Israel decides Bitcoin and pals are property, not currency, and attract biblical levels of tax
The idea that Bitcoin and its ilk create uncontrollable and un-taxable instruments no government can control has been dealt a blow in Israel, where the local Tax Authority has ruled cryptocurrencies are boring old property.
In a circular distributed by the authority dated February 19, the organisation said cryptocurrencies can’t be considered a form of money. The document confirms a draft first published on January 12,2017.
Taxation will therefore apply « according to the nature of activity » in a virtual currency, the circular said.
Someone handling cryptocurrencies at a purely individual level – in other words, buy, hold, and sell at a profit later – will be liable to between 20 and 25 per cent capital gains tax.
That rate will also apply to businesses mining and trading cryptocurrencies, and there’s an extra slug: value-added tax will be levied at 17 per cent.
VAT doesn’t apply to an individual whose sole activity is for investment purposes, because « a distributed means of payment is an intangible asset », the circular said.
Someone whose activity meets the definition of business will also be classified as a financial institution, the circular said. That classification means another layer of regulation in addition to taxation. Israel reformed its financial services regime in 2016 with the passage of the « Financial Services Supervision Law (Regulated Financial Services) – 2016 », which among things imposes fair conduct, disclosure, permits, and enforcement on all non-bank financial institutions.
The circular is linked from this announcement (both in Hebrew and shoved through online translate-o-tronic services by Reg operatives for this story). ®
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