The bill exempting foreigners from crypto taxes passes initial reading in Israel.

Foreign residents of Israel may receive an exemption from capital gains taxes when they sell digital currencies. On June 5, a bill proposing this exemption and other tax benefits for digital asset holders passed its first reading in the Israeli parliament, known as the Knesset. The bill, sponsored by Knesset member Dan Ilouz, aims to reduce the current 50% tax on crypto bonuses for employees to 25%. Ilouz stated that the bill has the full support of the ruling coalition parties.

According to the bill’s explanatory note, the proposed amendments aim to close the regulatory gap in the digital currency industry in Israel. The hope is that these amendments will make the country more attractive to global investors. The bill suggests exempting foreign residents from capital gains tax on the sale of digital currencies from Israeli-based companies.

Nir Hirshman and Shauli Rejwan, co-founders of the Israeli Crypto Companies Forum, explained that the bill’s passage indicates Israel’s endorsement of cryptocurrency. They compared this endorsement to the actions of Rishi Sunak in the United Kingdom and lawmakers in Europe, suggesting that Finance Minister Bezalel Smotrich’s support of the local sector sends a clear message to global investors and companies: Israel welcomes business engagement.

The bill also proposes distinguishing “digital currency” from “security.” However, the Israeli Securities Authority (ISA) has suggested including digital assets under the “security” category in its proposed regulatory framework starting in 2023, which has raised concerns within the industry.

In April, the Bank of Israel hinted at its central bank digital currency project, although no formal decision has been made yet. The bank’s special committee has also outlined potential scenarios for developing and implementing a digital shekel.