Global Daily Tax News, Israel Clarifies Tax Rules For Cryptoassets, (Nov 18, 2024)

Israel's tax agency and the Finance Ministry have issued a new legal memorandum intended to clarify the tax rules for cryptoassets.

The memorandum provides that cryptoassets are to be classified as assets in the Income Tax Ordinance and gains generated from such are liable to capital gains tax.

The tax agency said: "This determination is consistent with the Tax Authority's position as published to the public back in 2017 and confirmed by the courts; however, anchoring it in legislation will provide more certainty for those engaged in activities in digital assets in general and cryptocurrency in particular."

In addition, the memorandum of the law establishes the rules according to which it will be determined when profit generated from a digital asset will be considered profit generated in Israel. Under the general rules in the Income Tax Ordinance, a capital gain is taxable if it was produced by a resident of Israel or if it was produced in Israel, by an Israeli resident or a foreign resident.

The memorandum clarifies that a capital gain generated from the sale of a cryptoasset will be considered a gain generated in Israel if the seller of the asset was a resident of Israel at the time of the purchase of the digital asset.

In addition, gains will be taxable in Israel where the cryptoasset reflects a right, directly or indirectly, to property located in Israel, or if it is sold for the benefit of a resident of Israel.