Israel

In Israel, cryptocurrencies are legally classified as property or assets, not as currency, based on the Israel Tax Authority's Circular No. 5/2018 and subsequent court rulings. The country has a regulated status for cryptocurrencies, establishing a framework under the Supervision of Financial Services Law that mandates licensing for service providers and strict Anti-Money Laundering (AML) and Know Your Customer (KYC) obligations. The Israel Tax Authority (ITA) oversees all aspects of cryptocurrency taxation under this established legal framework. It is responsible for issuing guidelines, classifying crypto activities, and enforcing tax laws. For individual investors, capital gains realized from selling crypto assets are subject to a flat 25% tax rate. There is no distinction between short-term and long-term gains, meaning this 25% rate applies regardless of how long an asset has been held. However, if crypto activity is classified as a business, income generated can be taxed at progressive rates, potentially reaching up to 50%. Corporate entities involved in crypto are subject to the standard 23% corporate tax rate. A 17% Value Added Tax (VAT) applies to crypto miners and businesses, but individual investors are exempt from VAT. Converting crypto to fiat currency or swapping one cryptocurrency for another, including stablecoins, are both considered taxable realization events, with gains calculated from the cost basis. Specific crypto activities also have clear tax treatments. Staking rewards are taxed as income upon receipt, which can fall under the 25% capital gains rate or progressive income tax rates, depending on the classification of the activity. Mining is generally treated as a business, with income taxed at either the 25% capital gains rate or progressive income rates, and a 17% VAT applies, though costs are deductible. Decentralized finance (DeFi) interactions, such as yield farming or providing liquidity, are treated as taxable asset disposals for each transaction, as per Circular 5/2018. Non-fungible tokens (NFTs) are taxed as assets, with a 25% capital gains tax applied upon their sale. A six-month pilot program began in early 2024, enabling direct tax payments on crypto profits. Additionally, an October 2023 Supreme Court ruling recognized digital currencies as assets, which is expected to facilitate their integration within the banking system.