In a significant move to boost foreign investment and support its citizens abroad, the Legislative Assembly of El Salvador has unanimously approved a measure to eliminate income tax on foreign investments and remittances. President Nayib Bukele announced this groundbreaking development on the X social media platform, stating, “Congress has reformed our income tax law, for international investments and money transfers, dropping the rate from 30% to 0%.” This decision, endorsed by a substantial majority with 69 votes in favor, marks a pivotal shift in the nation’s fiscal policy, aimed at encouraging the inflow of capital and supporting Salvadoran families receiving money from abroad.
This tax reform is part of a series of bold economic moves under President Bukele’s leadership since his election in 2019. Among the most notable is the adoption of Bitcoin as legal tender in 2021, a global first that underscored El Salvador’s commitment to embracing digital currencies and pioneering within the financial technology space. Following this decision, the country made an initial investment in Bitcoin, which has since generated significant profits, particularly highlighted by recent market performance where Bitcoin’s value surged past the 72,000 mark.
El Salvador’s economy has shown resilience and growth over the past few years. From a gross domestic product (GDP) of $24.9 billion in 2019, the country’s GDP grew to $32.4 billion by 2022, with an estimated growth rate of 2.8% for 2023. These figures suggest a positive trajectory for the nation’s economic health, further buoyed by the recent tax legislation aimed at enhancing its appeal to international investors and the diaspora.
The tax exemption on foreign investments and remittances follows another significant legislative change in April 2023, where El Salvador removed all taxes related to technological innovation. This previous legislation targeted income, property, and capital gains taxes on activities such as software programming, coding, app development, AI, and hardware manufacturing, signaling a clear focus on establishing the country as a hub for technological advancement and innovation.
These legislative changes reflect El Salvador’s strategic efforts to bolster its economy through foreign investment and technological innovation, aiming to position itself as a forward-thinking and investment-friendly destination.
