Israel Releases Draft Plan for Taxing ICOs

Israel's government has published draft circular outlining possible approaches to taxing the proceeds of initial coin offerings (ICOs).

AccessTimeIconJan 17, 2018 at 5:45 p.m. UTC
Updated Sep 13, 2021 at 7:23 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Israel's government has published draft circular outlining possible approaches to taxing the proceeds of initial coin offerings (ICOs).

Released Wednesday, the draft circular from the Israel Tax Authority proposes imposing a value-added tax (VAT) on ICOs, differentiating them into two types: service transactions and sales transactions. The draft appeared to indicate that goods or services offered to foreign residents would result in "a zero tax invoice" under current law.

While the draft outlines possible methods for taxing companies launching token sales, it does not touch cryptocurrencies directly, according to an announcement posted on the agency's website.

The draft detailed different classifications for companies launching campaigns involving the blockchain use case, focusing on the kinds of products or services the company offered as well as whatever profit model it may take.

Token sales which reap more than 15 million Israeli new shekels (INS) in revenue will be subject to bookkeeping regulations in accordance with existing law, according to the draft.

The amount of taxes owed can fluctuate if a company determines its dues at the end of a year – as opposed to during the year – with the text going on to explain:

"In cases where the tax liability is determined on a cash basis, at the end of the year, the buyer or recipient of a service is a resident of Israel or vice versa, it is possible that the tax rate for the transaction will change according to the provisions of the VAT Law."

Investors who sell the tokens they had already purchased from an ICO would be subject to taxation as well, the circular explained. However, groups which trade as a business would be "classified and registered as a financial institution" specifically for tax purposes, according to the draft.

The circular emphasized it was subject to change, and the Israel Tax Authority is looking for public input on the provisions outlined.

Editor's Note: Statements in this article were translated from Hebrew.

Israeli flag image via Shutterstock

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.