On June 5, the Knesset (parliament) passed the preliminary reading of a bill that would exempt foreigners from capital gains taxes on the sale of digital currencies and digital assets.
The measure would also increase the parity between crypto bonuses and stock options for employees by reducing the tax on the former from 50% to 25%.
Dan Ilouz, a 37-year-old member of parliament from the governing Likud party, is the initiative’s sponsor. According to Ilouz, the entire ruling coalition supports the measure.
According to the bill’s explanatory note, it should increase the country’s appeal to foreign investors.
“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.”
Co-founders of the Israeli Crypto Companies Forum (ICBW3), Nir Hirshman and Shauli Rejwan, explained that the law proposes that foreign residents be exempt from capital gains tax on the sale of digital currencies from Israeli-based companies. Now, they believe, the country is experiencing an increase in regulatory transparency:
“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 law proposes separating “digital currency” and “security.” However, at the start of 2023, the Israeli Securities Authority (ISA) proposed including “digital assets” under the “security” category in its proposed regulatory framework. The industry’s response to this initiative was one of grave concern.
In April, the Bank of Israel previewed its central bank digital currency (CBDC) initiative. Although, as stated at the time, “a formal decision has not yet been made,” the Bank’s special committee enumerated potential development and deployment scenarios for the “SHAKED” digital shekel.
