Israel issues draft of Cryptocurrency tax law, following the decision that cryptocurrencies are assets. The draft also details the taxation obligations of companies that raise money via ICOs.
18 January, AtoZForex – The Israeli Tax Authority has issued circular today in regards to the cryptocurrencies. The ITA’s new circular outlines a draft of new legislation that clarifies the status of cryptocurrency tokens as assets. In addition, the circular details the taxation obligations of companies that raise money via ICOs.
Israel issues draft of Cryptocurrency tax law
The Israeli Tax Authority has invited the public to comment on the proposed draft of the new legislation at this moment. As per the spokesperson of ITA, the draft will be open for public comment for 14 days. Afterward, the draft will be finalized.
In addition, the authority has decided that a digital currency is an asset. The reason for this ruling is that a cryptocurrency is a possession belonging to the individual holding it. Thus, a digital currency’s sale is a taxable event, which is subject to capital gains tax.
Firms that buy and sell cryptocurrency should be obliged to report profits and losses, just like with any other asset. The ITA cryptocurrency tax legislation draft reads:
“A person whose income from the sale of tokens reaches the level of a business, his income will be classified as a business income and it will be subject to tax rates under sections 121 or 126 of the ordinance.”
ITA statement on ICOs
Furthermore, the circular states that transactions in Bitcoin will be classified as barrier transactions. They will be measured according to the overall value of assets in the exchange. Additionally, the circular also classifies the taxable status of firms that are selling tokens via and ICO and tokens’ buyers.
The head of the Israeli Tax Authority, Moshe Asher, has commented on the matter:
“The Tax Authority is monitoring the technological developments and is working to provide an answer regarding the tax implications of virtual currency activity and the issue of digital tokens, thereby increasing the certainty and tax transparency of those operating in the field.”
The ITA draft only mentioned tokens used as utilities. Tokens as securities were already dealt with in a separate circular dated January 2017.
Think we missed something? Let us know in the comments section below.