The Israel Tax Authority put any speculations about the regulation of cryptocurrencies to rest when it stated, “Bitcoin is a property, not a currency.” Being the economic jewel of Southwest Asia, in terms of innovation and output, Israel has been ranked time and again alongside countries many multiples its size.
Since 2013, Israel has been grappling with the onset of Bitcoin and not been able to handle its own affairs regarding the same. The current Prime Minister has been known to be open to the idea of actualising the decentralized currency in the country as this could be labelled as a world model for its implementation and regularisation.
The circular also said while speaking to the Israel Securities Authority (ISA) policy, “A person whose activities include usage of distributed means of payment will be accounted as not having a business and is only entitled to capital gains tax. On the other hand, a person whose activity in the field reaches a business, tax will be paid for any business activity.”
For most goods and services in the country, a Value-added tax (VAT) is imposed and is placed at 17%. Also, electronic accounting for VAT is regulated by law in Israel. The agency explained that “A distributed means of payment is considered as an intangible asset and hence can be used for investment purposes only and not as a business. Any activity not amounting to a business will not be imposed VAT. VAT will be imposed on a dealer who accepts business transactions receipts based on a distributed mode of payment. However, a VAT will still not be paid, regardless of the nature of the receipt.”
The agency also added that “If a business is formed using such distributed mode of payment by such an individual, then it will be classified as a financial institution and miners will be labelled as dealers for VAT purposes.”