- El Salvador President Nayib Bukele signs a bill to eliminate taxes on technology innovations
- El Salvador maintains plans to establish an ONBTC - or the Bitcoin Office
- The tech innovation tax-free law will be implemented by the Ministry of Finance
In a landmark move, the President of El Salvador, Nayib Bukele, has officially signed a bill of 11 pages eliminating all taxes on technology innovation in the country. The bill, which the National Assembly passed, aims to promote and encourage technological innovation in El Salvador by removing financial barriers for businesses and entrepreneurs.
President Nayib Bukele makes good on his word
El Salvador was the first nation to legalize Bitcoin as currency. The current elimination of taxes is a significant step in the country’s adaptation to the modern financial systems of the global economy. This action coincides with the establishment of El Salvador’s National Bitcoin Office (ONBTC), also known as “the Bitcoin office.”
When legalizing Bitcoin on September 7, 2021, President Nayib Bukele saw the technology as a way to combat hyperinflation and reliance on the U.S. dollar. In the past 18 months, El Salvador has revised its Bitcoin investment strategy and utilized capital gains in various ways to rebuild the country.
Moving forward with the strategy, Bukele believed in reducing tax requirements in order to accelerate technological development. As promised, Bukele sent a bill to Congress that effectively eliminates all income, property, and capital gains taxes on tech innovations “such as software programming, coding, apps, and AI development, as well as computing and communications hardware manufacturing.”
The bill aims to boost the country’s competitiveness by promoting domestic innovation and manufacturing technology. The Ministry of Economy will regulate the law. It will provide incentives through tax reductions and other incentives specifically designed to encourage investment and development of the technology industry in the national territory.
This law aims to contribute to the country’s economic growth and long-term development by increasing competitiveness, by promoting innovation and manufacturing technology developed on the national territory. The law will accelerate technological innovation and manufacturing, such as microelectronics and semiconductor components.
Moreover, it will help to develop innovative materials and processing technologies while leading the development of advanced technology manufacturing in Latin America. Within its borders, it intends to expand and diversify Salvadoran human talent for technological manufacturing, develop, scale, and promote education and training in advanced technological manufacturing.
Furthermore, it aims to strengthen links between employers and employees. The law also aims to improve supply chain access and interconnections, as well as to expand efforts to reduce supply chain vulnerabilities for technological innovation and manufacturing.
Finally, it intends to strengthen and revitalize innovation, technological manufacturing, and commercialization ecosystems and provide appropriate incentives through tax breaks. It also includes other incentives specifically designed to encourage investment and development of the national tertiary sector.
The Ministry of Finance will enforce the law. The Authority will have the authority to regulate the operation and application of this law. They will also issue Qualification Agreements and conduct inspections and controls to verify compliance with the obligations established in this law.
Moreover, the government arm will promote the design and implementation of public policies to facilitate industrial and technological innovation and promote cooperation and exchange between the major national and international technological innovation organizations.
El Salvador positions itself as a tech and crypto hub
The establishment of the Bitcoin office, a regulatory body for conducting joint initiatives with Bitcoin entrepreneurs and companies, will aid the initiative to be a tech and crypto hub. According to Asociación Bitcoin de El Salvador (Bitcoin Association of El Salvador), ONBTC aims to position the country as a technological and economic power on the international stage.
Bukele’s ongoing efforts to reinvent El Salvador include promoting tourism, combating terrorism, constructing regional business hubs, and attempting a financial comeback.
El Salvador passed legislation in early 2023 that established the legal framework for Bitcoin-backed bonds known as Volcano Bonds. The Volcano Bonds are named after Bitcoin City, which is set to become a renewable crypto-mining hub powered by hydrothermal energy from the nearby Conchagua volcano.
Overall, El Salvador’s push to establish itself as a global tech and crypto hub is an exciting development for the country and the wider Latin American region. While there are still challenges to overcome, such as infrastructure and access to capital, the country’s ambitious vision and commitment to innovation are encouraging signs for the future.