Israel Deliberates Bill to Exempt Foreigners from Taxing Cryptocurrencies

Discuss tax exemption measures for foreigners and company employees

Israel’s parliament held early-stage deliberations on a new bill that exempts foreigners from the cryptocurrency capital gains tax and the tax on profits derived from cryptocurrency activities on the 5th.

The bill seeks to amend Israel’s income tax code. It also includes a reduction of the 50% tax on cryptocurrency options (similar to stock options) received by corporate employees to 25%.

One goal is to extend the tax incentives already available to tech workers to the crypto industry.

Likud MP Dan Ilow said the bill has the backing of Prime Minister Benjamin Netanyahu’s coalition government and fits in with his government’s plans to attract foreign investment.

Regulations related to virtual currency are under preparation

The Israeli government is taking steps to develop regulations related to cryptocurrencies.

In November 2022, Sheila Greenberg, the chief economist at the Israeli Ministry of Finance, submitted a wide-ranging report to the Finance Minister on the subject of cryptocurrencies. She presents a cryptocurrency risk assessment, how to address hurdles to market development, and comprehensive recommendations.

At that time, Mr. Greenberg commented as follows.

The Treasury team made the following key recommendations in its report:

• Remove barriers to entry in existing regulatory frameworks, such as licensing schemes
• Improving and expanding existing regulatory infrastructure
• Creation of new regulatory infrastructure

Of these, “improvement and expansion of existing regulations” included expanding the regulations of the securities authorities to include cryptocurrencies, and concentrating the authority to supervise cryptocurrency companies as much as possible in a single institution. .

Regarding the “creation of a new regulatory infrastructure,” legislation will provide for licensing supervision over the issuance of backed digital assets such as stablecoins and the provision of related services, as well as authority to supervise digital assets with significant financial impact. Transferred to the Central Bank of Israel.

He also touched on the establishment of an inter-agency committee to consider regulations on decentralized autonomous organizations (DAOs).

Stablecoin Regulatory Principles

In February, the Central Bank of Israel announced its regulatory principles for stablecoins. It aims to allow the use of stablecoins within the country while controlling the risks associated with using them.

It recommended that stablecoin holders be required to maintain reserves commensurate with the amount of stablecoins in circulation so that they can redeem them at any time.

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