The government of Israel has issued a notice to the users of virtual currencies clarifying the tax guidelines that apply to them.
In a statement released last week, the Israel Tax Authority (ITA) said that the Bank of Israel does not consider virtual currency as “foreign currency” and therefore they will be considered in accordance with the Income Tax Ordinance.
“Their [virtual currency] sale will be taxed as a sale of "property" and income from their sale will be classified as capital income and capital gains will be taxed according the fixed tax rates”, the statement reads (loosely translated).
Moreover, the income of persons engaged in the sale or mining of virtual currencies would be subject to business tax rates. Any commercial sales of digital currencies or trading transactions would be subject to value-added tax (VAT), the ITA said.
According to CoinDesk, reports that the Israeli government was considering taxation of bitcoin transactions emerged in September 2013. The ITA official said at the time that they were interested in imposing tax profits on bitcoin sales, but were unclear on how to do so.
