El Salvador passes tax cuts for AI industry

El Salvador passes tax cuts for AI industry

El Salvador’s governing party lawmakers adopted a measure late Tuesday to abolish taxes on firms producing artificial intelligence (AI) and other computer programming work for 15 years. This decision was taken in an effort to make the country a more appealing IT location. This move was first initiated by the country’s president, Nayib Bukele, a month ago. 

Bukele asked for the abolition of taxes on artificial intelligence enterprises last month. He announced that by a tweet which received plenty of positive responses. The measure exempts qualifying enterprises from income tax, capital gains tax, and local government taxes, as well as tariff payments on imported commodities required by technology businesses. 

Furthermore, Bukele defined the tax exemption’s positive consequences as the acceleration of production and innovation, such as semiconductors and microelectronic components. In addition, the president wishes to stimulate, diversify, and grow Salvadorean human potential in the field of technological production. He also aims to increase educational and training opportunities in the modern technology industry. 

The President signed the legislation earlier this month on April 1. El Salvador’s ruling party members approved a measure authorising the tax cut plan on April 18. The 84-member unicameral legislature adopted it with 69 votes in favour.

New Ideas lawmaker Rodrigo Ayala claimed during the debate, “With these exemptions, we are facilitating the development of the technological sector in our country, and manufacturing as well, which will help a new industry emerge.”

The new tax breaks for the growing digital industry are just the latest push by Bukele and his supporters to rebrand Central America as an emerging innovation hotspot. He even attempted to increase Bitcoin use in the country.  El Salvador made headlines in 2021 when it became the first country to accept Bitcoin as legal money alongside the US dollar.

El Salvador’s Bitcoin-centric move drew a lot of attention and increased tourism in the nation. With tax exemptions, numerous enterprises are likely to relocate to the nation. With the rise of AI, some countries have attempted to regulate this industry. El Salvador is expected to emerge as a Latin American innovation hotspot as its laws become more accommodating.