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For a long time, crypto currencies in Israel were treated in the same way as normal currencies from a tax point of view. But now there has been a decision by the Israeli tax authorities that Bitcoin, Ethereum and Co. should be considered as property that should be taxed in Israel.

The official confirmation of how digital currencies should be taxed in Israel was announced yesterday by the Israeli tax authority. This measure comes as no big surprise, as the Bank of Israel has long refused to recognise crypto currencies as currencies.

The position taken a month ago was clear:

The Bank of Israel’s position is that they [cryptocurrencies] should be viewed as a financial asset.

Crypto currencies are therefore no longer considered as currency, but are treated as property (in terms of taxes to be levied). In Israel, most services and goods are subject to VAT, similar to Germany. The published Communication makes it clear that both businesses and individuals may be affected.

Consequently, profits arising from trade in crypto currencies must be taxed with the capital gains tax, which is between 20 and 25%. Thus the legal situation for the taxation of crypto currencies is similar to ours in Germany.

Baudot-Trajtenberg also points out that to date there are no precedents worldwide that could serve as a basis for central banks to introduce a uniform rule for taxation and regulation. According to Baudot-Trajtenberg, this must first be sufficiently observed and studied before further steps can be taken.

About Israel

Israel is a state in the Middle East. It is the only state in the world in which Jews form a majority of the population. Legitimated under international law by a resolution of the United Nations General Assembly in 1947, Israel was founded as a parliamentary republic after the end of the British mandate over Palestine on 14 May 1948; the country is regarded as the only democracy in the Middle East. The UN’s plan to divide Palestine into an Israeli and an Arab-Palestinian state was the starting point for the complex Middle East conflict, some of which continues today.

The need to transform a relatively barren, underdeveloped country into a modern industrial state has determined Israel’s scientific and technological development since its inception. Water scarcity, desert-like landscape and labour shortages have also led to the development of novel agricultural practices.

Israel has a technologically advanced market economy with a high state share. A major employer is the public service, which employs 33% of Israel’s workforce. The official working week in Israel begins with Sunday (Hebrew “Yom Rishon”, “First Day”) as the first day of the week. During the Sabbath from Friday afternoon to Saturday evening, in many places most shops remain closed and almost no services are offered.

The Israeli armed forces are considered the strongest force in the region. Israel has never signed the Nuclear Non-Proliferation Treaty and has been widely believed to have had nuclear weapons since the 1960s.