Israel is seeking to exclude foreigners from paying taxes on digital asset gains in a new draft bill to make the Middle Eastern nation a global digital currency hub.
The bill was tabled in the Knesset, the country’s legislative body, in March and recently passed the preliminary reading. It’s sponsored by legislators Dan Illouz and Ariel Kellner and enjoys the support of the ruling coalition parties led by Prime Minister Benjamin Netanyahu.
With the proposed legislation, Israel is emulating the United Kingdom, which announced tax breaks for foreign investors purchasing digital assets through local brokers in January. According to HM Revenue and Customs, the move is part of Prime Minister Rishi Sunak’s move to turn the U.K. into a digital asset hub.
Israel gives tax breaks to foreign investors in certain approved companies or projects, mainly in high-tech, to spur growth.
The new bill will also halve taxes on digital asset options for employees from 50% to 25%, similar to stock options.
The latest tax measures will allow Israel to compete with major global blockchain hubs in Europe and beyond, Illouz commented.
“This law amendment aims to balance the situation and eliminate the discrimination in taxation. Thanks to the technology and crypto, the State of Israel has the opportunity to compete with the major financial cities in the world and be on par with London and New York. We must not miss it,” said the legislator, a member of PM Netanyahu’s Likud Party.
Local digital asset companies have welcomed the bill, saying it will bring global investors to Israel.
“The significance of last night’s vote outcome is that Israel is wholeheartedly endorsing cryptocurrency…[the government’s] issued a clear call to global investors and companies—Israel invites you to engage in business on our shores,” commented Nir Hirshman, the co-founder of the Israeli Crypto Companies Forum.
Despite the tax breaks, Israel has been stringent on digital asset taxation. Earlier this year, authorities arrested non-fungible token (NFT) artist Ben Benhorin, who is accused of failing to disclose digital asset earnings in his tax reports. The Israel Tax Authority has also investigated other NFT artists over their tax obligations.
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