On July 5, the Israeli Knesset approved the preliminary reading of bill that aims to introduce various tax benefits related to digital currencies in an effort to attract foreign investment.
The proposed legislation also seeks to provide regulatory clarity for the crypto industry. It defines digital currencies — even ones issued by a company — as different from a company’s security — such as stock.
According to the bill, there is a regulatory gap in the digital currency industry that needs to be addressed by amending legislation to make it more suitable.
“Despite the growth potential of Israeli companies in the field, the regulatory reality in Israel is not adapted to the digital currency industry.”
Knesset member Dan Ilouz, who is an active voice in blockchain regulation, is spearheading the bill and first submitted it in March.
Tax benefits
The bill’s first section proposes legislation to exempt foreign residents from capital gains tax on the sale of all digital currencies in Israel, including ones issued by local firms.
“This amendment is proposed to promote the blockchain industry and to attract foreign investors through the existing securities exemption.”
The bill also includes legislation that will reduce the current 50% tax on crypto bonuses given to employees to 25%. The bill said the tax on crypto-based bonuses should be similar to the tax imposed on bonuses that are given in the form of stock options.
According to the bill, the burgeoning “hi-tech” industry in the country needs to be supported via benefits to encourage growth in the sector. These benefits are intended to help companies in the growth stage to reward their staff and foster a more successful environment for the industry.
Security or not?
The bill makes a clear distinction between digital currencies and securities but does not delve into the nuances or complexities of this classification
The country’s securities regulator recently proposed that digital currencies should be labeled securities and treated as such. However, a final decision on the matter has yet to be made legally.
The relationship between this bill and the recent proposals by the Israeli Securities Authority remains unclear, igniting debates on whether the bill will supersede these suggestions or if new legislation will be introduced to resolve the issue
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