Digital Assets Rules and Tax Exemptions in El Salvador

The tax exemptions

• Acquirers: the nominal value, income and returns of digital assets, and the capital gain or ordinary income from selling or transferring them, are exempt from every tax, fee and contribution, present or future.
• Issuers, certifiers and registered service providers: exempt from VAT, income tax, municipal taxes and any other tax on their digital asset activity, and from the duty to withhold those taxes.
• Shareholders: for companies, the exemptions also cover partners and shareholders on the profits and dividends from those activities.
• Limit: the benefits do not apply to operations outside those allowed by article 19 of the law, for example when digital assets are used to buy goods or services outside the regulated ecosystem.

Source: INVEST: Digital Assets Issuance Law, English translation; PwC Worldwide Tax Summaries: El Salvador, tax credits and incentives^1,3

PwC notes that the exemptions have no end date, as long as the requirements of the law are met.³

Registration with the CNAD

• Every digital asset service provider, including certifiers, must register in the Registry of Digital Asset Service Providers run by the CNAD.
• Once registered, the provider receives the article 36 benefits; the CNAD informs the Ministry of Finance and the tax authority (DGII) issues the exemption qualification.
• A 2023 reform made the CNAD an autonomous body attached to the Ministry of Economy, gave certifications by authorised providers the force of an enforceable instrument, and allowed the Central Reserve Bank to give providers access to payment and settlement systems.

Source: CNAD regulation on the registry of digital asset service providers (Transparency Portal, PDF, in Spanish); Decree No. 781 of 27 June 2023 reforming the Digital Assets Issuance Law (Legislative Assembly, PDF, in Spanish)^4,2

Bitcoin after the 2025 reform

• 2021: the Bitcoin Law recognised Bitcoin as legal tender in El Salvador alongside the US dollar, and businesses were required to accept it.
• January 2025: Legislative Decree No. 199 made accepting Bitcoin voluntary for private parties, in line with a recommendation of the International Monetary Fund, and the State stopped accepting tax payments in Bitcoin. Its use as a means of exchange remains allowed.
• The reform also repealed the State duty to provide automatic, instant conversion of Bitcoin into US dollars.

Source: Reuters: Lawmakers in El Salvador rush new bitcoin reform after IMF deal (30 January 2025); Latin Counsel: Major changes to El Salvador's Bitcoin Law^5,6

Sources disagree on whether Bitcoin is still legal tender. Latin Counsel reports that the references to Bitcoin as legal tender were deleted, while Reuters quotes a ruling party deputy who said the reform was needed to ensure its "endurance as legal tender". Treat Bitcoin as a voluntary means of payment and ask a Salvadoran lawyer how the current text applies to your contracts.^6,5