A bill to exempt foreigners from crypto taxes passes preliminary reading in Israel

Foreign residents of Israel could get an exemption from capital gains taxes on the sale of digital currencies. A bill that would grant that and other tax benefits for digital assets holders passed through preliminary reading in the country’s parliament (Knesset) on June 5. 

The bill would also level up the crypto bonuses with stock options for employees by reducing the 50% current tax on the former ones to 25%. The initiative is sponsored by Dan Ilouz, a 37-year-old Member of Parliament from the ruling Likud party. According to Ilouz, the bill enjoys full support from the ruling coalition.

According to the explanatory note of the bill, it should enhance the country’s appeal for investors around the globe:

“Despite the growth potential of Israeli companies in the field, the regulatory reality in Israel is not adapted to the digital currency industry. Therefore, it is proposed to make a number of legislative amendments that will reduce the regulatory gap.”

“The bill proposes that foreign residents also be exempt from capital gains tax on the sale of digital currencies from Israeli-based companies,” Nir Hirshman and Shauli Rejwan, Israeli Crypto Companies Forum (ICBW3) co-founders, explained to Cointelegraph. Now the country is witnessing a broadening in regulatory openness, they believe: 

“The significance of last night’s vote outcome is that Israel is wholeheartedly endorsing cryptocurrency. Similar to Rishi Sunak in the United Kingdom and lawmakers throughout Europe, Finance Minister Bezalel Smotrich has invigorated the local sector and issued a clear call to global investors and companies — Israel invites you to engage in business on our shores.” 

Notably, the bill also proposes to use the term “digital currency” separately from “security.” However, at the beginning of 2023 in its proposed regulatory framework the Israeli Securities Authority (ISA) suggested including the “digital assets” under the “security” category. The industry reacted to that initiative with deep concern. 

In April, the Bank of Israel teased its central bank digital currency (CBDC) project. Although, as was stated back then, “a formal decision has yet to be made”, the Bank’s special committee outlined possible scenarios for the development and deployment of a digital shekel called “SHAKED.”