Israel to tax cryptocurrencies as assets, not currencies

Israel to tax cryptocurrencies as assets, not currencies

- in All News, Cryptocurrencies, Regulation
Israel

The Israel Tax Authority (ITA) has confirmed in a circular that it considers the cryptocurrencies assets and not currencies, and will tax them accordingly.

As per the document, quoted by Cointelegraph, “these currencies will be considered as ‘assets’ and will be sold as a ‘sale’ and the proceeds from their sale will be classified as capital income.” This means that the profits from these investments will be taxed as capital gain, with tax rates starting from 25% for private investors and up to to a 47% marginal rate for businesses, the authority said, instructing investors to report on their holdings within 30 days and arrange prepayment of tax.

On top of that, the cryptocurrency miners will have to pay not only capital gain taxes, but also VAT, which in Israel is 17%.

If the cryptocurrencies were considered currencies, investing in them would have been exempt from taxes.

Many in Israel, however, are not very happy with this. For example a tax lawyer from Tel Aviv – Shahar Strauss – told Haaretz that he has many clients who had invested a small sum in bitcoin years ago. Now their cryptouccrencies are worth millions of shekels due to the price spike and are liable for taxes in the millions of shekels.

“The [agency’s] stance ignore economic realities,” he said. “According to the Tax Authority, investing in the esoteric currency of some Pacific island that can’t be used in Israel and many other countries meets the definition of currency and is therefore entitled to a tax exemption, while investing in digital currency is not.”

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