El Salvador introduced a No tax policy for foreign investors on bitcoin-related profits


According to a statement by a government adviser on Friday, El Salvador will exempt foreign investors from paying taxes on profits made from bitcoin speculation in the country following its status as the first country in the world to recognize cryptocurrency as legal tender.
Javier Argueta, the legal adviser to President Nayib Bukele, said, “If a
person has assets in bitcoin and makes high profits, there will be no tax. This
(is done) obviously to encourage foreign investment.” He adds, “There will
be no taxes to pay on either the capital increase or the income.”
Instead of knowing the possible impact on El Salvador’s program with the
International Monetary Fund, Bukele tweeted shortly before the lawmakers’ votes
in favor of the move to create a law to adopt bitcoin, “It will bring financial
inclusion, investment, tourism, innovation and economic development for our
country.” However, El Salvador doesn’t have its currency.
With the bitcoin-dollar exchange rate set by the market, its use as
legal tender will commence in 90 days. As of now, the government and the
Central Bank did not hold any bitcoin.
El Salvador officially recognized Bitcoin as legal tender last week.
Now, the Central American country has announced that it intends to attract
crypto companies around the world by offering a tax break on Bitcoin profits.
The Government of El Salvador says that the new law will help many
Salvadorans to make use of financial services for the first time and hopes to
cut fees from payments from abroad, moreover, 23% of the nation's GDP comes
from remittances.
Even though there are prohibitions in many other nations on the adoption
of cryptocurrencies as a legal tender, Nayib Bukele has provided incentives for
Bitcoin firms in the country.
Crypto Experts and policymakers have stressed the infamous volatility of
digital currencies, its possible impact on developing countries, and the lack
of consumer protection.
There are also concerns about its unlawful use in criminal operations
like drug trafficking and terrorist financing risks.
The price of Bitcoin dropped by over $7,000 on the day it became legal
tender in the Central American country. The day saw a surge in liquidations as
Bitcoin was adopted as the country's official currency alongside dollars, with
Salvadorans now permitted to transact using digital currency for everyday
needs.

Joyashree Dey
CBW - External Analyst
INDIA