investors will be exempt from paying taxes for their crypto investments in the country.
El Salvador will reportedly exempt foreign investors from paying any income tax as well as capital gains tax on Bitcoin earnings to encourage foreign investments. This was revealed by Javier Argueta, President Nayib Bukele’s legal adviser.
“If a person has assets in bitcoin and makes high profits, there will be no tax. This (is done) obviously to encourage foreign investment, Javier Argueta told AFP. “There will be no taxes to pay on either the capital increase or the income.”
El Salvador became the first country in the world to adopt Bitcoin as legal tender alongside the dollar. With its adoption, merchants are required to accept BTC as a means of payment.
However, regulators have expressed concerns about the lack of protection for Bitcoin users as well as the crypto’s volatility, which might impact price inflation. Critics have likewise pointed out BTC’s potential use in illegal activities such as terrorist financing, drug trafficking, and money laundering.
Argueta assured that the cyber wallet known as Chivo comes with mechanisms that will provide traceability. “We are implementing a series of recommendations from international institutions against money laundering,” he explained.
The Chivo BTC wallet was launched in cooperation with international companies such as Silvergate Bank and Bitso crypto exchange, according to Cointelegraph. It allows Salvadorians to buy and spend Bitcoin, convert the crypto into U.S. dollars, and make ATM withdrawals.
However, the crypto wallet would temporarily suspend Bitcoin transactions if the crypto’s price suddenly collapses. This feature is in place to minimize the impact of extreme price fluctuations.
