The Israel Tax Authority (ITA) has released an official draft circular to clarify the tax guidelines on virtual currencies like bitcoin. It announced the decision to treat digital currencies as assets that are taxable.
“According to the Bank of Israel, virtual currency is not considered ‘foreign currency,’ and therefore these coins will be considered in accordance with the Income Tax Ordinance as ‘assets’ and their sale will be taxed as a sale of ‘property’ and income from their sale will be classified as capital income and capital gains will be taxed according to the fixed tax rates,” ITA said in the statement.
Every time individual users sell bitcoin, they will be obliged to pay the country’s capital gains tax, which starts at 25%. Further, companies will no longer be able to receive bitcoin transactions as settlements for various services. Companies receiving cryptocurrency payments will have to treat them as barter transactions.
The ITA claims that the circular was announced as a response to multiple requests to clarify the taxation status received from the cryptocurrency community in Israel. However, it is not clear yet when Israel will implement the changes.
Israel‘s decision to tax cryptocurrency is not an exceptional case. Two years ago the United States took a similar decision and classified digital currency as a taxable property. However, it does not follow the latest softer approach towards bitcoin that is increasingly taken by other countries around the world.
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29 October 2020