The Knesset passed the proposal for a law amendment that addresses discrimination in taxation suffered by cryptocurrency, blockchain, and Web3 companies. Members of the Knesset supported the bill, which will grant cryptocurrency companies the same tax benefits enjoyed by other Israeli tech companies. These benefits include exemptions from tax for foreign investors, meaning that foreign residents will be exempt from tax on capital gains from the sale of digital currencies, and a reduction in the taxation on options for employees, from 50% to 25%.
"Until now, employees in the cryptocurrency industry were required to pay double tax on their options compared to employees in the traditional tech industry. Foreign investors in the blockchain industry were not entitled to receive the same benefits as those available to investors in the traditional tech industry," said the bill's initiator, Member of Knesset Dan Illouz . "This bill aims to balance the situation and eliminate discrimination in taxation. Thanks to cryptocurrency technology, Israel has the opportunity to compete with major financial centers in the world and be on par with London and New York. We cannot miss this opportunity. This move directly reflects the economic policy led by Finance Minister Zeev Elkin and Prime Minister Benjamin Netanyahu to attract investors and companies to Israel and significantly contribute to Israel's economic development."
The forum of cryptocurrency, blockchain, and Web3.0 companies stated: "We welcome Finance Minister Zeev Elkin for supporting the bill, stating that Israel chooses crypto. This courageous decision places Israel on par with Britain and European countries, encouraging the industry and creating job opportunities through clear regulation. By supporting this bill, the Finance Minister is making a groundbreaking move that enables the Israeli cryptocurrency industry to advance. According to KPMG's report, 174 companies raised $3.85 billion and employ over 3,800 workers – this provides fertile ground for progress. This bill sends a clear signal to investors and companies regarding Israel's commitment to creating a significant hub for the global cryptocurrency industry."
In the bill's explanatory notes, it was written: "The Israeli high-tech industry's growth engines have been joined in the last decade by a new and significant sector originating in the field of digital currencies. Israeli companies lead global technology development in this field and receive extensive investments. Despite the potential growth of Israeli companies in the field, the regulatory reality in Israel is not adapted to the digital currencies industry. Therefore, several legislative amendments are proposed to narrow the regulatory gap and enable comparison of conditions for companies operating in the cryptocurrency, blockchain, and the Web3.0 fields with those of traditional tech companies."
Additionally, it is proposed that a foreign resident will also be exempt from capital gains tax when selling digital currencies of an Israeli-based company. Moreover, an amendment is proposed to the Income Tax Ordinance to grant a tax benefit for the allocation of digital currencies to employees similar to the procedure used in granting options.
Dan Iloz, photo: Danny Shem Tov