El Salvador approves law that eliminates taxes on technology companies for 15 years

El Salvador President
  • The law eliminates income tax and others for technology developers.
  • Tax incentives seek to attract foreign investment in El Salvador.

The Legislative Assembly of El Salvador approved this week a law that exempts companies dedicated to technological development, including those related to Bitcoin and artificial intelligence, from taxes for at least 15 years now.  

In the plenary session, number 103, held on Tuesday, April 18, the bill for the Promotion of Technological Innovation and Manufacturing was approved with 69 votes in favor, none against, and six abstentions.

The Salvadoran Chamber made up of 84 deputies, is currently under the control of the government party called Nuevas Ideas, founded by President Nayib Bukele.  

This new law seeks for the Central American country to lead the development of advanced technological manufacturing in Latin America. For this, they will provide tax incentives to natural and legal persons, as well as nationals or foreigners who are dedicated to that sector. 

In detail, the beneficiaries will be those who invest in El Salvador in projects of programming, management, maintenance, software analysis, and development and commercialization of computer services.  

Also included are technology projects based on the manufacture of parts, materials and equipment or facilities, as suggested by the Salvadoran Parliament in a press release.  

With the new law, the development of new technologies is proposed, which includes everything related to Bitcoin. The foregoing, considering that this country is the first in the world to give legal tender to the first cryptocurrency. It will also open spaces for the development of artificial intelligence, which is present among the trends of this 2023.  

The Law for the Promotion of Technological Innovation and Manufacturing was proposed by President Bukele himself a few weeks ago. As reported by CriptoNoticias, the president reported that he would introduce a project before the Legislative Assembly to promote technological development in that region. 

Exemption from various taxes for technology developers 

The tax incentives established by the Law for the Promotion of Technological Innovation and Manufacturing entail total exemption from income tax, as well as all kinds of withholdings on this tax.  

It also proposes the total exoneration of municipal taxes on the declared asset, in addition to the elimination of the capital payment gain tax, which is paid when a benefit is obtained from selling an asset. It also suppresses the payment of customs duties.  

These tax incentives will be in force for the next 15 years for those who are interested in investing in the Salvadoran technological field.  

The law also establishes that the beneficiaries will have to be registered with the Salvadoran tax authority. They must also provide proof that their activities meet the established parameters and that they are new investments. In addition, they will have to have the current agreement issued by the Minister of Economy of El Salvador.