Legislators believe that the amendments would help crypto taxpayers adhere to local tax policies
Last Thursday, four Knesset members from the nationalist Yisrael Beiteinu party introduced a draft bill that would effectively put an end to Israel’s 25% capital gains tax on Bitcoin. It would do so by redefining certain “distributed digital currencies” as currency, instead of its present classification as a taxable asset.
The proposed redesignation will be applied to cryptocurrencies that have a one billion shekel (around $288 million) market cap or more, a distributed issuance network, an independent origin story and a general user purpose.
“The regulatory reality in Israel is not adapted to the existing reality in the field. [Digital currencies] will continue to be a growth engine that allow the Israeli high-tech industry to flourish and develop.” the bill read.
According to the bill authors, Oded Forer, Evgeny Sova, Yulia Malinovsky and Alex Kushnir, Bitcoin and a few other cryptocurrencies meet these criteria.
The lawmakers wrote that this clarification will help create a conducive environment for cryptocurrencies in the future.
“This regulatory clarity will create commercial certainty and allow more digital currencies to enter the Israeli market,” they wrote.
The measure stated that defining cryptocurrencies as ‘real’ currencies would help Israeli bitcoiners with their tax responsibilities and make crypto a more attractive payment mechanism.
While the cryptocurrency industry is slowly establishing its roots in the country, the Yisrael Beiteinu party is only part of Israel’s parliamentary opposition. The passage of the bill is unlikely if members of the majority do not express their support.
As of writing, cryptocurrencies in Israel are taxed 25% under capital gains tax. If the amendments are passed and implemented, cryptocurrency sellers will be obliged to file a tax report within 30 days of transactions, and pay an advance on the tax rate for capital gains.
In August 2019, crypto traders within the country filed a series of lawsuits against financial institutions due to restrictions that had previously been imposed on their bank accounts. The traders demanded the Bank of Israel, and other commercial banks, to “make their policy in this matter public”.
According to Mei Rosenfeld, the Chairman of the Bitcoin association, the Bank of Israel had refused their request because it infringed on “commercial secrets.”