No Capital Gains Tax on Bitcoin in El Salvador: How It Works and Why It Still Matters

El Salvador doesn’t tax Bitcoin profits. Not a cent. Not for locals. Not for foreigners. Even when Bitcoin hits $100,000, you keep every dollar you make. That’s not a rumor. It’s the law. And it’s still in place-even after the country signed a $1.4 billion deal with the IMF in late 2024.

Most countries treat Bitcoin like property. Sell it for more than you paid? You owe capital gains tax. The U.S., Canada, Australia, the UK-they all take a cut. But El Salvador? They made Bitcoin legal tender in September 2021, and with that move, they erased the tax on Bitcoin gains. That’s unique. No other country has done it at the national level. Not even close.

How the Law Actually Works

The law is simple: if you buy Bitcoin in El Salvador and sell it later for a profit, you pay zero tax on that gain. It doesn’t matter if you’re a Salvadoran citizen, a tourist, or a foreign investor from Tokyo or Toronto. The moment you convert Bitcoin to dollars-or even use it to buy coffee-the profit is tax-free.

This exemption isn’t just for individuals. Businesses that operate as Bitcoin Service Providers (BSPs) under the National Commission of Digital Assets (CNAD) also get full tax relief. They don’t pay corporate income tax, services transfer tax, or municipal taxes on Bitcoin-related income. The government even waives import duties for crypto hardware and infrastructure.

There’s a catch for foreign investors, though. To qualify for the full exemption, you need to invest at least ₿3 (three Bitcoin) in El Salvador. That’s about $180,000 at today’s prices. But once you cross that line, your profits-whether from trading, mining, or holding-are completely untaxed. And if you earn income from outside El Salvador? Also tax-free.

What Changed After the IMF Deal

In December 2024, El Salvador agreed to a $1.4 billion loan from the IMF. The deal came with strings attached. The government had to scale back its Bitcoin buying program. It stopped requiring businesses to accept Bitcoin as payment. It shut down the state-run Chivo wallet for new users. And it stopped letting people pay taxes in Bitcoin.

But here’s what didn’t change: the capital gains tax exemption. That part of the law was left untouched. The IMF didn’t demand it. Why? Because it doesn’t cost the government money. The tax break doesn’t reduce tax revenue-it just means the government doesn’t collect something it never had. Bitcoin gains were never taxed to begin with. So removing that rule wouldn’t have raised a single dollar.

The real changes were about control and optics. The IMF wanted El Salvador to look more like a conventional economy. Cutting back on Bitcoin adoption helped with that. But the core tax policy? That stayed. It’s the one part of the Bitcoin law that still has political and economic teeth.

Who’s Actually Using Bitcoin in El Salvador?

Don’t believe the hype. Most Salvadorans don’t use Bitcoin for daily purchases. In 2021, about 26% of the population used it regularly. By 2024, that number dropped to 8.1%. People didn’t hate Bitcoin. They just didn’t trust it. Many saw it as volatile, confusing, or unnecessary when cash and dollars worked fine.

The government pushed hard. They gave people $30 in Bitcoin just for downloading the Chivo wallet. They ran TV ads. They trained teachers. But adoption stalled. Why? Because Bitcoin didn’t solve any real problems. Prices didn’t drop. Wages didn’t rise. The cost of living stayed the same. And when Bitcoin’s price swung 20% in a week, people got nervous.

Still, the tax exemption kept foreign interest alive. Investors from the U.S., Europe, and Asia saw El Salvador as a rare safe harbor. Some set up crypto businesses. Others bought land near the planned Bitcoin City, where the government promises zero taxes on income, property, and even carbon emissions.

How El Salvador Compares to Other Crypto Havens

El Salvador isn’t the only place with no crypto taxes. But it’s the only one that made Bitcoin legal tender.

• Cayman Islands: No income tax, no capital gains tax, no corporate tax. But Bitcoin isn’t legal tender. It’s just another asset.
• UAE: Zero tax on crypto everywhere. Clear rules. Strong regulation. But again, no legal tender status.
• Germany: No tax if you hold Bitcoin for over a year. But if you sell before that? You pay up to 45%.
• Portugal: No tax on personal crypto gains. But you need to be a resident under their Non-Habitual Resident program.

El Salvador’s edge? It’s not just about tax. It’s about identity. The country declared Bitcoin part of its economy. That’s symbolic. That’s bold. And even after the IMF adjustments, that identity hasn’t faded.

What Businesses Need to Know

If you want to run a Bitcoin exchange, wallet service, or payment processor in El Salvador, you need a license from CNAD. There are two types:

• Bitcoin Service Provider (BSP): For businesses that only handle Bitcoin.
• Digital Asset Service Provider (DASP): For businesses that handle other crypto, NFTs, or tokens.

You don’t pay corporate tax. But you still have to follow the rules. You need to do KYC. You need to report suspicious activity. You need to keep financial records. And you need to file VAT forms if you’re selling services to locals.

Foreign companies can set up here without a local partner. You can open a bank account. You can hire employees. You can even get residency for your team. The government wants you here. And the tax break is real.

Is This Going to Last?

El Salvador’s Bitcoin tax policy isn’t guaranteed forever. The country is still poor. Its debt is high. And the IMF is watching. If the economy tanks, pressure to raise taxes could grow. Politicians might argue that Bitcoin profits should contribute to public services.

But right now, that’s unlikely. The tax exemption is cheap. It costs the government nothing. And it’s a powerful signal to the world: if you want to avoid crypto taxes, come here. The Bitcoin City project is still on the table. The government still holds over 5,000 Bitcoin-worth more than it paid for them. And the law? It’s still written in stone.

For now, El Salvador remains the only country where you can legally buy Bitcoin, hold it, sell it, and never pay a single dollar in capital gains tax. No other nation has done that. And until someone else does, it’s the most unique crypto policy on Earth.