Bitcoin Tax

Bitcoin Tax

Israeli Judiciary Rules Bitcoin has an Asset and a Not Currency in Court Case; Bitcoin Investor liable to pay $800,000 Tax Bill

Israel and bitcoin

An Israeli Central District Court has given its verdict on the cryptocurrency case, involved between the Israel Tax Authority and blockchain startup founder. The court ruled the case in favor of the Tax Authority. The news was revealed by Israeli local source on 22 May 2019.

The blockchain startup founder, Noam Copel, argued in the court saying the profit gained from digital currency sales should be exempted from tax, and Bitcoin should be considered as a foreign currency. The Tax Authority of Israel opposed his claims.

The Israeli court, however, ruled in defense of the tax authority by saying Bitcoin is a financial asset and not a currency, the profits earned on cryptocurrency sale is liable for tax in Israel.

Now, the decision of the court has made Noam Copel to either pay the tax or appeal in the high court.

Bitcoin Tax Noam Copel to Pay

According to Globes, Noam Copel back in 2011 had purchased Bitcoin and sold them in 2013. The Bitcoin trade helped Copel to earn revenue of more than NIS 8 million. One of the points raised in the court by Copel was to consider Bitcoin the leading cryptocurrency as an international currency, similar to the dollar.

He further, requested the court saying:

“Bitcoin should be classified as a foreign currency and that his profits should be seen as exchange rate differences received by an individual, not in the course of a business, and therefore should not be taxed.”

Copel’s arguments were rejected by the court, according to the definition of the central bank, Bitcoin cannot represent currency, and so it cannot be considered as foreign currency. The agency says that the digital currency lies within the definition of an asset, and revenue is ‘subject to capital gains tax.’

Copel needs to pay a tax of worth NIS 3 million.

Court Ruling

Judge Shmuel Bornstein was ruling the cryptocurrency case; Bornstein mentioned Bitcoin could not be treated as a currency because Bitcoin strength is not promised. The tax authority pointed out that Bitcoin lacks the characteristics of a currency, and hence, the judge concluded, it shouldn’t be treated as foreign currency.

With respect to this matter, the judge referred to the definition of currency and said, according to Israel Bank, and currency should have some physical evidence. The cryptocurrencies and Bitcoin are viewed as property for tax purposes. The Tax Authorities in February 2018 had published a notice, stating the revenue earned from digital currencies will be under Capital Gains Tax (CGT). The same what the court currently ruled.

Looking at both the views, Copel expects that

“the trust users put in Bitcoin and its use as both a payment method and to benchmark value means it should be considered a currency.”

The Judge carefully observed both sides of the arguments and dis-approved the views of Copel saying he was not successful in proving his point of Bitcoin to consider as currency or it indicates alternative to coins and notes in any nation, Globes mentioned.

The former Tax Authority Deputy Head, Gidi Bar Zakay mentioned that the status of Bitcoin would be determined by a reality test. When Bitcoin receives massive acceptance from people, then they need to modify the law to adopt it so as to benefit the country from the digital currencies.