How is the sale of Bitcoin taxed in Israel?

Bitcoin, or crypto-currencies in general, have recently become a huge hit with the general public. Many people hold crypto-currencies, or intend to acquire them in the near future.

We're not going to discuss whether this is a bubble or not, but rather draw attention to the tax side of this trend.

The tax authorities in Israel have decided how income generated by this type of product should be taxed and/or declared.

Below you'll find important and useful information about the tax aspects of Bitcoin in Israel. This information will enable you to comply with the relevant tax laws when the time comes.

How will bitcoin be viewed in Israel?

In Israel, bitcoin is considered a stock market security in the same way as shares or options. As a result, when a bitcoin holder realizes a capital gain, he must pay capital gains tax of 25%.

It is important to note that if a person trades in bitcoins (buying, selling...) their principal occupationshe will have to pay income tax according to tax bracket - up to 50% for an individual and up to 23% for a corporation (rates valid for 2021).

Similarly, if this person makes a loss on the sale of the Bitcoin, it can be deducted. Just like any tax loss that can be deducted in other business activities.

When should I declare gains or losses from Bitcoin transactions?

Since this is a new and complex subject for the taxpayer, the law stipulates that the declaration must be made as part of the annual tax return, and not within 30 days of the sale. As is the case for a more "traditional" stock market security.

From a VAT perspective

As with other VAT laws, anyone who holds bitcoins but whose main occupation is not bitcoin will not have to pay VAT on a sale.

On the other hand, anyone who makes bitcoin their main business will have to pay VAT.

It is important to point out that the position of the tax authorities reported in this article has not yet been formalized by an official instruction from the tax authorities in Israel. This official position is expected to be published in the next few days.

Needless to say, the next few weeks will be crucial for Bitcoin holders. Indeed, as with any new business sector such as AirbnbIn Israel, as soon as a new form of business is created, it immediately comes under the scrutiny of the tax authorities.

Faced with these new laws, it's important to be prepared and know what to do when the time comes. Contact us for assistance with your annual tax return in Israel.