No Capital Gains Tax on Bitcoin in El Salvador: What You Need to Know in 2026

El Salvador made history in 2021 by becoming the first country in the world to make Bitcoin legal tender. But the most surprising part? No capital gains tax on Bitcoin - not for locals, not for foreigners. Even now, in 2026, that rule still stands - even after major changes to the law.

Why El Salvador Doesn’t Tax Bitcoin Gains

When President Nayib Bukele pushed through the Bitcoin Law in September 2021, the goal wasn’t just to adopt a new currency. It was to create a financial revolution. The law didn’t just say Bitcoin could be used to pay for coffee or rent. It also declared that any profit made from buying or selling Bitcoin would be completely tax-free. That includes people who bought Bitcoin at $30,000 and sold it at $70,000. No tax. Zero. Not even a dime.

This wasn’t an accident. It was intentional. The government wanted to attract foreign investors, entrepreneurs, and crypto businesses. And it worked - at least at first. The National Commission of Digital Assets (CNAD) is the regulatory body created to oversee all Bitcoin and digital asset activities in El Salvador started issuing licenses to crypto companies. Businesses could operate without paying corporate income tax, services transfer tax, or municipal fees. For investors, the message was clear: if you hold Bitcoin here, you keep every dollar of profit.

Who Benefits From This Rule?

The tax exemption isn’t just for Salvadorans. Foreigners who invest at least three Bitcoin (₿3) in the country get the same deal. That means if you’re a crypto investor from the U.S., Germany, or Brazil, and you buy Bitcoin in El Salvador, you don’t pay capital gains tax when you sell it - even if you cash out later in another country.

But here’s the catch: the rule only applies to Bitcoin. Other cryptocurrencies like Ethereum or Solana? Not covered. The Bitcoin Service Provider (BSP) license is for businesses that deal only with Bitcoin - wallets, exchanges, payment processors. If you’re running a Bitcoin-only business, you’re in the clear. But if you’re trading altcoins, you need a Digital Asset Service Provider (DASP) license, which doesn’t come with the same tax benefits.

What Changed After the IMF Deal?

In December 2024, El Salvador took a $1.4 billion loan from the International Monetary Fund (IMF). In exchange, the government had to make major changes to its Bitcoin policy. The Chivo wallet - the state-run app meant to push Bitcoin adoption - was scaled back. Merchants no longer had to accept Bitcoin. The government stopped using Bitcoin to pay taxes. And it cut back on buying more Bitcoin.

But here’s the key point: the capital gains tax exemption stayed. The IMF didn’t force El Salvador to tax Bitcoin profits. That part of the law was untouched. Why? Because it’s the core of the country’s entire crypto strategy. Remove the tax break, and you remove the reason anyone would come here.

Even with those changes, the tax-free rule still makes El Salvador one of the most attractive places in the world for Bitcoin investors. Only a handful of countries offer something similar: the Cayman Islands, the UAE, Germany (after 12 months of holding), and Portugal. But none of them treat Bitcoin like legal tender. None of them built an entire economic identity around it.

What About Businesses?

If you’re running a crypto business in El Salvador, the tax perks go even deeper. You don’t pay:

• Corporate income tax
• Services transfer tax
• Municipal taxes
• Import duties on equipment
• Income tax on earnings made outside the country

But you’re not completely free from rules. You still need to register with the CNAD. You still need to file annual financial statements. You still need to follow AML and KYC rules. You still need to report transactions. The government isn’t turning a blind eye - it’s just not taking a cut of your profits.

Real-World Usage? Not What They Expected

Here’s the irony: while the tax policy is bold, everyday adoption is fading. According to surveys from the Universidad Centroamericana, only 8.1% of Salvadorans used Bitcoin for payments in 2024 - down from 25.7% in 2021. People still use the Chivo wallet, but mostly for government payments or cash-outs, not daily spending.

Why? Many Salvadorans don’t trust Bitcoin. They don’t understand it. They’re scared of price swings. And they don’t see real benefits - like lower fees or faster payments - compared to cash or mobile money.

Meanwhile, the government’s Bitcoin wallet still holds over 3,000 BTC. When Bitcoin hit $70,000 in early 2025, those holdings were worth over $210 million - more than $50 million in profit since the original purchases. But the cost of promoting Bitcoin - marketing, education, infrastructure - was far higher. The country hasn’t broken even on its investment.

Is This Sustainable?

El Salvador’s Bitcoin experiment is still unfolding. The tax exemption is the only part that’s held strong. The rest - mandatory acceptance, state wallets, government buying - is being rolled back. But the tax rule? That’s locked in. It’s the one thing the IMF didn’t touch. And it’s the one thing that still draws interest from global investors.

Companies are still setting up shop. Investors are still moving money. The Bitcoin City project, a planned tax-free zone powered by geothermal energy and Bitcoin, is still moving forward. Even if most Salvadorans don’t use Bitcoin daily, the world is watching - and many are betting on its future.

How It Compares to Other Countries

El Salvador isn’t the only place with no crypto taxes. But it’s the only one where Bitcoin is official money. Here’s how it stacks up:

El Salvador’s rule is simpler. No waiting. No limits. Just pure tax-free Bitcoin. And that’s why it still matters.

What You Should Do If You’re Considering It

If you’re thinking about investing in Bitcoin through El Salvador:

• Only deal with CNAD-licensed businesses - check their license status online.
• Keep detailed records of every transaction. Even though there’s no tax, you still need proof.
• Don’t assume other cryptocurrencies are tax-free. Stick to Bitcoin.
• Understand that local adoption is low. Don’t expect to use Bitcoin like cash in daily life.
• Consult a tax advisor in your home country. Your home country might still tax your gains - even if El Salvador doesn’t.

El Salvador didn’t become a crypto haven because it’s perfect. It became one because it was bold. And that boldness is still alive - in the law, in the wallets, and in the minds of investors who see opportunity where others see risk.