A Court Decree in Israel: Cryptocurrencies Are Taxed
Israel is a democratic country with developed political foundations and social and economic structures. This country is considered as the most developed country in the Middle East in industrial, technical, and economic development. Software, machinery, chemicals, textile, and agricultural products are among its major exports. Accepting technology is high in Israel; many people actively utilize cryptocurrencies for trade, investment, initial coin offering (ICO), and buying goods and services.
Considering the above facts, financial institutes in Israel have issued statements about cryptocurrencies’ regulations. Cryptocurrencies are not recognized with the legal definition of cryptocurrency and are considered as the tax asset. Hence, miners and cryptocurrency traders are considered as owning an occupation and are part of tax regulations.
A court has been held recently wherein Israel tax office could be a winner in case of paying tax for cryptocurrencies.
Bitcoin Should Be Taxed
Globes website has published a report on May 21 that an Israeli judge has stated that Bitcoin is not a cryptocurrency, but it is just an asset.
The court held is of high importance, since it was specified that according to the law, the profit gained from selling cryptocurrencies is under capital income tax. According to its definition in accounting, asset refers to all properties and rights having a monetary value. Based on what this lawyer has said, cryptocurrencies are assumed as the asset, and they are taxed. Accepting the interpretation of the Tax Authority and with the emphasis on the issue that Bitcoin is an asset not cryptocurrency, the Central District Court in Lod considered the trades under question taxable.
Noam Copel, the founder of Blockchain startup DAV, bought a high amount of Bitcoin and sold them two years later. He had a profit of about $2.5 million at today’s rates.
During the court case, Noam Copel claimed that Bitcoin should be considered a foreign currency since the volatilities of trades rates are taxed. However, the claim by the tax office in Israel is different and believes that cryptocurrencies should be physically offered under the country’s regulations.
Bitcoin Is Not a Good Replacement for Fiat
Judge Shmuel Bornstein has said in this decree that in the condition that there is not yet any exact definition for Bitcoin and it is probable at any moment for it to stop and be replaced with another cryptocurrency, reaching a conclusion in which Bitcoin is attended to as money for financial purposes was difficult. He has stipulated that Copel failed in proving that Bitcoin can meet such a need or be used as a good replacement for fiat. However, he pointed out that it is the court’s attitude and decree, and it might change.
In the current condition, each entrepreneur should pay $830,000 from his profit. Anyway, Copel can appeal to the Supreme Court.
The tax office in Israel set forth some plans to pay tax for cryptocurrencies as the asset for the first time. Early this month, after the politicians of the Congress, warned that there are still many ambiguities about the manner of paying the tax on cryptocurrencies, United States Internal Revenue Service announced that issuing guidance on cryptocurrencies will be prioritized.
Now, considering difficulties and impediments in the way of this industry, if this plan can be enacted and executed extensively, how will it influence the unclear future of the world of cryptocurrencies?
Imagining the condition where the price of cryptocurrencies is low, and the people cannot sell their cryptocurrencies, keeping this cryptocurrency will be costly, and they should pay tax if they address mining too.