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Israeli court determined bitcoin as an asset

Jun 25, 2019

An Israeli court has recently ruled that bitcoin is an asset and not legal currency. This is crucial a decision since it means profits earned selling cryptocurrency will now be liable to capital gains tax.

Lod’s Central District Court rejected an appeal from a founder of a crypto startup who argued that profits from the sale of cryptocurrency should be exempted from taxes. The claimant stated that Bitcoin should be considered as a foreign currency, and that the profit of NIS 8.27 million (appx. $2.30 million) occurred from an exchange between individuals, not a business transaction that is legally taxable under Israeli law.

At the same time, the Israeli district court ruled that all earnings made through bitcoin sales shall be taxable. As a result of the ruling, the appellant is now liable for tax of around 3 million NIS (appx. $830,000) as well as legal costs of 30,000 NIS (appx. $8,500) due to a judge's fine.

On the grounds of this case it was determined that Bitcoin has a very unstable legal standing, hence it may be difficult to accept it as a currency for tax purposes.

The Israeli Tax Authority (ITA) earlier took a position that bitcoin and other cryptocurrencies are considered property for tax purposes, therefore it will tax cryptocurrency as it does any other transacted commodity. As such, trading in cryptocurrencies is subject to a capital gains tax of 25% in case of private investors. It is worth noting that, individuals (crypto traders or crypto miners) associated with businesses, are liable to a 17 percent value-added tax in addition to capital gains tax.

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