Posted on

Israel Confirms It Will Tax Bitcoin as Property

Israel’s government confirmed Monday that it would treat bitcoin and other cryptocurrencies as a kind of property for tax purposes.

The notice confirms past indications that the Tax Authority will regard cryptocurrencies as “a property, not a currency”, making it therefore taxable as such. The Authority’s position was first detailed in a draft circular issued in January of this year.

The circular explains that profits from cryptocurrencies will be subject to capital gains tax at rates between twenty percent and twenty-five percent, while individuals mining or trading cryptocurrencies in connection with businesses must pay a seventeen percent value-added tax (VAT) in addition to capital gains tax.

That latter aspect – excluding broad swaths of investors from potential VAT charges – is in line with a trend seen in recent years since the issue gained prominence. The Israeli government started exploring the taxation of cryptocurrencies as early as 2013.

And while today’s announcement was largely expected (given the previous draft release from the Tax Authority), officials there are still working on initiatives that could continue to impact the industry at-large.

The Authority’s Monday announcement follows another draft circular published in late January, which outlined potential ways in which the government could tax ICOs. Possible steps include setting a minimum token sale revenue threshold at which a tax would be triggered.

Israel on a map image via Shutterstock 

Editor’s Note: Some statements in this report have been translated from Hebrew. 

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Posted on

Israel Releases Draft Plan for Taxing ICOs

Israel’s government has published draft circular outlining possible approaches to taxing the proceeds of initial coin offerings (ICOs).

Released Wednesday, the draft circular from the Israel Tax Authority proposes imposing a value-added tax (VAT) on ICOs, differentiating them into two types: service transactions and sales transactions. The draft appeared to indicate that goods or services offered to foreign residents would result in a “a zero tax invoice” under current law.

While the draft outlines possible methods for taxing companies launching token sales, it does not touch cryptocurrencies directly, according to an announcement posted on the agency’s website.

The draft detailed different classifications for companies launching campaigns involving the blockchain use case, focusing on the kinds of products or services the company offered as well as whatever profit model it may take.

Token sales which reap more than 15 million Israeli new shekels (INS) in revenue will be subject to bookkeeping regulations in accordance with existing law, according to the draft.

The amount of taxes owed can fluctuate if a company determines its dues at the end of a year – as opposed to during the year – with the text going on to explain:

“In cases where the tax liability is determined on a cash basis, at the end of the year, the buyer or recipient of a service is a resident of Israel or vice versa, it is possible that the tax rate for the transaction will change according to the provisions of the VAT Law.”

Investors who sell the tokens they had already purchased from an ICO would be subject to taxation as well, the circular explained. However, groups which trade as a business would be “classified and registered as a financial institution” specifically for tax purposes, according to the draft.

The circular emphasized it was subject to change, and the Israel Tax Authority is looking for public input on the provisions outlined.

Editor’s Note: Statements in this article were translated from Hebrew.

Israeli flag image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.