Israeli Court Rules Bitcoin is an Asset, Not a Currency

An Israeli court has ruled that bitcoin is subject to capital gains tax (CGT) since it falls under the category of an asset, and not a currency.

According to a Globes report published May 21, the Central District Court made the ruling in a case between a blockchain startup founder and the Israel Tax Authority, which won the decision.

DAV.Network founder Noam Copel purportedly purchased bitcoins in 2011 and sold them in 2013 at a profit of 8.27 million Israeli new shekels ($2.29 million). He argued in court that bitcoin should be considered as a foreign currency and not be taxed.

On the other hand, the Tax Authority contended that bitcoin is an asset and not a currency, and therefore profits will be subject to CGT.

Shmuel Bornstein, the presiding judge, said in his arguments that bitcoin as a currency could stop existing and be replaced by another cryptocurrency. Thus, it cannot be regarded as a currency, particularly for tax purposes.

The ruling ordered Copel to pay tax worth roughly 3 million NIS ($830,600), along with costs of 30,000 NIS ($8,306), the report stated. However, Copel can file for an appeal to the Supreme Court for a reversal of the decision.

The court has ruled in favor of the Israeli government’s position that bitcoin and other digital assets are regarded as property for tax purposes. In February last year, the Tax Authority issued a notice, stating that profits from digital currencies will be liable to CGT at rates from 20-25 percent.

On the other hand, in addition to CGT, individuals mining or trading digital currencies in relation with businesses are subject to a 17 percent value-added tax.