Israel Tax Authority Confirms Cryptocurrency To Be Taxed As An Asset And Not As A Currency
THE ISREALI TAX AUTHORITY (ITA) yesterday 19TH February 2018. Confirmed in a Circular sent out, stated that the Country will tax cryptocurrency as an asset rather than as a currency.
THE TAX Authority Department had earlier released a draft of yesterday’s circular on the 12th of January. Categorizing virtual currencies as “unit[s] used for barter [that] can be used for investment purposes.” this virtual currency will be categorized as an asset which can be traded off and the return will be classified as a capital income
The concluding version of the circular stated that cryptocurrency will be taxed by the capital gains tax in which 25 percent was declared as tax for private investors and 47 percent marginal rate for business owners.
The U.S Internal Revenue service (IRS) have been taxing cryptocurrencies as property since March 2014 according to the Israeli news outlet Haaretz.
Also, in January, the Israeli Tax Authority had also released a drafted a circular considering taxing of initial coin offering (ICO)with VAT (value added tax). This week’s circular did not state the stance of the Tax Authority department on ICOs taxation.
Israel’s government has been considering releasing their own cryptocurrency, a digital shekel since December 2017, as one possible means to limit black market transactions within the country.
The value added tax (VAT) will not be inclusive for individual investors because cryptocurrency is considered an unvalued asset used for investment purposes only but Business owners will have to pay the value added tax (VAT) also miners will be categorized as merchants for VAT purposes..
Shahar Strauss, a lawyer at the Israeli law firm Ziv Sharon & Company, doesn’t support the declaration of cryptocurrency as an asset and also it being charged for tax Haaretz reports)
“The [agency’s] stance ignores economic realities. According to the Tax Authority, investing in the esoteric currency of some Pacific island that can’t be used in Israel and many other countries meets the definition of currency and is therefore entitled to a tax exemption, while investing in digital currency is not.”