Israel’s official tax authority has affirmed that digital currencies like bitcoin will be taxed as an asset with investors subject to capital gains tax.
In an updated circular discharged on Monday, the Israel Tax Authority multiplied down on its past position of deeming digital currencies as ‘assets’ instead of currency. The authority first issued an early official draft to clear up tax rules for digital currency adopters in January 2017 after rehashed demands from the community to clarify the administration’s position on the tax collection of digital currencies.
With its updated circular and a last draft set up, the authority will now press ahead with tax taxation rules for assets wherein individual investors will be liable to the 25% capital gains tax for benefits from their digital currency holding. Furthermore, businesses and exchanges trading digital currencies will be at risk to pay a 17% value added tax (VAT). Notably, individual investors will be excluded from paying VAT as digital currencies utilized for investment purposes are especially observed as intangible assets. People who are engaged with mining or trading digital currencies will be subjected to the VAT of 17%.
The Authority’s official position on characterizing digital currencies as “assets” corresponds with a comparative approach taken by the nation’s central bank. In a public speech in January, Bank of Israel (BOI) deputy governor Nadine Baudot-Trajtenberg expressed the BOI’s position on digital currencies “is that they should be viewed as a financial asset, with all that entails.”
The Tax Authority’s last draft on digital currency taxation takes after late moves in January wherein tax officials published draft legislation to gather taxes from initial coin offerings (ICOs), some portion of its more extensive focused move to collect from the digital currency division.
“The Tax Authority is monitoring the technological developments and its working to provide an answer regarding the tax implications of virtual currency transactions and the issuance of digital tokens,” said the authority’s director Moshe Asher at the time. The draft suggested that an individual’s income could be classified as a business income when “the sale of tokens reaches the level of a business”, leading to taxation under applicable rates.