A bill has passed the preliminary reading in Israel’s parliament (Knesset), aiming to grant tax exemptions to foreign residents on capital gains from the sale of digital currencies. Proposed by Dan Ilouz, a Member of Parliament from the ruling Likud party, the bill also seeks to align the taxation of crypto bonuses with stock options for employees by reducing the current 50% tax rate to 25%.
The bill is designed to enhance Israel’s appeal to global investors interested in the digital currency industry. The explanatory note emphasizes that the regulatory environment in Israel needs to adapt to the growth potential of local companies operating in this sector. By reducing the regulatory gap, the proposed legislative amendments aim to attract more investment into the country.
Nir Hirshman and Shauli Rejwan, co-founders of the Israeli Crypto Companies Forum (ICBW3), explained that the bill proposes exempting foreign residents from capital gains taxes on the sale of digital currencies issued by Israeli-based companies. They view the passage of the bill as a significant endorsement of cryptocurrencies, comparable to measures taken by other countries such as the United Kingdom. Finance Minister Bezalel Smotrich’s commitment to invigorate the local sector and attract global investors is seen as a clear signal to engage in business within Israel.
Notably, the bill also suggests differentiating between “digital currency” and “security” in its terminology. This proposal contrasts with the Israeli Securities Authority’s previous suggestion to categorize “digital assets” as “securities” in its regulatory framework. The industry expressed deep concern about this approach.
Additionally, the Bank of Israel has recently revealed preliminary plans for a central bank digital currency (CBDC) known as “SHAKED.” While no final decision has been made, the central bank’s special committee outlined potential scenarios for the development and implementation of a digital shekel.
Summary
The passing of this bill in Israel’s parliament reflects a growing trend toward regulatory openness and support for cryptocurrencies. By offering tax exemptions to foreigners and aligning crypto bonuses with stock options, Israel aims to position itself as an attractive destination for global investors and foster growth in its digital currency industry.