A bill recently passed a preliminary reading in the Israeli parliament, the Knesset, which could grant foreign residents an exemption from capital gains taxes on the sale of digital currencies. The bill, sponsored by Likud party member Dan Ilouz, also seeks to reduce the tax rate on crypto bonuses for employees from the current 50% to 25%, bringing it in line with stock options.
Ilouz believes that the bill has the full support of the ruling coalition and aims to enhance Israel’s appeal to global investors. The explanatory note accompanying the bill highlights the regulatory gap in the country’s digital currency industry and proposes legislative amendments to address this issue.
One notable aspect of the bill is the separation of the terms “digital currency” and “security.” This is in contrast to the proposed regulatory framework put forward by the Israeli Securities Authority (ISA) earlier this year, which categorized digital assets as securities. The industry expressed concerns about this initiative, and the bill seeks to establish a distinct classification for digital currencies.
Crypto regulations in Israel
In addition to the developments regarding taxation and regulation of digital currencies, the Bank of Israel has also been exploring the possibility of launching a central bank digital currency (CBDC) called “SHAKED.” While no formal decision has been made yet, the bank’s special committee has outlined potential scenarios for the development and deployment of the digital shekel.
The bill’s passage through the preliminary reading in the Knesset represents a step towards addressing the regulatory gaps and tax issues surrounding digital currencies in Israel. If enacted, the proposed exemptions and tax reductions could make the country more attractive to foreign investors and provide greater clarity for the digital currency industry. Additionally, the ongoing discussions surrounding a potential CBDC demonstrate Israel’s interest in exploring digital payment solutions and staying abreast of global developments in the digital currency space.
