In a preliminary vote Wednesday night, the Knesset plenum approved a legislative amendment to eliminate taxation on crypto, blockchain, and web3 companies.
Likud MK Dan Illouz, who introduced the amendment, said he proposed that the sale of digital currencies by an Israeli resident company be exempt from the tax currently imposed on capital gains from securities.
In addition, the amendment proposes a tax benefit be granted by the Income Tax Ordinance for the allocation of digital currencies to employees, similar to the practice of granting options.
If passed into law, the bill would exempt foreign residents from capital gains taxes on the sale of digital currencies and reduce tax on crypto options for employees – similar to stock options – to about 25% from 50%, the Israel Crypto, Blockchain and Web3 Companies Forum (ICBW3) told CoinDesk.
The law is intended to strengthen investors and companies and make Israel attractive to the global crypto, blockchain, and web3 industry.
“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,” said Likud Knesset member Dan Illouz, who introduced the measure.
“Until now, workers in the crypto industry had to pay double the tax on their options compared to workers in the traditional hi-tech industry. Moreover, foreign investors in the blockchain industry were not entitled to the same benefits as those entitled to investors in the traditional hi-tech industry,” said Illouz.
“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.
“This proposed law offers the opportunity to implement the economic policy led by Finance Minister Betzalel Smotrich and Prime Minister Benjamin Netanyahu to attract investors and companies to Israel, contributing significantly to Israel’s economic development.”
The Crypto, Blockchain, and Web3 Companies Forum called passage of the first reading of the measure “a refreshing turn of events by the Israeli government” and praised Finance Minister Bezalel Smotrich for having “demonstrated economic leadership” and reinforcing “sustainable economic development” in the Israeli hi-tech industry.
The crypto, blockchain and web3 sector has grown significantly in the Israeli hi-tech industry over the past decade.
Israeli companies lead global technological development in this field and receive extensive investments, but Illouz maintains that despite the potential for growth of Israeli companies in the field, “the regulatory reality in Israel has not adapted to the digital currency industry.”
The proposed legislative amendment “seeks to align the conditions for companies involved in crypto with those of regular companies to prevent the diversion of investments to foreign companies,” Illouz explained.
