Bitcoin Is An Asset, Not A Currency, According To Israeli Courts Regarding Crypto Tax Legal Case
Bitcoin Is An Asset, Not A Currency, According To Israeli Courts
- In Israel, a court ruled that Bitcoin and other cryptocurrencies are considered assets, rather than currencies.
- Founder of DAV.Network will be forced to pay over $830,000 in taxes from his revenue incurred between 2011 and 2013.
The regulation of Bitcoin and the cryptocurrency industry in Israel has been pending on a specific classification – does Bitcoin count as a currency or an asset? The Central District Court has finally issued a ruling in the case, stating that Bitcoin will be considered an asset, which means that it will be subjected to capital gains tax (CGT). The ruling happened as part of a case involving a founder of a blockchain startup and the Israel Tax Authority. The latter came out victorious in the ruling, according to Globes.
Noam Copel, the aforementioned founder of DAV.Network had made a profit of 8.27 million Israeli new shekels (about $2.29 million) from a purchase of Bitcoin in 2011 that he sold two years later. Copel argued that Bitcoin should not be taxed since it should be considered a foreign currency. However, the Tax Authority said that Bitcoin is not a currency, but an asset, making it liable to taxes.
Shmuel Bornstein, the presiding judge, pointed out that Bitcoin is not a permanent asset, in that anything could ultimately replace it. With that characteristic alone, it cannot be considered a regular currency, especially when it comes to taxes.
Unfortunately for Copel, this classification means that the founder is going to be responsible for paying 3 million NIS ($830,600) in taxes on his revenue. He will also be charged another 30,000 NIS, according to reports regarding the court session. While Copel can appeal to the Supreme Court to reverse their decision, there are no records to indicate that he has done so.
The court chose ultimately to side with the Israeli government, saying that holders of crypto assets (including Bitcoin) would consider them to be property when filing taxes. Last February, the Tax Authority said that the profits from this type of investment would incur 20% to 25% tax rates. However, the individuals involved with mining or trading for businesses would have a 17% tax rate instead, in addition to CGT.