The government of El Salvador will exempt investors from paying capital gains and income taxes on bitcoins (BTC), according to a presidential legal counsel.
According to Agence France-Presse, Javier Argueta, a legal adviser to President Nayib Bukele, the aim is to entice international investment through significant tax discounts on Bitcoin.
“If a person has assets in Bitcoin and makes high profits, there will be no tax. This is done obviously to encourage foreign investment,” Argueta said, adding that El Salvador will impose no taxes on “either the capital increase or the income”.
To prevent the possible unlawful usage of Bitcoin, Argueta reportedly stated that the Salvadoran government will be actively tracing transactions on El Salvador’s official BTC wallet, Chivo. He stated, “We are implementing a series of international organisations’ recommendations against money laundering”.
To reduce the impact of excessive volatility or price swings, the Chivo wallet would temporarily cease Bitcoin transactions on the app if the value of Bitcoin fell.
El Salvador became the first country in the world to recognize Bitcoin as legal cash on Tuesday, requiring all local businesses to accept Bitcoin as a form of payment. El Salvador introduced the official BTC wallet known as Chivo in collaboration with worldwide organizations such as Bitso crypto exchange and Silvergate Bank, allowing users to convert BTC transactions into US dollars or withdraw using a special ATM with no transaction fees.
On the day of the introduction, the Chivo wallet was temporarily pulled down for maintenance, as previously stated. According to multiple social media reports, some Chivo wallet users are still having serious problems transacting or withdrawing funds from the crypto wallet after El Salvador patched it last week.