Israeli Draft Bill Proposes Bitcoin be Defined as Currency to Cut Down the Hefty Capital Gain Tax
Four members of the Knesset, Israel’s legislative body, from the Yisrael Beiteinu faction, the secular nationalist political party, have submitted a private member’s bill seeking to amend the taxation of crypto-related activities so that the sale of bitcoin and crypto-assets isn’t subject to 25% capital gains tax, as per local media reports.
The private member’s bill, submitted by MKs Oded Forer, Yevgeny Soba, Yulia Malinowski Kunin, and Alex Kushnir, was tabled earlier this week on Tuesday that seeks to amend the way digital assets activities are taxed under the Income Tax Ordinance.
Under the ordinance, digital currency is considered an asset; as such, its sale and conversion in fiat currency are subject to capital gains tax. Currently, the tax on most capital gains in the country is 25%.
Section 91 of the Income Tax Ordinance, however, provides relief in the taxation of capital gains from short-term lenders or non-CPI linked bonds — they are taxed at only 15%.
“The regulatory reality in Israel is not adapted to the existing reality in the field,” claims the memorandum of the proposal.
The bill also seeks to add a section in the Ordinance, which deals with the “determination of distributed digital currency.” Under this proposed section, the Minister of Finance may prescribe provisions under which the digital assets shall be determined as a distributed digital currency.
The purpose of the bill is that Bitcoin and other digital assets are considered a currency for the taxation purpose.
“The State of Israel has the ability to be among the leaders in the field of digital currencies, if only it recognizes the use of the blockchain as a currency for everything. It is precisely in this period, when the economic future is unclear It is possible to promote digital payment options due to the social distance that has been forced on us,” said K Forer after the bill was submitted.
The same day another bill was tabled in the Knesset that seeks to allow reporting on digital asset trading once every six months or year.
Currently, those who sell digital currencies are required to submit a report to the tax authority within 30 days of the sale, along with paying an advance on the tax rate applicable to the capital gain arising from the transaction.
“The two bills passed last night by MKs Oded Forer and Sharan Hashakel are an infrastructure on which Israel can be developed as a global financial center and a leader in the field of digital currencies,” said Manny Rosenfeld, chairman of the Israeli Bitcoin Association.