Israel Follows US Lead; Will Tax Cryptocurrencies as Property
An announcement from the Israeli Tax Authority has confirmed that they will tax cryptocurrencies in the same way that they do property, as reported by the official website of the ministry of finance.
According to the Bank of Israel Law, virtual currencies are not considered “currency” or “foreign currency” and therefore 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.
The ministry also goes on to cover revenue generated from mining falling under business law:
In addition to the above, if a person’s income from virtual currencies rises to that of a business, in accordance with the tests prescribed in the case law, they will be classified as revenue with the appropriate tax rates. It should be clarified that the income of a person engaged in the sale and marketing of virtual currencies will be considered “productive.” (The circular also refers to “mining” activity, which is the provision of computing power for which virtual currencies are paid, which can be a sign of the existence of a business in virtual currencies).
Private investors will be subject to tax at the standard rate of 25%, with businesses paying at the marginal rate of 47%. While this is exactly the way in which the IRS in the US have chosen to classify crypto revenue for tax purposes, the announcement has unsurprisingly been met with some resistance. It will remain to be seen if Israel suffers the same issues as the US with regards to the difficulty of actually collecting these taxes, with US figures reporting a tiny percentage of declared revenue, with others choosing to remain safely silent as a result of the anonymity that crypto tech affords investors.
However, the announcement from the Israeli ministry makes no mention of a tax on ICOs, which was mentioned as recently as a couple of months ago. There is also no update on a potential government-controlled digital currency, which was debated back in December as a means of curbing black market activity in the country.