Israel will tax cryptocurrency as property

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The tax authority had published a draft of today's circular on January 12, which referred to virtual currencies, as "units used for barter that can be used for investment purposes".

The final version of the circular says that crypto will be taxed by the capital gains tax, which in Israel will be 25 percent for private investors, with a 47 percent marginal rate for businesses, the Israeli news channel Haaretz reports.

The Internal Revenue Service of the United States (IRS) has been taxing cryptocurrencies as property since March 2014.

Israel’s general consumption value-added tax (VAT) will not be added for individual investors, as crypto is considered an “intangible asset” used “for investment purposes only”, but businesses will have to pay VAT, the circular notes. The document also states that miners will be classified as “dealers” for VAT purposes.

In January, the Israeli tax authority had also published a draft circular, taking into account the methods of taxing initial coin offerings (ICO) with VAT. This week's circular does not mention decisions regarding the taxation of ICOs.

The government of Israel has been considering the possibility of issuing its own cryptocurrency - a digital shekel since December 2017, as one of the possible ways to limit transactions on the black market inside the country.