The new law could go a long way in attracting companies focused on innovation, which will bring development to El Salvador.
Nayib Bukele, president of El Salvador and a Bitcoin supporter, recently signed a law that eliminates taxes on technological innovations in the country. The Technology and Innovation Manufacturing Incentives Act (ITMI) revealed a wide spectrum of sectors where full tax elimination applies.
Bukele announced this decision via Twitter as follows:
“I’ve just signed into law, the INNOVATION AND TECHNOLOGY MANUFACTURING INCENTIVES ACT, which eliminates all taxes (income, property, capital gains, and import tariffs) on technology innovations, software, and app programming, AI, computer and communications hardware manufacturing.”
El Salvador Promotes Technological Innovation by Eliminating Taxes
Nayib Bukele used his official Twitter account on May 4, 2023, to say that he signed the new law to ensure that taxes on property, income, capital gains, import duties, software and application programming, AI, computer, and communications hardware manufacturing will be phased out entirely in the future.
The signed ITMI Law has been in the works, as far back as March 2023, when the President of El Salvador made clear his intentions to present a bill to safeguard innovative technological advances in the country. Following his intentions, legislation was submitted to Congress to eliminate taxes on technological innovations in the country.
Among the activities included in this law are technological innovations, software programming, and applications, as well as artificial intelligence or the manufacture of computer and communications hardware.
This law received a vote in favor of 69 of the 84 members that make up the country’s Legislative Assembly last April. Bukele’s purpose is for the country to attract investment from companies in the technology and information sector.
The recently signed law is just one among the many efforts that the Salvadoran president has promoted for the growth and technological development of the country. In January 2023, a Forbes India report broke the news that El Salvador had established a legal framework and process for issuing Bitcoin-backed bonds, also known as “Volcano Bonds.”
El Salvador’s Bitcoin-backed bond boosted sovereign debt payments, developing Bitcoin mining infrastructure by financing the construction of a project dubbed Bitcoin City to scale sustainable crypto mining efforts.
A Welcoming Nation for Innovative Tech and Crypto Mining Companies?
The law signed by Nayib Bukele today could promote the growth and technological development of El Salvador as a nation, as well as of the manufacturing, technological, and cryptographic companies that operate in the country. With the tax exemption law applicable to the aforementioned sectors, innovative companies abroad have the incentive to relocate their operations to a country with a positive tax law.
Nayib Bukele’s efforts to build a Bitcoin city near the Conchagua volcano in the country will exponentially escalate BTC mining activities by corporations. The energy required for mining will be obtained directly from the volcano, which generates hydrothermal energy.
While the US recently proposed a 30 percent tax on crypto mining operations, El Salvador continues to promote a thriving ecosystem of technological innovation.
By Audy Castaneda
