By
Bhushan Akolkar
April 15th, 2024
Israel is becoming ingrained more and more deeply into crypto ecosystem. Cryptos will be subject to the capital gains tax, decides the Tax Authority.
The Israel Tax Authority announced that Bitcoin as well as other cryptocurrencies would be treated as a kind of assets for tax purposes. This move was not a very surprising one, as recently the Bank of Israel has refused to recognize cryptos as currencies
So, cryptocurrencies are not considered to be money and people who buy and sell them will be subject to tax as in cases with any other investments. The Authority’s position regarding cryptocurrencies was initially mentioned in January and now it was officially confirmed.
Profits of investors in Bitcoin or other virtual coins will be subject to capital gains tax at rates ranging from 20% to 25%. But it’s important to notice that individuals mining or trading cryptocurrencies for business purposes will have to pay not only capital gains taxes but also a 17% value added tax (VAT).
According to the Authority’s requirements, all cryptocurrency transactions should be documented for possible audit. In order to be able to present relevant evidence for an audit, the taxpayer must prepare documents confirming the transaction in the decentralized means of payment, and consequently verify the existence of this transaction and its monetary volume, as well as data of the accounts through which the fund were transferred.
Moreover, the seller must also present the evidence of the transaction attaching the pages of the bank accounts through which the funds were transferred or at least a computer screen capture demonstrating the sale and purchase and the date/time of the operation.
These are not the only limitations for crypto market in Israel. Last week it was announced that companies whose value is based on the value of the Bitcoin shouldn’t be included in one of the Tel Aviv Stock Exchange (TASE) indices. The Israel Securities Authority sent a letter to the TASE describing what they believe to be suspicious about the nature of cryptocurrency.
The Israel Bitcoin Association voted for the Tax Authority’s move. As the Authority at least formally “recognizes” Bitcoin and other digital currencies as actual things. Nevertheless, as it was mentioned above other two main financial regulatory bodies of Israel, the Bank of Israel and the Israel Securities Authority, are still not ready to do it.
The Israeli government has been examining a possibility to introduce taxation for crypto sphere since 2013 when virtual currencies have begun to gain their popularity among investors. Some new initiatives that could continue to influence the industry in general are currently under consideration.
In late January, another draft circular concerning ICOs taxation was published. But while this document is still a draft, the token sale of the first “Kosher” ecosystem BitCoen launched in Israel has reached $2 500 000. The project represents itself a business platform and a services system developed for interaction between representatives of Jewish communities around the world and promises to be a successful one.