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 granting the exemption and other tax benefits for digital assets holders passed through a preliminary reading in the country’s parliament, the Knesset, on June 5.

The bill would also level up crypto bonuses with stock options for employees by reducing the current 50% tax on the former to 25%. The bill is sponsored by Knesset member Dan Ilouz. According to Ilouz, the bill enjoys the full support of the ruling coalition parties.

According to the explanatory note of the bill, it should enhance the country’s appeal to 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, co-founders of Israeli Crypto Companies Forum (ICBW3), explained to Cointelegraph. They believe the country is witnessing a broadening in regulatory openness:

“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.“ 

The bill also proposes to use the term “digital currency” separately from “security.” However, at the start of 2023, in its proposed regulatory framework, the Israeli Securities Authority (ISA) suggested including digital assets under the “security” category, leading to concerns in the industry.

In April, the Bank of Israel teased its central bank digital currency project. Although, as it stated back then, “a formal decision has yet to be made.” The bank’s special committee also outlined possible scenarios for developing and deploying a digital shekel.