IsraeliÂ digital currency owners may soon be paying much lower taxes on their holdings, if a recently proposed bill passes into law. The bill seeks to redefine digital currencies and thus remove the capital gains tax they are currently subjected to.
Proposed by four members of the Knesset, Israelâ€™s unicameral legislature, the bill seeks to amend the countryâ€™s Income Tax Ordinance. Yevgeny Soba, MK Oded Forer, Alex Kushnir and Yulia Malinovsky want digital currencies to be classified as currencies and not as assets.
Under the existing Israeli laws,Â digital currenciesÂ are considered assets and therefore, their sale or conversion attracts a 25% capital gains tax. The law only provides taxation relief on capital gains to short-term lenders and certain bond-related activities only, charging a 15% tax in such instances.
Israel risks falling behind in the adoption of new technologies unless the existing tax laws are amended, the four legislators believe, asÂ reportedÂ by local outlet Globes. The Income Tax Ordinance has remained unchanged for a long time despite the advent of new technologies such as digital currencies.
In a summary of the bill, the lawmakers stated, â€œThe purpose of the bill is to amend the way in which activities in digital currencies are taxed, so that a digital currency that meets the criteria set out in the ordinance, such as Bitcoin, will be considered a currency for taxation.â€
The lawmakers further seek to amend the law to include a section that defines which digital currencies qualify for the new re-classification. To qualify, a digital currency must be issued by distributed computer network and not by a central entity and must not have been pre-issued as a payment to any party such as the founders or developers.
A digital currency must also have a market capitalization not below a billion Israeli New Shekel ($290 million) as calculated by the Israeli government. Currently, only 53 digital currencies qualify under this metric as per CoinMarketCap data.
The legislators believe that passing the proposed bill will give Israel an edge over its peers and enable it to become a leader in the field of digital currencies.