Israeli Tax Authority Declares Bitcoin a Taxable Asset, Not Currency

After years of uncertainty regarding reporting cryptocurrency transactions and holdings on their tax statements, Israelis have finally received an official statement from the authorities. Unfortunately, the policy seems to be very strict and prohibitive to users.

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A new draft paper circulated by the Israel Tax Authority (link to PDF in Hebrew) today sets to clarify the taxing of "Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term, Litecoin and other virtual currencies" activities in the country. The authorities explain they are doing so after receiving repeated questions from the cryptocurrency users community in Israel.

The Tax Authority begins by explaining that, according to their interpretation of the relevant laws, cryptocurrency is not currency but rather an asset. It adds that it is also not a financial security (like a stock). This determination has a number of legal repercussions in terms of using cryptocurrency in Israel.

First, if a company is paid in bitcoin its accountants can't write down the transaction as receiving payment. Instead, this needs to be classified as a barter and dealt with accordingly. Needless to say this can cause a lot of extra paperwork for companies that are open to accepting Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term as a payment method.

Second, individual users will have to pay the Israeli capital gains tax, currently at 25%, every time they sell bitcoin.

Lastly, anyone working at trading, marketing or mining bitcoin will be taxed as a business, which beyond just paying the corporate income tax, will have to charge their clients 17% value added tax (VAT).

The Israel Tax Authority understands that providing a record of cryptocurrency trading could be difficult. Therefore, to prove such transactions it demands a letter of clarification, bank statements about the purchases and screenshots of the computer when a transaction takes place.