Bitcoin Office in El Salvador is born: all taxes on technological innovation in the country removed

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El Salvador, a well-known Bitcoin-friendly country, has just announced that all taxation related to technological innovations such as software programming, coding, app and artificial intelligence development, and computer hardware manufacturing will be removed.

Will this be the prerequisite for El Salvador’s growth and prosperity?

Let’s take a look at all the details of this together.

No tax in El Salvador to technologically innovate the country

El Salvador was the first country to accept Bitcoin as legal tender.

It is now on the verge of accelerating the country’s economic and technological growth by removing all taxation on software programming, code and app development, as well as hardware manufacturing.

This is a real turning point for the country: the introduction of Bitcoin as currency on 7 September 2021 was just the first move by President Nayib Bukele, who wants to harness new technologies to combat hyperinflation and poverty in the country.

Indeed, it is well known that Bukele planned to leverage possible future capital gains from the purchase and sale of Bitcoin to modernize El Salvador.

As was promised by the president himself last week, he would send a bill to Congress proposing to abolish all taxes on income, property, and capital gains from technology-related activities.

The promise was kept: on 31 March Bukele tweeted the following:

What will happen now? Will there be a successful transition of the country to a situation of economic prosperity?

At the moment, it is not possible to predict what the consequences will be on the economic front for El Salvador.

Certainly these tax incentives will help the country’s internal development and will also ensure opportunities for adjacent populations, who may decide to start businesses inherent in software, hardware and AI development while enjoying the tax breaks just described.

In addition, countries such as Guatemala, Honduras, and Nicaragua may decide to follow in El Salvador’s footsteps, effectively pushing the adoption of the cryptocurrency world throughout Central America.

If, on the other hand, you think that people from more prosperous countries such as the US, Canada, Germany, China, and Australia will move to El Salvador to start technology-based businesses, you are going about it the wrong way.

It is worth remembering that El Salvador is one of the most dangerous countries in the world: in 2022 the homicide rate was 12.6 inhabitants per 100,000.

To give you an idea, in Italy 0.6 homicides occur per 100 thousand inhabitants. This is about 20 times the rate.

Consider that President Nayib Bukele only yesterday tweeted proudly saying that in April there were no murders for two days in a row.

No tweets today, hence there probably has been at least one murder: do your own thinking.

Bitcoin office is born in El Salvador

Accompanying the news of zero taxes on technology activities in the country is the announcement of the establishment of the “Bitcoin Association of El Salvador” also known as the Bitcoin Office.

This body will be in charge of regulating initiatives among pro-Bitcoin entrepreneurs and companies.

The stated goal of the association is to “position the country in the world as a technological and economic powerhouse.”

Bukele is trying hard to grow El Salvador using Bitcoin.

Earlier this year he passed a bill that will allow the issuance of bonds backed by Bitcoin. This will be a somewhat risky financial product, but quite interesting to watch.

The president’s attempts are not only about the country’s technological financial environment but include activities to promote tourism, fight terrorism, and create regional economic entities.

El Salvador: how the investment in Bitcoin is going

How is El Salvador’s famous investment in Bitcoin doing?

In September 2021, in addition to declaring the leading cryptocurrency by market capitalization legal tender, Nayib Bukele bought several Bitcoin on several occasions to make up for the country’s poverty and decay.

According to the available data, El Salvador currently holds 2,381 BTC, bought at an average price of $43,357: this is an expense of about $100 million.

As of today, considering that the price per Bitcoin is $28,140, the value of the investment is around $67 million.

This is a total unrealized loss of $33 million.

Assuming that the Bitcoin have not yet been sold, hence the current value might change in time, we can still say that Bukele does not really represent a trader to be taken as an example.

The same thing can be said about the famous Michael Saylor, CEO of MicroStrategy, a public company with the largest number of BTC on its balance sheet, namely 138,955.

For Saylor, the unrealized loss is around $240 million, well above El Salvador’s loss.

However, in this case the average purchase price for MicroStrategy is $29.817