A bill granting exemption from capital gains taxes on the sale of digital currencies for foreigners has passed through a preliminary reading in Israel’s parliament on June 5. The bill also seeks to allot other tax benefits to foreign digital asset holders living in the country.
Sponsored by Dan Ilouz, a 37-year-old Member of Parliament from the ruling Likud party, the bill would level up the crypto bonuses with stock options for employees by reducing the 50% current tax on the former ones to 25%.
The bill is said to have full backing from the ruling coalition, which gives it a good chance of being passed into law. The explanatory note of the bill states that it is intended to make the country more appealing to crypto 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.”
Speaking to Cointelegraph, Nir Hirshman and Shauli Rejwan, Israeli Crypto Companies Forum (ICBW3) co-founders who believe the country is witnessing a broadening in regulatory openness said the bill will also exempt foreign residents from “capital gains tax on the sale of digital currencies from Israeli-based companies.”
Israel Endorses Cryptocurrency
The proposed bill is the first of its kind in Israel that seems to be opening the door to cryptocurrencies. By exempting foreigners from crypto taxes as well as giving them other benefits, the bill is openly inviting crypto companies to invest in the country.
“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,” Nir Hirshman and Shauli Rejwan said.
Israel is now the latest country to offer an open invitation to cryptocurrency investors with this bill. Hong Kong, an autonomous administrative region of China has already done this when a lawmaker offered an open invitation to crypto companies to come to the region.
Similarly, the UK has done a similar thing by inviting crypto companies to work with the Financial Conduct Authority (FCA) to draft a regulatory framework for crypto. While the United Arab Emirates (UAE) has not openly offered an invitation, it has done so with its regulations for the crypto industry.
By putting in place clear and non-threatening regulation, the UAE has become one of the hotspots for crypto companies in the world today. This is why Binance, an embattled crypto giant may be considering developing its presence in the UAE more than any part of the world.
Digital Assets, Not Securities
Another notable thing about the proposed bill is that it places cryptocurrencies in its own category as “digital assets”, not to be confused with “securities” as was first suggested in the country’s proposed regulatory framework by the Israeli Securities Authority (ISA).
If passed into law, this bill could make Israel the next crypto hub, a destination every crypto investor or company would like to do business in, unlike the US where the SEC cannot clearly distinguish securities from digital assets.