As El Salvador continues to embrace cryptocurrency, understanding its licensing framework is crucial for businesses looking to enter this dynamic market. Here's a straightforward guide to ensure your legal entity is compliant and ready to operate within this pioneering economic environment.
Key Requirements for Compliance
To operate legally in El Salvador’s crypto space, your entity must adhere to several essential requirements:
Registration: Companies must register with the appropriate regulatory body in El Salvador.
Due Diligence: Implement thorough due diligence processes, including KYC (Know Your Customer) and AML (Anti-Money Laundering) protocols.
Operational Readiness: Ensure that your business operations align with local financial regulations, including data protection laws.
Reporting: Regular reporting and auditing are mandatory to maintain transparency and compliance.
Registering a cryptocurrency company in El Salvador step-by-step
Selecting the best organisational structure. Before proceeding with the creation of the company, it is necessary to choose the most appropriate type of organisational structure. In El Salvador, the most common types of companies are limited liability companies and corporations.
Preparation of the necessary set of documents. The list of documents includes notarised copies of the passports of the board of directors, proof of physical address, bank statements, etc.
Submission of the application for registration to the appropriate authority responsible for registering the company. Once the application is submitted, it will be subjected to review by the competent authorities. If the application is approved, your company will be registered and you will be issued an official certificate of incorporation, which will confirm its legal status.
Opening a corporate bank account. To successfully incorporate your company, you will need to deposit at least 5% of the authorised capital, which is $2,000, into a corporate account. Some local banks have the option to conduct the process remotely or through an intermediary.
Registration with other public authorities. Once your registration is approved, you will need to contact the Hacienda tax authority, the Salvadoran Social Security Institute, and the Ministry of Labor to register your company under Salvadoran law. You will also need to register your company with the Ministry of Finance within 15 days of approval of registration.
Obtaining a Crypto License.Bitcoin service provider registration with BCR. Under the Bitcoin law, companies or individuals providing BTC-related services must list themselves in the Registry of BTC Service Providers at the Central Reserve Bank. For this purpose, it is necessary to go through the registration procedure and obtain a Certificate of Registration. Once this procedure is completed, the company will be subject to regular supervision by the SSF and FIU to ensure compliance with the rules for the prevention of terrorist financing and money laundering in El Salvador. Registration of a digital asset service provider with the CNAD. According to the recently enacted Digital Asset Issuance Law, the registration of service providers, asset issuers, and certifying organisations is done through the procedures established by the National Commission for Digital Assets.
Costs and Timelines
Establishing a new legal entity and obtaining the necessary crypto license in El Salvador can vary in cost and time:
Setup Costs: Initial setup costs typically range between $5,000 to $10,000, depending on the complexity of your business structure.
Licensing Fees: Licensing fees can vary, but you can expect to budget approximately $10,000 for the complete process. These fees can be paid in USD or its equivalent in bitcoins, based on the official exchange rate set by the Central Reserve Bank of El Salvador.
Timeline: The entire process from registration to receiving your crypto license can take between 3 to 6 months, subject to the promptness of your application submissions and regulatory review.
Fully remote: Everything can be organised remotely without the need to visit El Salvador in person
Tax obligations for crypto companies in El Salvador
Companies listed in the Registry of Digital Asset Service Providers (RPSAD) in El Salvador have the following tax benefits:
exemption from all types of fees, taxes, duties, and assessments on the nominal value and yield of digital assets;
exemption from taxes on capital gains and ordinary income derived from the purchase, sale, or transfer of digital assets;
exemption from goods and services transfer tax, income tax, and other tax liabilities for issuers, certifiers, and service providers of digital assets.
Final Thoughts
El Salvador's bold move to integrate cryptocurrency into its economy provides a unique opportunity for businesses. By understanding and complying with the local regulations, companies can leverage the benefits of operating in a crypto-friendly environment. Remember, the key to success in this innovative space is staying informed and proactive in compliance matters.
This simplified guide should serve as a starting point for your journey into El Salvador’s cryptocurrency market. Whether you're establishing a new venture or expanding an existing one, keeping these points in mind will help streamline your process.
For more detailed information or specific queries, consulting with a local expert is highly recommended. We at advix.com have an established partnership with local experts and would be happy to help to navigate your business through the landscape.