Bill to recognize Bitcoin as a currency in Isreal

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According to a local news report, four members from the Yisrael Beiteinu political party in Israel have submitted a new bill that proposes to recognize Bitcoin (BTC) as a digital currency instead of an asset, at Knesset, the legislative branch of the Israeli government. The reason for this amendment to BTC’s current regulation stemmed from the fact that the party members did not want to subject the sale of the premier crypto to capital gains tax. The report did not mention the names of the politicians who proposed the bill.

Capital gains tax is the tax that it paid on an asset based on its Return On Investment (ROI). So, under this conditions, bitcoin would be taxed whether or not the holder actively trades it, as long as it is held for over a year and there is an increase in price from when the user bought those bitcoins to the point they sold.

So far, BTC has been seen as an asset under Israel’s current regulations and is subjected to a capital gains tax of 25 percent. However, some users like short-term BTC lenders and those who undertake bonds-related activities in Israel pay capital gains tax of 15 percent.

According to the report the unnamed politicians want to make Israel more accommodative for digital assets growth and as a step want to cut down on the taxations of the asset, so as to encourage adoption. If it's considered to be a currency then holders would not be subjected to capital gain taxes but would still be taxed based on income earned through it, like profits withdrew from a trading platform, coins purchased during a Token offering or payment received in bitcoins.

The four politicians envisioned Israel to be one among the leaders of the virtual currency sector, as they believed that cryptos were gaining recognition especially during the current global economic meltdown, the report added.

Furthermore, the Israeli Bitcoin Association had conducted a survey which stated that the number of crypto companies in Israel had increased by 32% from 2018 to 2019 and that there were about 150 active blockchain and crypto companies by December last year, according to a local news report.

Source
This is a good move should it be adopted and would put Isreal ahead of the digitalization curve along with other nations who are receptive of bitcoin. According to this report, there are currently about eight countries who do not subject Bitcoin to capital gains tax;
• Portugal
• Germany
• Singapore
• Malaysia
• Belarus
• Slovenia
• Malta
• Switzerland

I believe that countries who are more accommodative of Bitcoin would experience more growth than those who use regulatory laws to try and control the network.
Do you expect taxes on Bitcoin to become more popular as the community of users grow?
And would this hinder adoption rate?

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[Johnyz]

We live through taxes and I don't mind paying it through my bitcoin profit because I know bitcoin can give more profit than those taxes, and I think this is way better than to ban bitcoin. Some countries pushes their people to transact more online and do a cashless transaction, if bitcoin become more legal then this is a great option to all of us. Bitcoin is indeed a currency despite of the volatility, so this is still a good move by Israel.

[Welsh]

Interesting that there's so many European countries which don't regulate Bitcoin through capital gain tax. I would have thought that most European countries would be jumping in on the act, since its quite popular in some of those countries that are listed. Perhaps that's why is is so popular. As for Israel, I think the benefits outweigh the cons, and could lead to more adoption since if the government somewhat acknowledge it as a currency people will see it as a legit source of income rather than just a commodity. I think the problem with Bitcoin adoption is the bad press, and reputation its got over the years as criminal/shady money on the internet, as well as simply not having enough documentation for a layman to digest. Bitcoin is way to complex for mass adoption, and this will continue to be a problem for the foreseeable future I believe.

As for your question, I don't think regulation has a massive effect on adoption. It can go both ways, some people will see it as a legitimate business just because its not acknowledged by the government, and to be quite honest those that are interested in Bitcoin, I don't think it being taxed will effect their chance of adoption, since they'll be taxed on fiat currencies at the same or similar rates anyway.

Unless, Bitcoin gets taxed more than traditional currencies, I think regulation through tax isn't too bad.

[20kevin20]

I remember a while ago I used to publicly say Bitcoin shouldn't be subject to capital gains tax and received a lot of hate and suppositions such as me "being pro-tax evasion". It's interesting how some governments actually think the same way.

Gold has been the heaven of many current millionaires and billionaires, yet a quite unaffordable asset for the regular people. A gram of gold currently is worth more than 15% of the Romanian minimum wage. You can purchase BTC worth as much as you can afford to invest.. can't even comprehend how many of the top wealthiest people use different gimmicks to evade taxes legally - I think it's time to let the average person experience wealth as well.

IIRC, Germany actually does have capital gains tax for BTC but once you get past a certain amount of hodling time (1yr I believe), you don't have to pay taxes anymore. Feel free to correct me otherwise


LE:

Interesting that there's so many European countries which don't regulate Bitcoin through capital gain tax.

Regulation will likely be a thing in all of the EU member states quite soon, but time will tell. I would've expected 2020 to start quite strong with regulations here tbh, but they've been less aggressive with it than I thought (maybe due to the focus on pandemic?).

I don't think regulation has a massive effect on adoption.

I spoke to quite a lot of people and the main fear they have when it comes to owning BTC or a Bitcoin business is the missing legal framework. Regulation is a double-edged sword - good from a business perspective but, depending on what "regulation" means, could be hell for hodlers if they come out with even worse stuff than KYC.

[Bitcoinpro]

not much capital gains recently so wats the point

bitcoin is finished, its regulated crypto that will take over

regulation has tremendous advantages and also

leads to deregulation which is an even more advanced

economic cycle after regulation

[Upgrade00]

I think the problem with Bitcoin adoption is the bad press, and reputation its got over the years as criminal/shady money on the internet, as well as simply not having enough documentation for a layman to digest. Bitcoin is way to complex for mass adoption, and this will continue to be a problem for the foreseeable future I believe.

From my perspective, that opinion of Bitcoin being shady or criminal is not as popular now and is mostly used by government and banks, as well as people who spread FUD. I discuss Bitcoin regularly and have been part of some webinars on the blockchain tevhnology; people mostly view it as a complicated system and are genuinely interested in learning about it. As you pointed out, it being complex is one of the barriers to adoption.
In my opinion, for regular people to use it on a global scale, it would need to be through a third party service which would handle the technicalities of it making it more convenient to own. This may lead to different types of users in years to come.

Unless, Bitcoin gets taxed more than traditional currencies, I think regulation through tax isn't too bad.

Afaik, this would depend on the regulatory laws. Some countries subject Bitcoin to capital gain taxes and income gotten in Bitcoin (such as through trades or payments received) is also taxed, this would put it higher than traditional currencies (which are not regarded as assets) and discourage holders, to an extent.

IIRC, Germany actually does have capital gains tax for BTC but once you get past a certain amount of hodling time (1yr I believe), you don't have to pay taxes anymore. Feel free to correct me otherwise

True, the report reads;
"If you hold bitcoin for one year or more in Germany, you won’t have to pay any taxes. Regardless of how much money you make selling your BTC, you do not pay capital gains as long as you have held your coins for a period exceeding 12 months.''

[Reid]

The unnamed politician is making a good point.
It ain't to be lined with assets like gold. It is a damn currency. Why put a tax on it? 

It could be just a cheap shot for KYC. They don't want their citizens escaping taxes because they put it on bitcoin and there is no record of it.
Yeah, adopt it and be as a payment tool. This pandemic might have made them realize that.

[abhiseshakana]

Do you expect taxes on Bitcoin to become more popular as the community of users grow?
And would this hinder adoption rate?

The services provided by cryptocurrency exchange service providers cannot be classified as financial services, so, every bitcoin sale is subject to value added tax. Owning Bitcoin as an asset, whether from mining or from purchases, is not necessarily accompanied by an understanding of the taxation principle of income in a broad sense. There needs to be massive education for Bitcoin users and cooperation with exchange intermediary companies to provide information about the meaning of taxable income so that they can fulfill their tax obligations.

Capital gains obtained as a Bitcoin trader or Investor who treats them like stocks are taxable income. In terms of intermediary companies, the income derived from the difference in the distribution of selling and buying rates and services provided to members such as delivery, storage and withdrawal of deposits constitutes income from business activities subject to income tax.

Increasing awareness of bitcoin tax payments will change the mindset of the government, which was previously apathetic to optimistic about bitcoin adoption, which in turn will increase state income.

[buwaytress]

It could be just a cheap shot for KYC. They don't want their citizens escaping taxes because they put it on bitcoin and there is no record of it.
Yeah, adopt it and be as a payment tool. This pandemic might have made them realize that.

It's the only eventual answer most states already realise, and more will come to realise. Can't fight it, just legislate it. And then slowly ease business into it, then people using those businesses will have to as you say KYC. And some users will go and find more ways to circumvent, thus seeking out more private and decentralized solutions. Win either way for Bitcoin.

[Ucy]

I guess this means that tax on bitcoin(the currency) will be reduced for people of the country who simply use it as currency but their incomes earned working for bitcoin esp to earn a living or make profits (mainly as businesses) will be taxed? I can see how even a decentralized company from the country can be taxed this way...(then companies owned by Decentralized Network users will be independent of existing countries hence not be taxed by them)
Sounds fair.

[davis196]

Do you expect taxes on Bitcoin to become more popular as the community of users grow?

No way.Are you kidding me?Bitcoin users will always hate to pay taxes,it doesn't matter how popular Bitcoin has become or how low the capital gains tax rate is.
The bill is what it is-a bill.It is still not accepted as a law by The Knesset,so we are discussing assumptions and rumors only.If Israel recognizes Bitcoin as a digital currency,that's would be nice,but nothing will change drastically.Cryptocurrency adoption in Israel will not increase,just because the capital gains tax rate over cryptocurrencies has been lowered.

[Alert31]

Putting tax to bitcoin is a good government decision rather than trying to ban it. Also if it was regulated by the government ,people will have courage to use bitcoin and they don't have fear that they will be punish if ever they use and invest on it. Adoption will now increased. Although for me, decentralization is still better than a regulated cryptocurrency.

[yazher]

We live through taxes and I don't mind paying it through my bitcoin profit because I know bitcoin can give more profit than those taxes, and I think this is way better than to ban bitcoin. Some countries pushes their people to transact more online and do a cashless transaction, if bitcoin become more legal then this is a great option to all of us. Bitcoin is indeed a currency despite of the volatility, so this is still a good move by Israel.

Yeah! the last time a country has legalized and recognized bitcoin as their currency is Germany. Now we heard this popular country have the same vision as the Germany does and if that bill will passed, that's another good story and will make some good history in the record of bitcoin throughout these years. The only thing I don't know is, the reason of Israel to do this. what could be their main reasons to submit such bill?