The government of Israel has decided to treat digital currencies like bitcoin as assets instead of foreign currencies for the purpose of taxation.
The Israel Tax Authority released a draft circular last week, which detailed “the tax professional activities of virtual currencies.”
Under the new rules, transactions involving bitcoins in the country will be treated as barter transactions, and any profit from coin sales can be charged with capital gains tax, which starts at 25 percent. Aside from the capital gains tax on those profits, the ITA said commercial sales and trading transactions may also be subjected to value added tax.
The ITA said profits made from the sale of cryptocurrencies in the country will be need to be declared to the tax authority.
“According to the Bank of Israel, virtual currency is not considered ‘foreign currency,’ and therefore these coins will be considered in accordance with the Income Tax Ordinance as ‘assets’ and their sale will be taxed as a sale of ‘property’ and income from their sale will be classified as capital income and capital gains will be taxed according to the fixed tax rates,” the tax authority said in a statement.
ITA’s announcement comes more than three years after reports surfaced that Israel would seek some degree of taxation on bitcoin transactions. Officials from the tax agency were quoted in 2013 saying that they wanted to pursue a means of taxing profits on bitcoin sales, but that they were uncertain on how to do so.
Israel is not the first country to tax cryptocurrency. In fact, the Israeli government’s move is similar to the decision made by tax authorities in the United States two years ago, when it decided to classify the popular digital currency as a type of taxable property.
Current bitcoin price
The price of bitcoin was up slightly on Monday morning, trading at $830.33.